REGULATORY FRAMEWORK AND LEGAL ISSUES IN BUSINESS

MIDTERMS
PDIC LAW: PHILIPPINE DEPOSIT INSURANCE CORPORATION LAW
Salient features of the law:
1. Insurance deposits – deposits na pwede mainsure under pdic
2. Maximum liability – max liab to be ensured in one acc
3. Requirements for claims – claim ng pdic, ano yung mga requirements
SHORT BACKGROUND OF PDIC LAW

1. Republic Act No. 3591 – created June 22, 1963, provide an org to execute functions & duties of pdic
2. Republic Act No. 10846 – amendment law 2016, pinagtibay yung authority pdic as liquidator, binago yung 3591,
another law to amend, An Act Enhancing the Resolution and Liquidation Framework for Banks

NATURE AND PURPOSE OF THE PDIC LAW

• To strengthen the mandatory deposit insurance coverage system to generate, preserve, maintain faith and confidence in
the country’s banking system, and protect it from illegal schemes and machinations.
• To achieve this purpose, is to safeguard the interest of depositing public by providing insurance coverage on bank deposits.

FUNCTIONS OF PDIC

1. Deposits Insurer – to convince the public to deposit their money on the bank, mas maraming tao na may pera sa bank mas
tumataas ang economy and flow ng money sa country. Merong guarantee insurance up to the coverage of 500,000.
CLOSING BANKS - liquidation process, uninsured deposits can be filed a claim against the assets of the said bank, but not
covered by the PDIC Law.
2. Liquidator of closed banks
3. Other functions

As deposit insurer, what is the mandate of PDIC

• Effective June 1, 2009, the maximum deposit insurance coverage is P500,00 per depositor.
• All deposit accounts by a depositor in a closed bank maintained in the same right and capacity shall be added together.
• Advantage: guaranteed amount to recover/claim within a short period of time.

Example: Luahalti maintained the following accounts in the close ABC Bank: individual acct

1. Php 1,000,000 – ABC Bank, Monumento, Caloocan branch

2. Php 700,000 – ABC Bank, Karuhatan, Valenzuela branch
3. Php 600,000 – ABC Bank, Cubao, Quezon City branch

Total amount of deposits in 2.3 million Pesos. How much is the insurable deposit? 500,000 maximum deposit insurance, the
remaining of 1.8M can be filed as claimed against the asset of the bank.

• Per depositor, per capacity rule - in determining the amount due to any depositor, added together all deposits in the bank.

What bank deposits can be insured by PDIC?

Within the Philippines

• Deposits of all commercial banks, savings and mortgage banks, rural banks, private development banks, cooperative banks,
savings and loan associations.
• As well as branches and agencies in the Philippines of foreign banks and all other corporations authorized to perform
banking functions in the Philippines, are insured with PDIC.
 • Foreign currency deposits are also insured by PDIC pursuant to RA 6426 (“An act instituting a foreign currency deposit
system in the Philippines, and for other purposes”) and Central Bank (CB) Circular No. 1389. (Extent of 500k)

Outside the Philippines

• As for Philippines banks with branches outside the country, subject to the approval of the Board of Directors, any insured
bank with branch outside the Philippines may elect to include for insurance its deposit obligations payable at such branch.
(Not mandated to be covered by PDIC, just possible by these conditions)
INSURED DEPOSITS
BY DEPOSIT TYPE: BY DEPOSIT ACCOUNT: BY CURRENCY:
• Savings • Single Account • Philippine Peso
• Special Savings • Joint Account • Foreign currencies
• Demand/Checking • Account “By”, “In Trust For” (ITF) or considered as part of
• Negotiable Order of Withdrawal (NOW) “For the Account of” (FAO) another BSP’s international
• Certificate of Time Deposits person. reserves.

Single Accounts are individually owned accounts or accounts held under one name, either as natural person or juridical entity.

o Natural Person refers to any individual person. Single proprietors are considered natural persons.
o Juridical entity refers to a corporation partnership or cooperative.

Joint Accounts are accounts held under more than one name.

o A joint account regardless of whether the conjunction “and”, “or” “and/or” is used shall be insured separately from
single accounts.
o Unless a different sharing is stipulated in the deposit documents, the insured amount up to the Maximum Deposit
Insurance Coverage of Php 500,000 shall be divided equally between or among co-owners of a joint account
o The total shares of a co-owner in several joint accounts may exceed Php 500,000 but will only be insured up to the
Maximum Deposit Insurance Coverage of Php 500,000.
o Joint accounts held in the names of a juridical entity and a natural person shall be presumed to belong solely to the
juridical entity.

"BY" “ITF" or "FAO" Accounts *deposit is owned by the beneficiary*

o In a "By" account, Ana by Ben, Ana is the depositor.

o In an "In Trust For" (ITF) account, Ana In Trust For Ben, Ben is the depositor.
o In a "For the Account of" (FAO) account,

Ana For the Account of Ben, Ben is the depositor

What bank deposits cannot be insured by PDIC?

a) Investment products such as bonds, securities and trust accounts (different to trust fund);
b) Deposit accounts which are unfunded, fictitious or fraudulent;
c) Deposit products constituting or emanating from unsafe and unsound banking practices;
d) Deposits that are determined to be proceeds of an unlawful activity as defined under the Anti-Money Laundering Law.

Example: Luahalti maintained the following accounts in the close ABC Bank: have joint acct

1. Php 1,000,000 – Savings Account, in the name of Lualhati and/or Isko, ABC Bank, Monumento, Caloocan branch
2. Php 700,000 – Savings Deposit in the name of Lualhati & Isko ABC Bank, Karuhatan, Valenzuela branch
3. Php 600,000 – Savings Account, in the name of Lualhati in trust for Digong. ABC Bank, Cubao, Quezon City branch
4. Php 1,000,000 – Savings Account, in the name of: XYZ Corporation and/ or Lualhati

How much is the insurable deposit of Lualhati? 1. 250k (500k/2) 2. 250k (500k/2) 3. To beneficiary 4. belong to Corp (unless
stipulated: 1,2, & 4)
• Joint Accounts - regardless of whether the conjunction “and”, “or”, “and/or” is used, shall be insured separately from any
individually-owned deposit account:
o If the account is held jointly by 2 or more natural persons, or by two or more juridical entities = maximum insured
deposit shall be divided into as many equal shares as there are individuals and juridical persons, unless stipulated
otherwise.
o If the account is held by a juridical person or entity jointly with one or more natural persons = maximum insured
deposit shall be presumed to belong entirely to such juridical person.
o Note: The aggregate of the interest of each co-owner over several joint accounts, shall likewise be subject to MIDC of
500,000 php.

WHAT ARE THE REQUIREMENTS TO AVAIL OF THE INSURABLE DEPOSIT?

Steps how a depositor shall file his/her claim for insured deposit with PDIC

• Depositors will be advised through the national and/or local media and posters at the premises of the closed insured bank
and other public places within the locality on the schedule of distribution of claim forms by PDIC, receiving of claim forms
by PDIC, and the prescriptive date of filing claims by the depositors.
• When shall depositor file his/her insurance claim? - The depositor of the closed insured bank has 24 months from date of
bank takeover to file his deposit insurance claim.

If the depositor of a closed bank fails to file his claim within the 24-month period?

• All rights of the depositor with respect to the insured deposit shall no longer be honored. But he may still make a claim
against the assets of the closed bank.

Individually owned deposit accounts

• All deposit accounts by a depositor in a closed bank maintained in the same right and capacity shall be added
together.

Account in trust for another person

• The account in trust for another person shall be insured for the beneficiary and not for the trustee.
o Example: Hannah holds a savings account in ABC Bank corporation of Php 600,000 for Leny.

Rule for Joint Accounts: Between two or more natural persons, or by two or more juridical persons

a. “and” accounts
b. “or” accounts
c. “and/or” accounts

Rule: If the account is held by a juridical person with one or more natural persons, the maximum insured deposit shall be
presumed to belong entirely to juridical person.
A joint account shall be insured separately from any individually owned deposit account.

Example: Hannah maintains several accounts in the closed ABC Bank:

1. Account 1 – Php 700,000

2. Account 2 – Php 800,000
3. Account 3 – Php 600,000
4. Account 4 – Php 700,000 joint account with Digong under “and/or” account.

How much is the insurable deposit?

Hannah will get MDIC of

a. Php 500,000 for the total sum of her individual accounts and
b. Php 250,000 from her joint account with Digong. The other Php 250,000 will belong to Digong.
 SECRECY OF BANK DEPOSITS LAW
R.A. 1405, as amended

PURPOSE OF THE LAW

1. To give encouragement to the people to deposit their money in banking institutions.

– there are people na ayaw ilagay sa bank yung pera dahil baka masilip yung laman ng bank, or in danger ang
kanilang account. Para maiwasan ang ganitong scenario, general rule of this law is to limit kung sino lang
makakakita ng account at hindi ma-rereveal ang kanilang account to public.
2. To discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in
the economic development of the country.
– maiwasan yung pagtago ng pera sa sariling paraan (private hoarding)

DEPOSITS COVERED

• Substance of this Law or as a General Rule:

• Which means absolutely confidential and may not be examined, inquired or looked into by any person,
government, official, bureau or office.

1. All deposits (Peso or foreign) of whatever nature with banks or banking institutions in the Philippines.

2. Including Investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities.

• Distinguish deposits in peso from that in foreign currency with respect to the Secrecy of Bank Deposits Law.
• Include the case of salvacion as an exception to the rule in foreign currency deposit.

*garnish = attach ng court na isasama sa case ang bank account. So later on, magagamit yun para pambayad.

Points of Comparison Peso Deposit Foreign Currency

(R.A. 6426)
1. As whether or not it May be garnished because the amount is May not be garnished, attached or be
may be garnished actually not disclosed. subject to any court process
Instances when a 1. Upon order of competent court: a. Waiver/ written permission of the
deposit may be depositor – before ito lang ang exception
examined or inquired a. In case of bribery or dereliction of duty of
into: public officials. b. Under Sec. 11 of AMLA
b. Anti-graft and corrupt practices act
Refer to the specific c. When the money deposited is the c. Under Sec.27 and 28 of the Human
articles subject of the subject of the litigation. Security Act.
exception. d. Impeachment
e. As a rule, bank accounts involving all d. Sec.10 of RA10168, where AMLC is
AMLA cases, requires court order before authorized to inquire into or examine
may be inquired into. deposits and investments with any banking
institution and their subsidiaries and
However, there are certain AMLA cases, affiliates without court order.
where the deposit may be inquired into
without need of court order. AMLA related cases under the following
circumstances:
• Kidnapping for ransom
• Drugs • When AMLC seeks to examine
• Hijacking suspicious deposits.
• Destructive Arson • Upon order of the court
• Without court order upon proper
cases
 • Murder when perpetrated by • When there is probable cause of
terrorist against non-combatant money laundering
person. e. Examination and disclosure to the
Commissioner of Internal Revenue under Sec.
f. Unexplained wealth under Anti-Graft and 6 (F) of the NIRC.
Corrupt Practices Act
f. Disclosure to the BSP in the course of
examination to ensure compliance with the
Anti-Money Laundering Act; and
2. Other exceptions without need of court
order: g. PDIC’s inquiry into and examination of
deposit accounts and all information related
g. When there is written permission of the thereto in case there is a finding of unsafe or
depositor or investor. unsound banking practice under par 8, sec 8,
of RA 3591 as amended by RA 9576.
h. Upon inquiry by the CIR/BIR
Commissioner for the purpose of In Salvacion vs. Central Bank –
determining the gross estate of a deceased
depositor. An American tourist found guilty of
repeatedly raping a 12-year-old child was
i. Compromise tax liability due to financial held civilly liable to pay Php 1 million. The
incapacity. court allowed the foreign deposit to be
examined, garnished, and then released to
- Check what are other grounds for tax the rape victim.
liability compromise. Para sa exam.
Determine what is the reason of the court.
j. Unclaimed Balances Act – in case of Exception: Subject to garnishment to prevent
dormant deposits for at least 10 years) injustice and for equitable grounds