On February 27, the Philippine Deposit Insurance Corporation (PDIC) announced it would be doubling the maximum deposit insurance coverage (MDIC) from P500,000 to P1 million per depositor per bank, effective March 15.

PDIC president Roberto Tan cited the country’s economic growth and inflation, which has eroded the value of the MDIC since it was last raised in 2009. (READ: PDIC raises maximum deposit insurance to P1 million)

However, at a press conference on Friday, March 14, the state deposit insurer clarified that the MDIC does not cover funds lost due to scams or hacking.

“’Yung insurance ng PDIC (The PDIC insurance) would kick [in] only if a bank is closed by the Bangko Sentral. It does not cover any other instance, but only when a bank fails or when a bank is closed,” said Sandra Diaz, PDIC’s senior vice president for management services sector.

What is the deposit insurance for?

Deposit insurance is a state policy which serves as a financial safety net to protect depositors’ hard-earned money.

In the event of a bank closure, the PDIC guarantees clients that they can receive up to P1 million per depositor per bank.

“Deposit insurance, provided by the [PDIC], not only protects depositors but also prevents bank runs during financial crises, and helps maintain public confidence in the banking system,” the state deposit insurer said.

Bank runs are when depositors withdraw their money from a bank at the same time. This often happens when depositors fear that the bank will fail.

Fears over bank fails last surfaced in 2023 after the closure of two high-profile American banks: Silicon Valley Bank (SVB) and Signature Bank. 

SVB, in particular, failed after several depositors withdrew $42 billion in just 24 hours. This depleted SVB’s liquidity, making it harder for the bank to meet withdrawal requirements.

US authorities guaranteed the entire deposits of all SVB clients to restore trust in the banking system, even if these went beyond the government’s maximum insured levels.

The PDIC insures deposits through a Deposit Insurance Fund (DIF), which is built through premiums collected from member banks. The Bangko Sentral ng Pilipinas (BSP) requires all licensed banks to become members of the PDIC.

“We collect assessments or premiums from member banks equivalent to one-fifth or 1% of their total deposits,” said PDIC vice president for corporate affairs Joel Villaret.

As of end-2024, the DIF stands at P236.95 billion. Under the new MDIC, the state deposit insurer can fully insure P5.3 trillion in deposits, 24.1% of all deposits in the banking system.

“If we did not change the coverage at 500,000, the covered amount is only up to 3.7 trillion, and it can only cover less than 19% [of deposits],” Villaret pointed out.

What’s covered by the MDIC?

The MDIC only covers deposits in banking institutions registered with the BSP. These include commercial banks, thrift banks, digital banks, as well as foreign banks with branches in the Philippines.

Funds in the following accounts are covered by deposit insurance:

• Savings/Special savings
• Demand/Checking
• Negotiable Orders of Withdrawal (NOW)
• Long-term Negotiable Certificate of Deposits
• Time Deposits
• Islamic Deposits

Meanwhile, deposit insurance does not cover the following:

• Investment products (securities, bonds, trust accounts)
• Deposit accounts or transactions that may be fictitious or fraudulent
• Deposits stemming from unsound banking practices
• Deposits determined to be proceeds of illicit activities as per the Anti-Money Laundering Law
• Deposits in non-banks such as cooperatives, loan associations and non-stock savings

The MDIC does not cover funds stored in e-wallets such as GCash since the funds are not considered deposits. The PDIC previously explained that this is because most users use their e-wallets for transactions, not savings.

“Kung na-hack dahil sa mga online transactions, hindi po kasama kasi ’yung remedy with the depositor should be with the bank on how to resolve the hacking incident

(If an account was hacked from online transactions, that’s not included because the depositor should seek remedy with the bank in resolving the hacking incident.)

How does the PDIC calculate the insurance I’ll receive?

If a bank closes down, the PDIC liquidates it by collecting the remaining loans and disposing of its assets. It will also begin paying affected depositors up to the maximum amount insured.

“If you have several accounts in the same bank, we consolidate and add them up and we only insure up to P1 million,” Villaret said.

The PDIC separately insures single and joint accounts. This means you can receive up to P1 million for all your deposit accounts.

In Jane Doe’s case, P50,000 of her deposits are uninsured by the PDIC since it exceeds the P1 million per depositor per bank threshold. Meanwhile, Juan dela Cruz’s trust account was not included since trusts are not considered deposits and are not insured by the PDIC.

If a depositor still has outstanding loans with the bank during the closure, payments for these loans will be deducted from insured deposits.

If a depositor has joint accounts, the PDIC calculates insurance for these separately from their single depositor accounts.

For Jane Doe and Maria Concepcion’s joint account, they will only receive P500,000 each since their total deposits exceed the P1 million limit. The P1 million insurance is then split between the two depositors.

The PDIC also has an e-calculator on its website that can help depositors estimate how much they will receive. You can access the e-calculator here. – Rappler.com