Financial Blog

You’ve seen it before—on your bank’s website, on your bank application form, or maybe subtle mentions in a financial seminar. In the Philippines, deposit insurance is governed by the PDIC (Philippine Deposit Insurance Corporation), a government-run insurance fund under the Department of Finance.

Read more: 7 Habits that are Costing You (and How Much You Can Potentially Save)

Its primary function: “To protect depositors by providing deposit insurance coverage for the depositing public and help promote financial stability.”

PDIC pays deposit insurance on all valid deposits up to Maximum Deposit Insurance Coverage (MIDC) of P500,000 per depositor of a closed bank. That amount includes accounts “maintained in the same right and capacity for a depositor’s benefit” whether it’s under his own name or the name of others. PDIC also determines if these deposits are valid by checking banking records evidenced by inflow of cash.

A deposit insurance is essentially the assured amount a bank depositor gets in the case that the bank cannot fulfill its obligations. It is mandatory by law and is designed to maintain financial stability.

PDIC insures valid deposits in domestic offices of its member-banks:

By Deposit Type:

• Savings
• Special Savings
• Demand/Checking
• Negotiable Order of Withdrawal (NOW)
• Time Deposits

By Deposit Account:

• Single Account
• Joint Account
• Account “By”. “In Trust For” (ITF) or “For the Account of” (FAD) another person

By Currency:

• Philippine Peso
• Foreign currencies considered as part of BSP’s International reserves

The following are excluded from PDIC deposit insurance, whether they are denominated, documented, recorded or booked as deposit by the bank.

• Investment products such as bonds and securities, trust accounts and other similar instruments
• Deposit accounts or transactions that:
  • Are unfunded, fictitious or fraudulent.
  • Constitute and/or emanate from unsafe and unsound banking practice/s as determined by the PDIC, in consultation with the BSP, after due notice and hearing and publication of PDIC’s cease & desist order against such as deposit accounts/transactions.
  • Are determined to be proceeds of an unlawful activity as defined in the Anti-Money Laundering Act (Republic Act 9160, as amended).

1. Solicitation and acceptance of deposits outside bank premises, including brances, without BSP authority.
2. Non-compliance with minimum identification and documentation requirements from depositors in the opening of deposit accounts (Anti-Money Laundering Law).
3. Allowing depositors to deposit, withdraw, and/or transfer funds without proper documentation such as duly accomplished deposit or withdrawal forms.
4. Granting high interest rates, when bank has: (i) negative unimpaired capital, and (ii) either a liquid assets-to-deposits ratio of less than 10% or an operating loss.

First, we need to differentiate the type of accounts.

1. Single accounts- These are individually-owned accounts or accounts held under one name, either as natural person (any individual) or juridical entity (corporation, partnership, cooperative, etc).
2. Joint accounts – These are accounts held under more than one name.

A joint account, regardless of whether the conjunction “and”, “or” or “and/or” isused shall be insured separately from single accounts. Unless a different sharing is stipulated in the deposit documents, the insured amount up to the Maximum Deposit Insurance Coverage of P500,000 shall be divided equally between or among co-owners of a joint account.

And even though the total share of a co-owner in several joint accounts may exceed P500,000, he/she will only be insured up the maximum deposit insurance amount of P500,000.

Meanwhile, joint accounts held in the names of a juridical entity and a natural person shall be presumed to belong solely to the juridical entity.

• In a “By” account, say for example “Patricia and Johnny”, Patricia is considered the depositor.
• In a “In Trust For” (ITF) account, “Patricia In Trust For Johnny,” Johnny is considered the depositor.
• In a “For the Account of” (FAO) account, Patricia For the Account of Johnny,” Johnny is considered the depositor.
• In an account with combined and FAO/ITF, “Patricia and/or Juliet In Trust For Johnny, “ Johnny is considered the depositor.

If a depositor is the sole beneficial owner of a single “For the Account of”, “By” and “In Trust For” accounts, the consolidated balances of these accounts shall be insured up to P500,000. Each depositor’s total shares in all of his/her joint accounts shall be separately insured up to P500,000.

Meanwhile, a depositor with single accounts and joint accounts may have insured deposits of up to P100,000.

To easily estimate your insured deposits, visit the Deposit Insurance eCalculator at https://www.pdic.gov.ph/ecalculator

Source: PDIC