PDIC won't pay claims on bogus deposits

Philippine Deposit Insurance Corp. warned deposits from “unsafe and unsound" practices are not covered by deposit insurance as mandated by its new charter, president Jose C. Nograles said. In a statement, Nograles said Republic Act 9576, which took effect in June, strengthens PDIC against deceitful activities that “compromise the stability of our banking system and take advantage of the deposit insurance system provided by the government." “We championed this amendment to the PDIC Charter because it safeguards against the maneuverings of individuals and entities that victimize depositors who put their trust in the banking system," he added. The amended charter does not only increase maximum deposit insurance coverage to P500,000 but also excludes accounts or transactions that will not be covered by PDIC. Deposit accounts or transactions either constituting or coming from unsafe and unsound banking practices will not be covered by deposit insurance. The same rule applies for deposits that are unfunded, fictitious or fraudulent, and deposits that are determined to be the proceeds of an unlawful activity as defined by the Anti-Money Laundering Act of 2001. PDIC can now issue a cease and desist order against such deposit accounts or transactions, which will serve as notice to other banks to prevent practices that endanger depositors and the bank themselves. “Now we have a new charter that supports our position that deposit insurance should not be exploited to support unsafe, unsound and fraudulent practices of unscrupulous bank owners, officers and employees," he said. PDIC will adopt the guidelines in BSP Circular No. 640 on unsafe and unsound banking activities. It is preparing regulatory issuance and studying new rules and regulations to strengthen its regulatory oversight. BSP Circular 640 lists 23 activities that may be considered unsafe and unsound banking practices. It includes excessive reliance on large, high-cost or volatile deposits/borrowings. - Ruby Anne M. Rubio, GMANews.TV