Hike in deposit insurance
The Department of Finance (DOF) said it is supporting the proposed measure seeking to increase the deposit insurance coverage provided for by the Philippine Deposit Insurance Corp. (PDIC) and the removal of the latter’s regulatory function.
During the Senate hearing on proposed amendments to the PDIC charter, Finance Secretary Carlos G. Dominguez III said the proposal will help in the development of the banking industry and the stability of the financial sector in the country.
Dominguez said that increasing the deposit insurance coverage from P500,000 to P1 million per depositor will encourage small savers to entrust their hard-earned savings to the banks.
“It promotes a broader depositor base for our banks and a better savings rate for our economy. In addition, the PDIC insurance coverage prevents bank failures from inflicting a larger dislocation in our market. All these are necessary to build a strong financial system,” Dominguez said.
The last time the PDIC’s deposit insurance coverage was increased was 12 years ago from P250,000.
The proposed removal of PDIC’s regulatory function was also supported by Dominguez, noting that “there should be only one regulator for banks and that should be the BSP .”
He explained that PDIC should focus on its role as a deposit insurer and as a liquidator.
“By sharpening the focus of the PDIC to that of a ‘pay box’ for insurance claims and as liquidator of failed banks, we will ensure even better institutional efficiency than what we have at present,” Dominguez said.
“All regulatory functions, such as the issuance of cease-and-desist orders relating to unsound banking practices will be ceded entirely to the BSP. This will help prevent confusing functions and confounding signals to the industry,” he added.
Likewise, the finance chief is also supporting the proposal that will remove the “tedious process of passing a law each time the maximum coverage needs to be adjusted.”
“The proposed bill will make the PDIC more responsive to the constantly changing financial landscape. With this, the PDIC will be better capable of fulfilling its mandate of providing insurance coverage for small depositors and supporting a sound and stable banking system,” Dominguez said.
“As an institution, it will be more nimble and adept in responding to prevailing economic conditions, such as elevated inflation rates or sharp currency fluctuations,” he added.