Philippine Deposit Insurance Corporation (PDIC) negotiability of the certificates evidencing these deposits. PDIC vs.

CA 1998
Basic policy
• Promote and safeguard the interest of the depositing public by way
of providing permanent and continuing insurance coverage on all Deposit liabilities required to be insured with PDIC
insure deposits.
1. The term “ deposit” means the unpaid balance of money or its
Concept of insured deposits equivalent received by a bank in the usual course of business and for
which it has given or is obliged to give credit to a commercial, checking,
1. The term “Insured deposits” means the amount due to any bona savings time or thrift account.
fide depositor for legitimate deposits in an insured bank net of any
obligation of the depositor to the insured bank as of the date of the 2. The deposit must give rise to creditor-debtor relationship
closure but not to exceed P 500,000. between the bank and the depositor.

2. The term “deposit” means the unpaid balance of money or 3. Deposits in a branch of domestic bank outside the Philippines shall
equivalent received by a bank in the usual course of business and for not be covered unless the insured bank elects to include the same for
which it has given or is obliged to give credit to a commercial, insurance subject to approval of the PDIC.
checking, savings, time or thrift account or which is evidenced by
passbook, check and/or certificate of deposit printed or issued in Commencement of liability
accordance with Central bank rules and regulations and other 1. PDIC shall commence the determination of insured deposits due to
applicable laws, together with such other obligations of a bank which, the depositors of the closed bank upon its ACTUAL take-over of the
consistent with banking usage and practices, the board of directors shall closed bank.
determine and prescribe by regulations to be deposit liabilities of the
Bank. PDIC vs. CA 1998 2. Under its charter (RA 3591), PDIC is liable only for deposits
received by a bank “in the usual course of business”. Even though a
Liability to depositors bank was prohibited by CB from doing further business on the ground of
insolvency, the bank and its clients could be given the benefit of the
1. PDIC can only be liable if doubt that they were not aware that the Monetary Board resolution
a. the insured bank actually receives deposit and had been passed, given the necessity of confidentiality of placing a
b. the bank is ordered closed by BSP. banking institution under receivership. If on the next banking day
following the issuance of the Monetary Board Resolution, the epositor
2. Where no deposit (as defined in Section 3(f) of Republic Act No. PRE-TERMINATED his time deposits and RE-DEPOSITED the funds
3591) came into existence, PDIC cannot be held liable for the value into smaller denominations; said deposits were STILL for a
of time deposit certificates. consideration and COVERED by the PDIC insurance coverage. PDIC
vs. CA (2003)
The LIABILITY of PDIC for insured deposits is STATUTORY and under
RA 3591, as amended, such liability RESTS UPON THE EXISTENCE Deposit accounts not entitled to payment
with the insured bank, NOT on the negotiability or non- *PDIC shall not pay deposit insurance for the following accounts or
transactions whether denominated, documented, recorded or booked
as deposit by the bank;

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 1. investment products such as bonds and securities, trust Mode of payment
accounts, and other similar instruments; • Whenever an insured bank shall have been closed by the MB,
2. deposit accounts or transactions which are unfunded, or that payment of the insured deposits shall be made by PDIC as soon as
are fictitious or fraudulent; possible either by
3. deposit accounts or transactions constituting unsafe and • 1) cash or
unsound banking practices as determined by PDIC, in • 2) making available to each depositor a transferred deposit
consultation with BSP, after in another insured bank in an amount equal to insured
• a. due notice and hearing, and deposit of such depositor, subject to submission of proof of
• b. publication of a cease and desist order issued by claims.
the PDIC against such deposit accounts or
transactions; and Effect of payment of insured deposits
4. deposits that are determined to be the proceeds of an • PDIC, upon the payment of any depositor, shall be subrogated to all
unlawful activity as defined under the Anti-Money the rights of the depositor against the closed bank to the extent of such
Laundering law payment.
• Subrogation shall include the right on the part of PDIC to receive
Extent of liability Determination of insured deposits; Calculation the same dividends from the proceeds of the assets of such closed
of liability; per depositor, per capacity rule; joint accounts bank and recoveries on account of stockholders’ equity as would
have been payable to the depositor on a claim for the insured deposit
1. Deduct any loan of the depositor from the deposit with the insured • but such depositor shall retain his claim for any uninsured
bank to determine net insured deposit portion of his deposit.
2. Individually owned deposit account is insured separately from joint
accounts regardless of whether the conjunction “ and “, “ or “ , “ and/or Failure to settle claim of insured depositor
“ is issued. In determining such amount due to the depositor, there shall • The failure to settle the claim within six months from date of filing of
be added together all deposits in the bank maintained in the same the claim for insured deposit whether such failure was due to grave
right and capacity for his benefit abuse of discretion, gross negligence, bad faith or malice shall, upon
either in his own name or in the name of others. conviction, • subject the directors, officers or employees of PDIC
3. if the account is held jointly by two or more natural persons or responsible for the delay, to mprisonment from six months to one
two or more juridical entities, the maximum insured deposit shall be year;
divided into as many equal shares as there are many individuals or • provided that the period shall not apply if the validity of the claim
juridical entities, unless a different sharing is stipulated in the deposit requires the resolution
document. of issues of facts and/or law by PDIC or another office, subject further
4. If the account is held by a juridical person jointly with a natural to the remedy of PDIC to require final determination of a court of
person, the maximum insured deposit shall be presumed to belong competent jurisdiction if PDIC is not satisfied as to the viability of the
entirely to the juridical person. claim for insured deposit.
5. The aggregate of the interests of each co-owner over several joint
accounts, whether owned by the same or different combination of Failure of depositor to claim insured deposits
individuals, juridical persons or entities shall likewise be subject to • Unless otherwise waived by PDIC, if the depositor in the closed bank
the maximum insured deposit of P500,000. shall fail to claim his insured deposit with PDIC within two years from

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actual take over of the closed bank by the receiver or does not enforce injunction against PDIC for any action on its part under the PDIC
his claim filed with PDIC within two years after the two year period to charter.
file a claim, all rights of the depositor against the PDIC with respect to • The Supreme Court may issue a temporary restraining order or
the insured deposit shall be barred; injunction when the matter is of extreme urgency involving a
constitutional issues such that unless a TRO is issued, grave injustice
• however, all rights of the depositor against the closed bank and its or irreparable injury will arise.
shareholders or the receivership estate to which the PDIC may have • GR: The actions of PDIC with respect to determination of insured
become subrogated shall thereupon revert to the depositor. deposit accounts shall be final and executory and may not be set
aside or restrained by the court
Examination of banks and deposit accounts • XPN: except on petition for certiorari on the ground that the action
• PDIC may conduct examination of banks with prior approval of the was taken in excess of jurisdiction or with grave abuse of discretion
MB as to amount to lack or excess of jurisdiction.
• provided that no examination can be conducted within 12 months • The petition for certiorari may only be filed within 30 days from
from the last examination date; notice of denial of claim for deposit insurance.
• provided however that PDIC may, in coordination with BSP conduct a
special examination if there is a threatened or impending closure
of a bank.
• Notwithstanding RA 1405, RA 8791, RA 6426 and other laws, PDIC
and/or BSP may inquire into or examine deposit accounts and all
information related thereto in case there is a finding of unsafe and
unsound banking practice**

Prohibition against splitting of deposits

• Splitting of deposits occurs whenever a deposit account with an
outstanding balance of more than the statutory maximum amount of
insured deposit maintained under the name of natural or juridical
persons is
• broken down and transferred into two or more accounts in the
name/s of natural or juridical persons or entities who have no
beneficial ownership on transferred deposits in their names
• within 120 days immediately preceding or during a bank
declared holiday or immediately preceding a closure order by the
BSP
• for the purpose of availing of the maximum deposit insurance
coverage.
• Such splitting of deposit is punishable by imprisonment and/or fine.
Prohibition against issuance of TRO
• No court, except the Court of Appeals, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory

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 corresponding to the same, he is entitled to recover only up to P10,000.00 in
case of closure and liquidation of the bank. (BAR 1977)

3. When Oriental Bank was ordered close by Central Bank on May 15, 1985,
Elizabeth Diaz had 3 separate deposit accounts in her name with the same
1. X, a bank depositor has a P15,000 savings deposit and a P20,000 time deposit
bank, namely: P200,000 in time deposit; P100,000 in current deposit; and
with a bank. If the bank becomes insolvent, and is closed by the Government,
P50,000 in savings deposit. Under the PDIC law, how much, if any, could she
how much if any, is the guaranteed amount he can obtain as a
recover from each of the 3 separate accounts? Explain.
matter of right for the two accounts? Explain.
Answer:
Answer:
Under the PDIC law, Elizabeth Diaz, although having 3 separate deposit
He can only obtain P10,000 as a matter of right, by way of guarantee. Under the
accounts in her name, totaling P350,000, in the Oriental Bank which was
Philippine Deposit Insurance Act, the maximum amount covered by insurance
ordered close by the Central Bank, can recover only the aggregate amount of
is P10,000. And by express provision of law, this includes all kinds of deposits
P40,000 because the maximum amount of the insured deposit of any depositor,
—savings current as well as time deposits—in the name of or for the benefit of
not for every account of a depositor in the bank, is only P40,000.
one person. (BAR 1975)
Note: Section 4 (g) of RA No. 9302 provides that the term “insured deposits”
Note: The term “insured deposits” means the amount due to any bona fide
means the amount due to any bona fide depositor for legitimate deposits in an
depositor for legitimate deposits in an insured bank net of any obligation of the
insured bank net of any obligation of the depositor to the insured bank as of the
depositor to the insured bank as of the date of the closure but not to exceed
date of the closure but not to exceed P500,000.00. (BAR 1985)
P500,000. (Sec.4 (g), RA 9302)
4. An employee of a large manufacturing firm earns a salary which is just a bit
2. The Deposit Insurance Law insures deposits up to P10,000.00 per depositor.
more than what he need for a comfortable living. He is thus able to still
X has three separate deposits in a single bank, namely, P15,000.00—Savings
maintain a P10,000 savings account, a P20,000 checking account, a P30,000
Deposit; P15,000.00—Current Deposit (checking account). Later on, the bank
money market placement and a P40,000 trust fund in a medium-size
ran into financial trouble and was ordered by the Central Bank to close and
commercial bank.
liquidate. How much may X recover? Answer with reasons.
State which of the four accounts are deemed insured by the PDIC?
Answer:
Answer:
X may recover only up to P10,000.00. According to Sec. 3(f) of the Deposit
The P10,000 savings account and the P20,000 checking account are deemed
Insurance Corporation Act the term “deposit” means the unpaid balance of
insured by the PDIC. (BAR 1997)
money or its equivalent received by a bank in the usual course of business and
for which it has given or is obliged to give credit to a commercial, checking,
5. When OCCIDENTAL Bank folded up to insolvency, Manuel had the following
savings, time or thrift account or which is evidenced by its certificate of deposit,
separate deposits in his name; P200,000 in savings deposit; P250,000 in time
and trust funds held by such bank x x x. “The fact therefore that X has savings,
deposit; P50,000 in a current account; P1 M in a trust account; and P3 M in
time, and current deposits in the same bank is immaterial. They all came under
money market placement. Under the PDIC Act, how much could Manuel
the same heading of deposit”
recover?
In Sec. 3(g) of the same Act, the term “insured deposit” is defined as the net
Answer:
amount due to any depositor for deposits in an insured bank (after deducting
Manuel can recover P500,000 because this is the total of his savings deposit,
offset) less any part thereof of which is in excess of P10,000.00 x x x.” Likewise,
time deposit and current account. The trust account and the money market
Sec. 10(a) thereof, insofar as pertinent provides: “That the maximum amount of
placements are not included in the insured deposits. (BAR 2010)
the insured deposit of any depositor shall be P10,000.00”. Evidently,
irrespective of kinds of deposits of a particular depositor and the total amount

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6. X is a depositor of AAA Bank. She has 3 deposit accounts all under her name.
One, in checking account, one in saving account and another one in time deposit
account. Each account has a balance of P250,000. AAA Bank became insolvent.
PDIC closed the Bank. X therefore is unable to withdraw from all of the
accounts. She then filed her claims with the PDIC. Which statement is most
accurate?
Answer:
a) X can claim a total of P500,000 for all 3 accounts. (BAR 2012)