FOURTEENTH CONGRESS OF THE 
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REPUBLIC OF THE PHILIPPINES 
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Second Regular Session 
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INTRODUCED BY HONORABLE MAR ROXAS 
EXPLANATORY NOTE 
Over the past few weeks, we witnessed the United States, the world's largest 
economy, beset by massive foreclosures, shrinking consumer spending and rising inflation. 
The turmoil has, so far, led to three of its five major investment banks-Bear 
Stearns, the 
158-year old Lehman Brothers, and Merrill Lynch & Co.-to 
fold up, file for bankruptcy, or 
be sold to other banks. The US Federal Government also had to rescue its biggest insurance 
company, the American International Group Inc. (AIG), at the cost of $85 billion. 
With the collapse of the US mortgage market, US banks and financial institutions, as 
primary lenders, sustained the hardest and most crippling losses. The sudden drop in the 
value of the capital assets they held coupled by their accumulating debts have caused write 
downs estimated at $334 billion, setting off a wave of costly bank closures unprecedented in 
the history of the United States. 
These events have generated fear among bankers and 
investors, triggering a severe credit crunch and staggering worldwide stock market plunges. 
The $700 billion bailout package infused by the US Federal Government into its banking 
system, meant to address the problem, seemed to have accomplished little to contain the 
panic and uncertainty. 
The Philippine banking system has soundly held out, as it remains stable amidst the 
turbulence. However, it must be emphasized that our banking system is only as strong as the 
trust and confidence reposed in it by the public. Should fear and panic prevail, the stability of 
our banking system will be eroded. Thus, measures must be enacted to maintain and shore 
up confidence in our banking industry, to shield depositors from bank failures, and to ease 
the impending impact of the global financial crisis to the Philippine economy. 
A well-functioning deposit insurance protects the public from market imperfections 
by guaranteeing the liquidity of their insured deposits and assuring them that their hard- 
earned savings, or at least a portion thereof equivalent to the covered insured deposit, would 
be safe, intact and available for withdrawal by depositors, notwithstanding the performance 
of their banks. The guarantee of a prompt access to deposits even in bank failures reduces the 
possibility of a "run" on banks. In short, deposit insurance prevents panic from spreading 
throughout a financial system, which can severely threaten even the healthiest of banks. 
This bill seeks to cushion the Philippines from the impact of the current global 
economic turmoil and assure Philippine depositors that their hard-earned savings are 
adequately protected and safeguarded by the Philippine Deposit Insurance Corporation 
(PDIC) through the adoption of the following primary and secondary measures: 


Increme of deposikizuurance from P250,W.OO to PSOO,W.OO. The primary proposal 
is to increase the maximum deposit insurance coverage (MDIC) provided by PDIC from 
P250,OOO.OO to P500,OOO.OO per depositor for a period of three years from the effectivity of 
this Act. We note that this initiative comes on the heels of countries all over the world 
substantially increasing the deposit guarantee for their citizens to encourage savers to keep 
their deposits in the banks and to even attract more depositors. The British Government has 
recently increased the guarantee to its savers from E35,000 to €50,000. The governments of 
Spain, Belgium and The Netherlands have agreed to raise deposit guarantees from €20,000 to 
€100,000. Some deposit insurers in Asia have also increased their deposit insurance to cover 
all deposits. The Federal Deposit Insurance Corporation of the United States of America 
opted for a temporary increase of its deposit insurance coverage. 
To mitigate the moral hazard resulting from the increase in the MDIC, additional 
amendments to the PDIC Charter are indispensable to achieving the task at hand. These are: 
AuthoriV to conduct independent emmhatiom. PDIC's authority to examine banks 
is limited by the need for prior Monetary Board approval and the requirement of a 12-month 
period between examinations. Upon the expansion of PDIC's responsibilities under this bill, 
PDIC must be granted independent examination powers for it to be able to: (1) determine the 
condition and performance of banks in an adequate and timely manner, (2) determine the 
amount of risks undertaken by covered banks and impose appropriate risk premiums for 
banks in danger of closing, and (3) obtain all information necessary for the purpose of 
determining and effectively implementing the appropriate and most cost-effective resolution 
method for distressed banks so that its depositors are paid efficiently and effectively. 
Authority to assess additional risk premium on banks. An increase in the deposit 
insurance coverage increases moral hazard such as banks taking excessive risks (like offering 
above market interest rates on deposits without the commensurate income to support such 
rates) to encourage deposit growth with depositors confident of being protected from losses 
due to PDIC insurance coverage. This moral hazard can easily defeat the purpose for which 
the present reforms are being made. To curb moral hazard, it is necessary to impose a risk 
premium, on top of the existing flat rate assessment, on banks found to be at risk by PDIC 
based on an evaluation of the bank's performance and condition, or, when there is a financial 
crisis. 
The exigency of this bill cannot be overstated, as the full impact of the global 
financial crisis may be felt in the Philippines at any time. Through these reforms in the 
country's deposit insurance system, it is hoped that the Philippine banking industry, and the 
millions of Filipino depositors whose hard-earned savings are at stake, would become better 
prepared to withstand the dreadful effects of the financial credit crunch. 
In view of the foregoing, approval of this bill is earnestly requested 


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FOURTEENTH CONGRESS OF THE 
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REPUBLIC OF THE PHILIPPINES 
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Second Regular Session 
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S E N A T E  
S. B. No. 
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INTRODUCED BY HONORABLE MAR ROXAS 
AN ACT 
GRANTING BROADER PROTECTION TO BANK DEPOSITORS AND 
REFORM 
POWERS TO THE PHILIPPINE DEPOSIT INSURANCE 
CORPORATION BY AMENDING REPUBLIC ACT NO. 3591, AS AMENDED, 
OTHERWISE KNOWN AS “THE CHARTER OF THE PHILIPPINE DEPOSIT 
INSURANCE CORPORATION AND FOR OTHER PURPOSES. 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assern bled: 
SECTION 1. Section 4, paragraph (g) of Republic Act No. 3591, as amended, is further 
amended as follows: 
“(8) The term “insured deposit” means the amount due to any depositor for deposits in 
an insured bank net of any obligation of the depositor to the insured bank as of the date of 
closure, but not to exceed two hundred fifty thousand pesos (P250,OOO.OO). Such net amount 
shall be determined according to such regulations as the Board of Directors may prescribe. In 
determining such amount due to any depositor, there shall be added together all deposits in 
the bank maintained in the same right and capacity for his benefit either in his own name or 
in the name of others. A joint account regardless of whether the conjunction “and,” “or,” 
and/or” is used, shall be insured separately from any individual-owned deposit account: 
Provided, That (1) if the account is held jointly by two or more natural persons, or by two or 
more juridical persons or entities, the maximum insured deposit shall be divided into as 
many equal shares as there are individuals, juridical persons or entities, unless a different 
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sharing is stipulated in the document of deposit; and (2) if the account is held by a juridical 
person or entity jointly with one or more natural persons, the maximum insured deposit 
shall be presumed to belong entirely to such juridical person or entity: Provided, further, 
That the aggregate of the interests of each co-owner over several joint accounts, whether 
owned by the same or different combinations of individuals, juridical persons or entities, 
shall likewise be subject to the maximum insured deposit of two hundred fifty thousand 
pesos (P250,OOO.OO): Provided, furthermore, that the provisions of any law to the contrary 
notwithstanding, no owner/holder of any negotiable certificate of deposit shall be recognized 
as a depositor entitled to the rights provided in this Act unless his name is registered as 
ownedholder thereof in the books of the issuing bank. 
FOR THE PERIOD OF THREE YEARS FROM THE EFFECTIVITY OF THIS ACT, 
THE MAXIMUM INSURANCE DEPOSIT COVERAGE SHALL BE INCREASED FROM 
TWO HUNDRED FIFTY THOUSAND PESOS (P250,OOO.OO) TO FIVE HUNDRED 
THOUSAND PESOS (P500,000.00).” 
SECTION 2. Section 6, paragraph (a) of Republic Act No. 3591, as amended, is further 
amended as follows: 
“Section 6. (a) The assessment rate shall be determined by the Board of Directors: 
Provided, that the REGULAR assessment rate shall not exceed one-fifth (1/5) of one per 
centum (1%) per annum; PROVIDED THAT THE BOARD OF DIRECTORS OF THE 
CORPORATION, 
THROUGH 
APPROPRIATE 
IMPLEMENTING 
RULES 
AND 
REGULATIONS, MAY PRESCRIBE A RISK-BASED RATING SYSTEM APPLICABLE TO 
ALL MEMBER BANKS, WHEREIN AN ADDITIONAL RISK PREMIUM ASSESSMENT OF 
A MAXIMUM OF ONE-HALF (112) OF ONE PER CENTUM (19’0) MAY BE IMPOSED ON 
BANKS WHOSE RISK RATING FALLS BELOW SATISFACTORY. THE RISK PREMIUM 
ASSESSMENT SHALL BE IN ADDITION TO THE REGULAR ASSESSMENT RATE. The 
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semi-annual assessment for each insured bank shall be in the amount of the product of one- 
half (ID) the assessment rate multiplied by the assessment base but in no case shall it be less 
than five thousand pesos (P5,OOO.OO). The assessment base shall be the amount of the 
liability of the bank for deposits as defined under subsection (f) of Section 4 without any 
deduction for indebtedness of depositors. 
The semi-annual assessment base for one semi-annual period shall be the average of 
the assessment base of the bank as of the close of business on March thirty-one and June 
thirty and the semi-annual assessment base for the other semi-annual period shall be the 
average of the assessment base of the bank as of the close of business on September thirty and 
December thirty-one: Provided, that when any of said days is a non-business day or legal 
holiday, either national or provincial, the preceding business day shall be used. The certified 
statements required to be filed with the Corporation under subsections (b) and (c) of this 
Section shall be in such form and set forth such supporting information as the Board of 
Directors shall prescribe. The assessment payments required from the insured banks under 
subsections (b) and (c) of this Section shall be made in such manner and at such time or times 
as the Board of Directors shall prescribe, provided the time or times so prescribed shall not 
be later than sixty (60) days after filing the certified statement setting forth the amount of 
assessment. 
SECTION 3. Section 8, paragraph Eighth of Republic Act No. 3591, as amended, is 
hereby amended to read as follows: 
“Eighth - [To conduct examination of banks with prior approval of the Monetary 
Board: Provided, that no examination can be conducted within twelve (12) months from the 
last examination date:] TO CONDUCT INDEPENDENT EXAMINATIONS OF BANKS, AS 
PROVIDED IN THIS ACT, SUBJECT TO RULES AND REGULATIONS PRESCRIBED BY 
THE BOARD OF DIRECTORS OF THE CORPORATION: Provided, [further,] that, to avoid 
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overlapping of efforts, the examination shall maximize the efficient use of relevant reports, 
information and findings of the Bangko Sentral NG PILIPINAS (BSP) which it shall make 
available to the Corporation[:]. [Provided, finally that the Board of Directors shall, in close 
coordination with the Monetary Board, prescribe such guidelines as may be necessary to 
ensure that there are no duplications of functions.] THE CORPORATION IS, LIKEWISE, 
AUTHORIZED TO MAKE ITS EXAMINATION REPORTS AVAILABLE TO THE BSP; 
PROVIDED FINALLY, THE CORPORATION MAY PARTICIPATE WITH THE BSP IN 
THE EXERCISE OF THIS AUTHORITY TO EXAMINE BANKS WHENEVER THE BOARD 
OF DIRECTORS OF THE CORPORATION DEEMS IT NECESSARY.” 
SECTION 4. Separability Clause. - If, for any reason, any section or provision of this 
Act shall be held unconstitutional or invalid, the other section or provision not otherwise 
affected shall remain in full force and effect. 
SECTION 5. Repealing Clause. - All laws, presidential decrees, executive orders, 
proclamations, rules and regulations which are inconsistent with the provisions of this Act 
are hereby repealed or modified accordingly. 
SECTION 6. Effectivity Clause. - This Act shall take effect fifteen (15) days from its 
publication in the Official Gazette or in at least two (2) newspapers of general circulation. 
Approved, 
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