EDITORIAL

Protecting bank depositors

Bank depositors will now be getting better protection on their deposits after President Gloria Arroyo recently signed into law Senate Bill 2964, which increases the maximum deposit insurance coverage for depositors to P500,000.

Sen. Chiz Escudero, principal author of the bill, said SB 2964 strengthens the capability of the Philippine Deposit Insurance Corp. to safeguard interest of depositors and help develop a more stable banking system. “SB 2964 gives depositors a greater sense of security and confidence which is a foundation of a sound and stable banking system.”

With the series of scandals which rocked the government and bank closures, signing SB 2964 into law comes at a time when the banking system – particularly the rural banking system – has been hard hit by the economic crisis.

“In the wake of the global economic crisis, and considering its impact on small banks in particular, SB 2964 should assuage the worries and concerns of bank depositors, especially small account holders,” Escudero said. Aside from increasing the deposit insurance coverage, the law now calls for the establishment and operation of bridge banks to acquire assets and assume the liabilities of a failed bank.

A bridge bank is a temporary bank licensed by the Bangko Sentral ng Pilipinas (BSP) authorized to purchase assets, assume deposits and other liabilities. A bridge bank shall have a life span of two years unless the PDIC board of directors extends its operations as deemed necessary for a maximum of one year. SB 2964 provides adequate protection for depositors in case of bank failures, according to Escudero. But how about those whose deposits are more than P500,000?