Title
PDIC rules on unsafe banking practices
Law
Pdic Regulatory Issuance No. 2011-01
Decision Date
Mar 4, 2011
The PDIC establishes regulations to identify and address unsafe and unsound banking practices, ensuring the protection of depositors and the stability of the banking system by enforcing compliance and imposing consequences for violations.

Law Summary

Adoption of Existing BSP Guidelines

  • The PDIC adopts guidelines from BSP Circular No. 341 (2002) and its amendment BSP Circular No. 640 (2009).
  • These circulars provide general principles for identifying unsafe and/or unsound banking practices.

Criteria for Unsafe and/or Unsound Deposit-Related Practices

  • Deposit-related practices are deemed unsafe or unsound when they:
    1. Cause unreasonable delays in processing deposit claims upon bank closure.
    2. Result or may result in material loss/damage or abnormal risk to depositors, creditors, shareholders, or PDIC.
    3. Pose material loss/damage or abnormal risk to the bank’s safety, stability, liquidity, or solvency.

Specific Unsafe and/or Unsound Deposit-Related Practices

  • The following are examples of unsafe and/or unsound deposit-related practices:
    1. Conducting deposit-related activities without required approvals or controls, leading to unrecorded or undocumented deposits.
    2. Failure to keep bank records, including depositor documents, within legally authorized premises (including leased or owned sites, physical or electronic).
    3. Offering high interest rates under financial distress conditions (negative unimpaired capital and low liquid assets-to-deposits ratio or operating loss). High interest rates mean rates exceeding 150% of market median for similar banks.
    4. Non-compliance with PDIC regulatory issuances.
    5. Other practices identified as unsafe through further PDIC issuances.

Consequences of Unsafe and/or Unsound Practices

  • PDIC may conduct inquiry or examination of deposit accounts involved irrespective of other laws.
  • The PDIC Board can issue cease and desist orders requiring correction or cessation of unsafe practices.
  • Deposit insurance may be denied on deposits related to unsafe practices after notice, hearing, and public directive.
  • Criminal, civil, and administrative actions, including fines, may be imposed on banks and responsible persons under PDIC Charter and related laws.

Legal Provisions on Severability

  • If any part of this issuance is declared invalid or unconstitutional, it does not affect the remainder of the regulations.

Effectivity

  • The rules take effect 15 days after publication in the Official Gazette or a newspaper of general circulation.

Key Legal References

  • PDIC Charter Sections 2(d)(1), 4(f)(3), 7(a), 8(8), and 21(f)(10)
  • BSP Circular Nos. 341 (2002) and 640 (2009)

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster—building context before diving into full texts.

About Privacy Terms