213

Directors, officers, employees or agents who

shall resign, retire, transfer to another agency
PHILIPPINE or be separated from the service,
DEPOSIT INSURANCE shall continue to be provided with such legal
protection in connection with any act done or
CORPORATION ACT omitted to be done by them in good faith
during their tenure or employment.
(RA 3591 as amended by This shall not apply to any civil, criminal,
RAs 6037, 7400, 8791 and administrative or any action or proceeding
9302 and PDs 120, 1094, initiated by the Corporation against such
director, officer, employee or agent.
1451 and 1935)
What fees / expenses are covered?
• Litigation costs and expenses, including
legal fees and other expenses of external
I. counsel, or providing legal assistance
• Legal assistance shall include the grant or
BASIC POLICY advance of reasonable legal fees to enable
the employee to engage counsel of his
• To insure the deposits of all banks which choice.
are entitled to the benefits of insurance • In the event of a settlement or
under this Act compromise, indemnification shall be
• To promote and safeguard the interests provided only when the Corporation is
of the depositing public by way of advised by counsel that the persons to be
providing permanent and continuing indemnified did not commit any
insurance coverage on all insured negligence or misconduct.
deposits. • The costs and expenses incurred may be
paid by the Corporation in advance of the
final disposition upon receipt of an
II. undertaking by the employee to repay the
ADMINISTRATIVE amount advanced should it ultimately be
determined by the Board of Directors that
PROVISIONS he is not entitled to be indemnified.

A. Authority to Examine Banks

The PDIC has the power to conduct C. Authority to Provide Financial
examination of banks with prior approval Assistance
of the Monetary Board:
What entities are covered?
Provided, No examination can be
conducted within 12 months from a) Insured banks in danger of closing
the last examination date. When the Corporation has determined that
• an insured bank is in danger of closing
• the continued operation of such bank is
B. Authority to Underwrite and Advance essential to provide adequate banking
Legal Fees and Litigation Expenses service in the community maintain
financial stability in the economy.
Who are covered?
The Corporation shall underwrite or advance b) Insured banks that have already
litigation costs and expenses, or provide closed
legal assistance to its directors, officers, The authority to extend financial assistance
employees or agents in connection with any may also be exercised in the case of a closed
civil, criminal, administrative or any other insured bank if the Corporation finds that
action or proceeding, to which such director, • the resumption of operations of such bank
officer, employee or agent is made a party is vital to the interests of the community,
by reason of the exercise of authority or or
performance of functions and duties under • a severe financial climate exists which
this Act. threatens the stability of a number of
banks possessing significant resources:

[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design]

[Bobbie_StaMaria.printing] [Miles Malaya.lectures] 213
[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law] [Hya_Rafael/Mac_Macapagal.crim_law]
[Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law]
[Ces_Sicangco/Rowena_Romero.tax_law]
 214
c) Entities acquiring /merging with III.
closed / closing insured banks
The Corporation may provide any CONCEPT OF INSURED
corporation DEPOSITS
• acquiring control of
• merging with The term “insured deposit” means the amount
• consolidating with due to any depositor for deposits in an insured
• acquiring the assets of bank net of any obligation of the
an insured bank in danger of closing in order depositor to the insured bank as of the date of
to prevent such. closure, but not to exceed P250,000.00.

d) Closure of entities that may produce In determining such amount due to any
systemic consequences depositor, there shall be added together all
When the Monetary Board has determined deposits in the bank maintained in the same
that there are systemic consequences of a right and capacity for his benefit either in his
probable closure of an insured bank, the own name or in the name of others.
Corporation may grant financial assistance in
such amount as may be necessary to A joint account regardless of whether the
prevent its failure or closure and/ or restore conjunction “and,” “or,” “and/or” is used, shall
the insured bank to viable operations. be insured separately from any individually-
owned deposit account:
A systemic risk refers to the possibility that
failure of one bank to settle net transactions Provided, That
with other banks will trigger a chain 1. If the account is held jointly by two or
reaction, depriving other banks of funds more natural persons, or by two or
leading to a general shutdown of normal more juridical persons or entities, the
clearing and settlement activity. It also maximum insured deposit shall be
means the likelihood of a sudden, divided into as many equal shares as
unexpected collapse of confidence in a there are individuals, juridical persons
significant portion of the banking or financial or entities, unless a different sharing
system with potentially large real economic is stipulated in the document of
effects. deposit and
2. If the account is held by a juridical
What are PDIC’s powers with regard to person or entity jointly with one or
financial assistance? more natural persons, the maximum
insured deposit shall be presumed to
It is authorized to belong entirely to such juridical
• make loans person or entity
• purchase the assets 3. The aggregate of the interests of each
• assume liabilities co-owner over several joint accounts,
• make deposits whether owned by the same or
• Provide financial assistance which may different combinations of individuals,
take the form of equity or quasi-equity juridical persons or entities, shall
of the insured bank Provided That the likewise be subject to the maximum
Corporation shall dispose of such equity insured deposit of P250,000.00
as soon as practicable.
No owner/holder of any negotiable
The Corporation, prior to the exercise of its certificate of deposit shall be recognized
powers, shall determine that actual payoff as a depositor entitled to the rights
and liquidation will be more expensive than provided in this Act unless his name is
the exercise of this power. registered as owner/holder thereof in the
books of the issuing bank.
The Corporation may not use its authority to
purchase the voting or common stock of an
insured bank but it can enter into and
enforce agreements that it determines to be
necessary to protect its financial interests.

[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design]

[Bobbie_StaMaria.printing] [Miles Malaya.lectures] 214
[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law] [Hya_Rafael/Mac_Macapagal.crim_law]
[Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law]
[Ces_Sicangco/Rowena_Romero.tax_law]
 215
1. A joint account regardless of whether
the conjunction “and”, “or” or
IV. “and/or” is used, shall be insured
LIABILITY TO DEPOSITORS separately from an individually-owned
deposit account.
A. Commencement of Liability 2. If the account is held jointly by two or
Liability commences when an insured bank is more natural persons, or by two or
closed by the Monetary Board pursuant to more juridical persons or entities, the
Sec 30 of R.A. 7653. maximum insured deposit shall be
divided into as many equal shares as
there are individuals, juridical persons
B. Extent of Liability or entities, unless a different sharing
Liability covers the amount due to any is stipulated in the document of
depositor for deposits in an insured bank net deposit.
of any obligation of the depositor to the
insured bank as of the date of closure, but Document of deposit referred to in the
not to exceed P250,000.00. preceding paragraph pertains to joint
account agreements, account ledgers,
certificate of time deposits, passbooks
C. Determination of Insured Deposits or other evidence of deposits,
specimen signature cards, corporate
The Corporation shall commence the resolutions, contracts or similar
determination of insured deposits upon its instruments, copies of which must be
actual takeover of the closed bank. in the custody or possession of the
bank upon takeover by PDIC.
In order that a claim for deposit insurance
with the PDIC may prosper, the law requires
3. If the account is held by a juridical
that a corresponding deposit be placed in the
person or entity jointly with one or
insured bank. A deposit as defined in Section
more natural persons, the maximum
3(f), may be constituted only if money or the
insured deposit shall be presumed to
equivalent of money is received by a bank:
belong entirely to the juridical person
or entity.
(f) The term "deposit" means the
unpaid balance of money or its 4. The aggregate of the interests or total
equivalent received by a bank in the share of each co-owner over several
usual course of business and for joint accounts, whether owned by the
which it has given or is obliged to same or different combinations of
give credit to a commercial, individuals, juridical persons or
checking, savings, time or thrift entities, shall likewise be subject to
account or which is evidenced by the maximum insured deposit of
passbook, check and/or certificate of P250,000.00.
deposit 5. The amount of insurance due to any
(PDIC vs CA ; 1997) depositor for deposits in an insured
bank shall be net of any matured or
The Corporation shall publish the notice once unmatured obligation of the depositor
a week for at least 3 consecutive weeks in a to the insured bank as of date of
newspaper of general circulation or, when closure. In case of joint deposit
appropriate, in a newspaper circulated in the accounts where only one of the co-
community or communities where the closed depositors has an obligation to the
bank or its branches are closed bank, the following shall apply:
located. a) Where the deposit is a joint
“and/or” or “or” account
which is covered by a hold-
D. Calculation of Liability out agreement, the obligation
(See Part III) secured by the hold-out
agreement shall be deducted
Special Provisions for Joint Accounts (PDIC from the balance of the joint
Bulletin 2004-04) account, regardless of the
fact that only one of the co-
depositors in the joint

[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design]

[Bobbie_StaMaria.printing] [Miles Malaya.lectures] 215
[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law] [Hya_Rafael/Mac_Macapagal.crim_law]
[Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law]
[Ces_Sicangco/Rowena_Romero.tax_law]
 216
account is indebted to the 1. PDIC is discharged from
closed bank. obligations
b) When the deposit is a joint • Payment of an insured deposit to any
“and” account which is person by the Corporation shall discharge
covered by a hold-out the Corporation
agreement, the obligation • Payment of a transferred deposit by the
secured by the hold-out new bank or by an insured bank in which
agreement shall be a transferred deposit has been made
deducted only from the available shall discharge the Corporation
share in the joint account of and such new bank or other insured bank
the depositor who is
indebted to the closed bank, 2. PDIC is subrogated to depositor’s
unless his co-depositor is rights
himself a co-signatory to • The Corporation, upon payment of any
the hold-out agreement. depositor shall be subrogated to all rights of
c) Where the deposit is either the depositor against the closed bank. But
a joint “and”, “or” or the depositor shall retain his claim for any
“and/or” account which is uninsured portion of his deposit.
not covered by a hold-out • All payments by the Corporation of insured
agreement, the obligation of deposits in closed banks partake of the
the depositor who is nature of public funds, and must be
indebted to the closed bank considered a preferred credit similar to
shall be deducted only from taxes due to the National Government.
his share in the balance of
the joint deposit account.
H. Failure to settle claim of insured
depositor
E. Mode of Payment
Failure to settle the claim, within 6 months
Payment of the insured deposits shall be
from the date of filing of claim for insured
made by the Corporation as soon as possible
deposit, where such failure was due to grave
either
abuse of discretion, gross negligence, bad
(1) by cash or
faith, or malice, shall subject the directors,
(2) by making available to each
officers or employees responsible to
depositor a transferred deposit in
imprisonment from 6 months to 1 year.
another insured.
The period shall not apply if the validity of the
The term “transfer deposit” means a deposit
claim requires the resolution of issues of
in an insured bank made available to a
facts and or law by another office, body or
depositor by the Corporation as payment of
agency.
insured deposit of such depositor in a closed
bank and assumed by another insured bank.
I. Failure of Depositor to Claim Insured
Deposit
F. Conditions that may be Imposed Prior
Unless otherwise waived by the Corporation, if
to Payment
the depositor in the closed bank shall fail to
claim his insured deposits
• The Corporation, in its discretion, may
with the Corporation
require proof of claims to be filed before
• within 2 years from actual takeover
paying the insured deposits
of the closed bank by the receiver, or
• Where the Corporation is not satisfied as
• within 2 years after the two-year
to the viability of a claimfor an insured
period to file a claim,
deposit, it may require final
all rights of the depositor against the
determination of a court of competent
Corporation shall be barred.
jurisdiction before paying such claim
However, all rights of the depositor against
the closed bank and its shareholders or the
G. Effect of Payment of Insured Deposit
receivership estate to which the Corporation
may have become subrogated, shall revert to
the depositor.

[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design]

[Bobbie_StaMaria.printing] [Miles Malaya.lectures] 216
[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law] [Hya_Rafael/Mac_Macapagal.crim_law]
[Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law]
[Ces_Sicangco/Rowena_Romero.tax_law]
 217
• This prohibition shall apply in all cases,
disputes or controversies instituted by a
private party, the insured bank, or any
shareholder.)

• The Supreme Court may issue a restraining

order or injunction when
o the matter is of extreme urgency
V. involving a constitutional issue
RESTRICTION ON PAYMENT o grave injustice and irreparable injury
will arise
OF DIVIDENDS BY INSURED o The party applying shall file a bond in
BANK an amount to be fixed by the Supreme
Court
General Rule :
No insured bank shall pay any dividend on Effects of issuing TRO :
its capital stock or interest on its capital • Any restraining order or injunction issued in
notes or debentures (if such interest is violation of this Section is void and of no
required to be paid only out of net profits) or force and effect
distribute any of its capital assets while it • Any judge who has issued the same shall
remains in default in the payment of any suffer the penalty of suspension of at least
assessment due to the Corporation 60 days without pay

Exception :
• If such default is due to a dispute between
the insured bank and the Corporation over
the amount of such assessment and
• Bank deposits security satisfactory to the
Corporation for payment upon final
determination

VI.
PROHIBITION AGAINST
SPLITTING OF DEPOSITS

The penalty of prision mayor or a fine of not

less than P50,000 but not more than
P2,000,000 or both shall be imposed upon
any director, officer, employee or agent of a
bank for :
xxx
5) splitting of deposits or creation of
fictitious loans or deposit accounts.
xxx

VII.
PROHIBITION AGAINST
ISSUANCE OF TROs
• No court, except the CA, shall issue any
TRO, preliminary injunction or preliminary
mandatory injunction against the
Corporation.

[Lorybeth_Baldrias.head] [Nayna_Malayang.deputy] [Dionne_Sanchez.acads] [Jam_Jacob.design]

[Bobbie_StaMaria.printing] [Miles Malaya.lectures] 217
[Japee_DeLeon.poli_law] [Ascheia_Yumul.rem_law] [Paul_Sorino/Judy_Ripol.civ_law] [Hya_Rafael/Mac_Macapagal.crim_law]
[Vivian_Tan/Justin_Mendoza.labor_law] [Miguel_DeJesus.legal_ethics] [Lianne_Gervasio.comm_law]
[Ces_Sicangco/Rowena_Romero.tax_law]