March 19, 2021
(Pleasantries) Senator Sonny Angara, Vice Chairperson of the Senate Committee on Banks, Financial Institutions and Currencies; Senator Franklin Drilon; Senator Imee Marcos; Senator Ramon Revilla, Jr.; Bangko Sentral ng Pilipinas Governor Benjamin Diokno; President Roberto Tan of the Philippine Deposit Insurance Corporation; fellow workers in government; ladies and gentlemen: Good morning.
The Philippine Deposit Insurance Corporation plays a vital role in the development of the banking industry and the stability of the financial sector in the country. By providing insurance coverage for small depositors, the PDIC encourages small savers to entrust their hard-earned savings to our banks.
That assurance helps build a more inclusive banking system. It promotes a broader depositor base for our banks and a better savings rate for our economy. In addition, the PDIC insurance coverage prevents bank failures from inflicting a larger dislocation in our market. All these are necessary to build a strong financial system.
We can further enhance the vital role played by the PDIC in our economy to boost the public’s confidence in the banking system, especially during these challenging times as mentioned by Senator Revilla.
We support the bill filed by Senator Sonny Angara and Senator Revilla amending the PDIC Charter to further strengthen the institution.
The proposed amendments aim to remove the regulatory overlap between the Bangko Sentral ng Pilipinas and the PDIC. There should be only one regulator for banks and that should be the BSP. The PDIC can, therefore, focus on its role as a deposit insurer and as a liquidator.
By sharpening the focus of the PDIC to that of a “pay box” for insurance claims and as liquidator of failed banks, we will ensure even better institutional efficiency than what we have at present. All regulatory functions, such as the issuance of cease-and-desist orders relating to unsound banking practices will be ceded entirely to the BSP. This will help prevent confusing functions and confounding signals to the industry.
One of the primary mandates of the BSP is to ensure financial stability. Considering that the PDIC is a vital component to achieving a solid financial system, it is best to transfer the institution as an attached corporation to the BSP. This will ensure better coordination between the two agencies.
Meanwhile, the last time the PDIC’s deposit insurance coverage was increased was 12 years ago. Through the efforts of Senator Sonny Angara’s father, the late former Senate President Edgardo Angara, the deposit insurance coverage of the PDIC increased from 250 thousand to 500 thousand pesos.
It took the passage of a law spearheaded by the late Senator Angara to get this done. The law heightened the confidence of our people to deposit their hard-earned money in our banks amid uncertainties triggered by the 2008 Financial Crisis.
Over the years, we have understood the need to provide the PDIC Board with the flexibility to adjust the maximum deposit insurance coverage periodically based on prevailing economic indicators.
The proposed amendments remove the tedious process of passing a law each time the maximum coverage needs to be adjusted. They will also do away with the requirement of a BSP-determined financial crisis to make a routine adjustment in the insurance coverage levels. In other words, the proposed bill will make the PDIC more responsive to the constantly changing financial landscape.
With this, the PDIC will be better capable of fulfilling its mandate of providing insurance coverage for small depositors and supporting a sound and stable banking system. As an institution, it will be more nimble and adept in responding to prevailing economic conditions, such as elevated inflation rates or sharp currency fluctuations.
In addition, the proposed amendments will provide the PDIC Board of Directors the flexibility to set up insurance coverage for new technology-driven financial products, as well as for depositors in Islamic banks. This would ensure that the PDIC is able to adequately protect depositors in the Islamic banking system and other financial services. This has the potential to expand banking services in the country and broaden financial inclusion among all our people.
The bill will also promote the alignment of the compensation structure of the PDIC with other government owned and controlled corporations. The framework will provide for base pay structures that are comparable with the private sector. This will take into consideration the PDIC’s unique function, the complexity of its operations as well as its financial capacity and sustainability. With the proposal, the government will be able to adhere to its policy of equal pay for work of equal value.
Lastly, the amendments will clarify how the Dividend Law applies to the PDIC in remitting portions of its income to the Bureau of the Treasury. A new clause on dividend remittances will be added to the PDIC Charter to provide the corporation the flexibility it needs to ensure that it has sufficient funds to pay insurance claims, if needed.
Overall, the proposed amendments are reasonable. These will ensure that the PDIC will be fully capable of protecting our people’s hard-earned savings. The bill will also help in revitalizing our economy over the long term.
If I may quote the late Senator Edgardo Angara on his sponsorship of the bill amending the charter of PDIC in 2008: “These are extremely confusing times where panic can only make matters worse. Maintaining, if not restoring confidence in the banking system should be our priority. A stable and dependable deposit insurance system shores up depositor confidence. It also guarantees the sufficiency of credit to finance vital economic activities in the country. Financial reform in the PDIC is very timely since it aims to safeguard the interest of the depositing public”. These words ring very true today.
We hope for your continued support in improving the institutions that will further make our banking system credible and stable.
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