THE Philippine Deposit Insurance Corp. (PDIC) is considering an increase in the maximum deposit insurance coverage (MDIC), nearly 15 years after this was pegged to P500,000, a senior official said Tuesday, Feb. 13.
According to PDIC president and chief executive officer Roberto Tan, the agency — which is mandated to insure the deposits of all banks in the country — is now working with the Bangko Sentral ng Pilipinas (BSP) and the Financial Stability Coordination Council (FSCC) to look into the matter.
“For now we are in the process of studying how we will be increasing our deposit insurance coverage, to what level, and what measures are needed to instill market discipline and to avoid moral hazard and riskier behavior by banks as well as depositors in this respect,” he said on the sidelines of the launch of the Financial Stability Report (FSR) in Manila.
The MDIC is currently set at P500,000, a level that took effect on June 1, 2009, doubling the previous P250,000 as a preemptive and precautionary measure should local lenders be adversely affected by the then-ongoing global financial crisis.
“The maximum deposit insurance coverage and our intention to raise it don’t mean that it’s a standalone action. Definitely, we will need to coordinate and work with the Bangko Sentral on the behavior, the risky behavior this can create once we increase, let’s say, our deposit insurance coverage,” Tan said.
He added: “The governor and the FSCC will be consulted on measures that we have to implement to discipline the market against moral hazard behavior because of a higher insurance coverage.”
The FSCC is an inter-agency council composed of principals from the BSP, the Department of Finance (DOF), the Securities and Exchange Commission (SEC), the Insurance Commission, and the PFIC, who convene quarterly.
The council, chaired by BSP governor Eli Remolona Jr., on Tuesday released the FSR for 2023 which highlighted optimism moving forward citing the local economic growth which is above global average, and the slowdown of inflation.
The Philippine economy grew by 5.6% in the fourth-quarter and the full-year 2023. While this marked a deceleration from the 7.6% expansion in 2022, and is lower than the government’s target range of 6.0% to 7.0%, it is also above the global average.
Meanwhile, inflation averaged 6.0% in 2023, marking an acceleration from 5.8% in 2022, due mainly to the higher food prices during the year.
“What is arguably driving the positive outlook in the market is the fact that the recovery from the pandemic turned out to be much stronger than expected, with little evidence of scarring,” Remolona said in the report.
“To borrow from investment terminology, we believe that we are squarely in the Risk-On part of the financial cycle. There is momentum, and that is something that should be nurtured and its opportunities maximized,” he added. (GMA Integrated News)
