Vol. XXII, No. 151
Wednesday, March 4, 2009 | MANILA, PHILIPPINES
Today's Headlines
A MEASURE DOUBLING the insured deposit ceiling to half a million pesos and strengthening the state firm tasked with providing the cover was approved yesterday by a bicameral panel.
The proposed law — a consolidation of Senate Bill 2964 and House Bill 5911 — will be ratified today before it is brought to Malacañang for President Gloria Macapagal Arroyo's signature next week, legislators said.
They did not disagree over the doubling of the maximum deposit insurance coverage to P500,000 — a move expected to shore up depositor confidence in the local banking system amid bank failures in the United States and Europe.
But senators agreed to drop a proposal to increase the assessment premiums paid by member banks to PDIC. SB 2964 provided an increase to 1/2 of 1% of total deposits, from 1/5 of 1%, three years after the new law takes effect.
Suzanne L. Felix, Chamber of Thrift Banks executive director, said keeping the provision "would mean a decrease in interest rates that will be given to depositors. The bottomline is this would hurt the banking public."
House panel member and Camarines Sur Rep. Luis R. Villafuerte said PDIC's annual collection was "enough" to cover all deposits.
"It will be authorized to increase the assessment rate if its deposit insurance fund has depleted to less than P35 billion .... In the last five years, PDIC paid only P7 billion [to depositors] but its annual collection totalled P8 billion," Mr. Villafuerte said.
He noted that PDIC's deposit insurance fund — from which payments are sourced — was healthy at around P60 billion as of end-2008.
PDIC President Jose C. Nograles proposed that a "standard assessment rate" be included in the reconciled bill to ensure the deposit insurer is able to cover insured deposits.
But with the strong opposition, Manila Rep. Jaime C. Lopez, House banks and financial intermediaries committee chairman, suggested that Congress meet again after three years to adjust the assessment rate, to which Mr. Nograles agreed.
"We have assurances [from the panel] that, moving forward, we will be able to [revisit the assessment rate]. Anyway, we have gotten some financial strengthening [measures] like tax exemptions and the ability to raise bonds with sovereign guarantee," Mr. Nograles said.
The bicameral panel agreed to give the PDIC tax perks such as exemption from income tax, final withholding tax, and value-added tax on the assessments premiums paid by member banks.
A Senate proposal to exempt the PDIC from documentary stamp and capital gains taxes on the transfer of assets from banks was dropped.
But legislators agreed to keep a Senate recommendation providing a sovereign guarantee to PDIC debt issuances on the condition these not twice exceed the deposit insurance fund.
The government will have to pay half of the P500,000 cover for three years after the new law takes effect. Legislators specified that an automatic appropriation in the national budget be made.
A joint congressional oversight committee will be convened to review the assessment rate and determine how much the government needs to allocate for deposit insurance payments.
Members of the bicameral panel also scrapped a provision proposed by the Senate that lists the types of deposits not covered by insurance. Mr. Villafuerte said the list was "too broad."
Under SB 2964, deposits that are marketed, solicited, accepted, received, evidenced by or recorded in violation of the law or the rules and regulations of the central bank should not be insured by the PDIC.
"Violation of the rules rests on the banks, not the depositors. Why should we make the depositors suffer for not knowing all the laws and regulations?," Mr. Villafuerte argued.
The panel agreed to adopt a Senate proposal to give PDIC a bridge bank authority. Bridge banks are subsidiaries or firms approved by the central bank to manage assets acquired from failed banks.
"We need this legislation to build up public trust and confidence in light of the financial crisis," Mr. Lopez said.
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