President Benigno Aquino III signed into law Republic Act No. 10846, amending the charter of state-run Philippine Deposit Insurance Corp., or the Deposit Insurance Law.
PDIC said in a statement the 50-million strong deposit account holders would benefit from the amendments which further enhanced PDIC’s authority to provide depositor protection.
The law gives PDIC fiscal and administrative autonomy and authority to resolve problem banks while still open. RA 10846 will take effect 15 days following the publication in the official gazette or in two newspapers of general circulation.
RA 10846 was co-authored by Senator Sergio Osmeña III, the chairman of the Senate committee on banks, financial institutions and currencies and Rep. Nelson Collantes, chairman of the House committee on banks and other financial intermediaries.
PDIC president Cristina Que Orbeta welcomed the passage of the law. “The amendments to the deposit insurance law will ultimately redound to the benefit of the depositing public. The enhanced authorities will afford depositors better protection as PDIC may now address risks
posed by problem banks early on,” she said.
Orbeta said this would also enable PDIC to perform its role in maintaining financial stability and managing the Deposit Insurance Fund.
Under the law, depositors will have quicker access to their insured deposits in the event of bank closure since PDIC now has the authority to pay insured deposits without netting out depositors’ loan obligations with the closed bank, and based on evidence of deposits and not on the closed bank’s records alone.
The law also restored PDIC’s authority to terminate the insured status of banks that engage in unsafe and unsound banking practices.
PDIC will also be able to more effectively promote financial inclusion through early intervention in problem banks or open bank resolution.
PDIC said in cases where bank closure became inevitable, R.A. 10846 enhanced the chances of recovery by creditors of their claims against the assets of the closed bank by preventing the further dissipation of these assets through seamless transition from bank closure to liquidation.
The law does away with the 90-day receivership period and allows PDIC to proceed directly to liquidation. The immediate assignment of encumbered assets to closed bank creditors, adoption of purchase of assets and assumption of liabilities as a mode of liquidation and express prohibition on reopening of banks ordered closed by the Monetary Board will help enhance recovery rate for creditors of closed banks.
RA 10846 also strengthened PDIC’s institutional and governance framework to align it with international best practices.