PNoy signs law enhancing depositor protection

President Benigno Aquino III on Wednesday signed Republic Act 10846 amending the charter of the Philippine Deposit Insurance Corp. (PDIC) or the deposit insurance law.

In a statement, state-run PDIC said the law gives them fiscal and administrative autonomy and authority to resolve problem banks while still open. 

"The amendments to the deposit insurance law will ultimately redound to the benefit of the depositing public," PDIC president Cristina Que Orbeta said. "The enhanced authorities will afford depositors better protection as PDIC may now address risks posed by problem banks early on."

"This will also enable PDIC to perform its role in maintaining financial stability and managing the Deposit Insurance Fund," she added.

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.

Moreover, the law restored PDIC’s authority to terminate the insured status of banks that engage in unsafe and unsound banking practices.

"In cases where bank closure becomes inevitable, RA 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 PDIC said.

The law removes 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," PDIC said. —John Ted Cordero/KBK, GMA News