Higher deposit cover eyed
THE PHILIPPINE Deposit Insurance Corp. (PDIC) is studying a possible increase in the maximum deposit insurance coverage from P500,000.
The regulator would discuss the plan with the Financial Stability Coordination Council (FSCC), PDIC President and Chief Executive Officer Roberto B. Tan told a forum where the council released its latest financial stability report on Tuesday.
“We are in the process of studying how we will be increasing our insurance coverage, and what measures we need to instill market discipline and avoid moral hazards or riskier behavior by banks as well as depositors in this respect,” he said.
PDIC provides a maximum insurance coverage of P500,000 per depositor per bank. Under the amended PDIC charter passed in 2022, it may adjust the ceiling based on inflation and other economic indicators without legislation.
The PDIC board must review the maximum deposit insurance coverage every three years.
The agency’s supervision was also transferred to the Bangko Sentral ng Pilipinas (BSP) from the Finance department. The central bank governor is the chairman of the PDIC board, while the Finance secretary is the vice-chairman.
Asked if the FSCC considers deposit insurance a “moral hazard” because insured parties may take on more risks, BSP Governor Eli M. Remolona, Jr. said there is no moral hazard in having deposit insurance.
“Our deposit insurance system was designed to prevent runs in individual banks,” he told the same briefing. “It wasn’t designed for systemic risk. It wasn’t designed for a crisis.”
“In the face of a crisis, there’s no such thing as a threshold on deposit insurance. All deposits have to be safe… The only thing you can do is make all depositors hold. If you worry about moral hazard at that point, you’re already in a crisis.”
The FSCC is an interagency council composed of BSP, Finance, Securities and Exchange Commission, Insurance Commission and PDIC officials.
The council’s executive committee is headed by the central bank governor, with members from the other agencies. — Keisha B. Ta-asan
