Partners in promoting financial stability-A A +A
Monday, September 16, 2013
THE success of the banking industry relies heavily on public trust and confidence. If people are not willing to entrust their hard-earned money to banks, the banks cannot fund loans or make investments that will help grow our economy.
That is why as supervisor and regulator of all banks, the Bangko Sentral ng Pilipinas (BSP) is keenly focused on promoting the stability of the banking system and helping them improve the services that banks provide to the public.
This way, people will feel secure about the banking sector, which plays a huge role as financial intermediary between the providers and the users of funds.
Fortunately, the BSP is not alone in promoting stability and public confidence in our banking system, which is made up of 9,477 bank branches and offices as of June 2013.
A partner of long standing is the Philippine Deposit Insurance Corporation or PDIC.
The PDIC is a government corporation attached to the Department of Finance and serves primarily as the insurer of bank deposits.
As of now, the PDIC insures deposits up to a maximum amount of P500,000.
However, the task of the PDIC does not end there.
Established in 1963 by virtue of Republic Act 3591, PDIC is also tasked to act as receiver of closed banks.
As receiver, PDIC tries to ensure that assets of padlocked institutions are not further dissipated and that depositors and creditors receive the most value from residual assets of closed banks.
The PDIC also tries to determine, within a period a 90 days from a bank’s closure, whether there is a chance for the closed bank to re-open. Re-opening sometimes becomes viable with the entry of a “white knight” which injects fresh capital and new management to the closed bank.
PDIC has also been granted by law the concurrent authority and responsibility to examine the banks, alongside the BSP.
Recently, the BSP and PDIC signed an amended Memorandum of Agreement (MOA) on joint bank examination. The MOA was signed by BSP Governor Amando M. Tetangco Jr. and PDIC President Valentin Araneta. Acting as witnesses were EVP Imelda S. Singzon and VP Shirley G. Felix of PDIC, and Managing Director Chuchi Fonacier and Managing Director Leny Silvestre of BSP.
In the words of Governor Tetangco, the amended MOA sought to tighten examination procedures “to avoid overlapping of functions and efforts, enhance(s) data-sharing arrangement, and maximize(s) the use of reports and resources.”
The amended MOA also provided the PDIC more flexibility in terms of the types of banks it can jointly examine with the BSP.
Without doubt, the amended MOA further strengthens the long-standing partnership between the BSP and PDIC in promoting a sound and responsive banking system.
Note: My book Central Banking for Every Juan and Maria is available in major branches of Fully Booked, Power Books, National Bookstore and the UP University Press.