House panel OKs P500,000 bank deposit insurance

The House committee on banks and financial intermediaries approved yesterday a bill doubling the amount of insured bank deposits from P250,000 to P500,000.

The approved amount is half the level of insured deposits that President Arroyo had proposed, which is P1 million.

Speaker Prospero Nograles is the bill’s principal author. His brother Jose is president of the state-owned Philippine Deposit Insurance Corp. (PDIC).

Manila Rep. Jaime Lopez, committee chairman, said the bill “is intended as a confidence-building measure to stave off the adverse effects of the worsening global financial crisis and sustain the stability of our financial system.”

To boost PDIC’s finances in the event it would have to pay the higher amount of insured deposits, the Lopez panel decided to recommend the increase in the deposit insurance fund from P3 billion to P24 billion.

The additional P19 billion will come from the national treasury, and therefore from taxpayers.

However, the committee’s recommendation is subject to the approval of the committee on appropriations.

During the hearing on the Nograles bill, some bankers and several members of the Lopez committee said there is no need to increase the amount of insured bank deposits since the banking system is stable and depositors are not panicking and withdrawing their money.

They warned congressmen that doubling the insured amount could send the wrong signal that something is wrong with the banking system.

Besides, they said the proposal would entail the expenditure of a huge sum of taxpayers’ money, which could further bloat the P75-billion projected budget deficit.

They said ordinary taxpayers would not benefit from the Nograles proposal since most of them do not have P500,000 in bank deposits.

They added that if PDIC wants a higher insured amount, it should generate the needed funds by selling idle assets.   – Jess Diaz