Bill amending PDIC Charter filed in Congress

MANILA — House Committee on Banks and Financial Intermediaries Chairman Rep. Nelson “Sonny“ Collantes has filed with the House of Representatives on May 12, 2014, House Bill No. 4392, a bill amending the Charter of the Philippine Deposit Insurance Corporation (PDIC).

House Bill 4392 aims to institute much needed reforms to the PDIC Charter as it seeks to enhance bank resolution and depositor protection by establishing a framework that will address gaps and allow the Philippines to conform to international standards. The enhanced resolution framework shall provide PDIC with more options to resolve problem banks. A more efficient and prompt resolution process shall help minimize the negative impact of bank closures on the stability of the banking industry. It will also maximize recovery of depositors and other creditors, and allow the prompt settlement of their claims, Rep. Collantes said in the Explanatory Note of the Bill.

HB 4392 also proposes measures to introduce additional modes of liquidating a closed bank such as bridge banking, to enhance PDIC’s authority as Liquidator of closed banks. Adhering to the principle that bank rehabilitation should happen while the bank is still open, the bill is also pushing for the removal of the 90-day receivership period for closed banks. Instead, banks will be given opportunities to address their problems while still open.

The Bill also covers changes in the liquidation process in the event bank closure becomes inevitable. Rep. Collantes said that the ability to deal with bank failures via a quick, efficient and cost-effective resolution framework and liquidation process contributes to the resilience of the banking system.

The proposed bill also aims to institute various measures to further protect the depositing public by allowing the PDIC to settle claims based on authentic evidence of deposit. This will further expedite settlement of deposit insurance claims. Stiffer sanctions and penalties for bank fraud and various offenses that adversely affect the bank, its depositors and creditors are being proposed.

Governance and institutional capability-building and financial strengthening measures shall support these measures.

Justifying the importance and urgency of the Bill’s passage in the Explanatory Note, Rep. Collantes said, “What we have before us is an opportunity to advance and to apply the lessons learned, not only from the recent global recession, but also from experiences of the past.”

The PDIC welcomed this Congressional initiative to amend the PDIC Charter citing that the move affirms the important role the state deposit insurer plays as a financial safety net player in the light of legislative reforms in the financial system.

PDIC Officer-in-Charge and Executive Vice President for Receivership and Liquidation Cristina Q. Orbeta said that the proposed amendments will enable PDIC to be a responsive and effective co-regulator of banks. She said, “Lessons from the financial crisis taught us that a strong resolution and liquidation framework over banks is crucial to depositor protection and to the stability of the banking system.”

The move to amend the PDIC Charter comes on the heels of legislative reforms to strengthen the financial sector such as the passage of the Insurance Code of the Philippines and proposal to amend the Charter of the Bangko Sentral ng Pilipinas.