Approval of deposit insurance bill faces delays

MANILA, Philippines - Disagreements between the House and the Senate over how to strengthen the state deposit insurer may derail the approval of a measure doubling the maximum deposit insurance coverage to half a million pesos. The House banks and financial intermediaries committee Thursday included in the unnumbered substitute bill raising the insured deposit ceiling to P500,000 a provision mandating the government to shoulder half of this amount for three years upon effectivity of the new law. The Senate version orders the government to do so for six years. Manila Rep. Jaime C. Lopez, committee chairman, said that given the higher insured deposit ceiling, the government must help the Philippine Deposit Insurance Corp. (PDIC). "It may not have the financial capacity as of the moment. After three years, conditions might stabilize and PDIC will be able to accumulate enough premiums to shoulder the increased amount of coverage," he said in a telephone interview. Mr. Lopez said the committee, however, is not amenable to raising the assessment rate and providing PDIC a sovereign guarantee, which the insurer said would prevent it from going bankrupt. "Banks will pass burden to depositors if we raise the assessment rate. We don’t want that because we are trying to protect the depositors. Also, taxpayers should not be made to shoulder any burden," Mr. Lopez said. The Senate wants the assessment rate slapped on banks raised to one-half of 1% from one-fifth of 1% at present. It also gave a sovereign guarantee to PDIC debt issuances. PDIC said a higher assessment rate and a sovereign guarantee are necessary if it is to shoulder the higher insurance coverage. Mr. Lopez said the House committee will draft a letter enumerating the provisions it opposes in the Senate version so delegates to the bicameral conference committee could take these up "We have put enough provisions to strengthen the PDIC. We hope that during the bicam, the House bill, which is more modest, will be adopted by the Senate," he said. The House bill is now up for second reading approval. The Senate passed its version on January 19. - BusinessWorld