Maria Antonette Brillantes-Bolivar Vice President, Litigation and Investigation Group

Philippine Deposit Insurance Corporation

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A. PDIC Bank Resolution Framework

B. Legal Hurdles

1. Limited role in bank resolution 2. Secrecy of Bank Deposits 3. Judicial Review of Action of Regulators 4. Legal Protection

C. Impact D. Moving Forward

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Grant of Financial Assistance subject to

The essentiality test

Least cost resolution

PDIC Resolution Authorities

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Merger & Consolidation and Purchase of Assets and Assumption of Liabilities: Strengthening Programs of PDIC

and the Central Bank

PDIC Resolution Authorities

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Receivership/Liquidation of banks

Appointed as Receiver

Determination whether the bank may still be rehabilitated

PDIC Resolution Authorities

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Purely voluntary on the part of the bank stockholders

Consent of stockholders and all creditors to proceed with rehabilitation

PDIC not involved early on in dealing with PCA failure

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Established framework on information sharing and coordination among financial safety-net players

Bilateral MOAs with the Central Bank

MOA on Information Sharing MOA on Examination

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Examination and Investigation Authorities

Early Warning Systems Off-Site Bank Rating Model Bank Stress-Testing and Failure

Prediction Model

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Enhanced resolution framework PDIC’s authority to determine resolvability of

banks in case of PCA failure

Deletion of 90-day receivership period Rehabilitation of distressed banks should be done while

still open

Authority of PDIC to adopt the purchase of assets and assumption of liabilities including franchise/ branch licenses

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State Policies under Republic Act (R.A.) 1405

Encourage bank deposits Discourage private hoarding to boost

economic development of the country

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Coverage All deposits of whatever nature with banks in the PHL

Regardless of whether debtor-creditor

relationship is created To include money that was “invested”

(509 SCRA 190)

Including foreign currency deposits (R.A. 6426)

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Absolute, save for certain limited exceptions

Applies even if disclosure pertains to existence of bank deposit, without revealing the bank or amount (BSP Deputy

Governor and General Counsel letter dated 13 Dec 2011)

Nature of Confidentiality

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Prohibited Acts (R.A. 1405)

Examination Inquiry

by any person, government official, bureau or office

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Exception from Prohibited Acts

Written permission of the depositor

Director or officer or stockholder

who contracts a loan or other form of financial accommodation with his bank or related bank, required to waive bank deposits secrecy in all banks in the PHL (Section 26, R.A.

7653)

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Exception from Prohibited Acts

Upon a finding of unsafe or unsound banking practices by the PDIC Board of Directors (R.A. 3591 as amended by R.A. 9372)

No court order required Exception includes the Central Bank

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Penalties under R.A. 1405

Imprisonment of not more than five (5) years

Fine of not more than Php 20,000.00 (US$450)

Both, on discretion of the court

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PDIC is unable to determine true condition of banks, risk to the DIF & validity of insured deposits

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Denial of claims for deposit insurance due to irregularities/lack of records

Delay in the payment of claims for deposit insurance

Difficulty of prosecution due to absence of documents

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High Risk Accounts

10%

88%

2%

UNFUNDED/FICTITIOUS DEPOSITS

SPLITTING

UNRECORDED DEPOSITS

Fraudulent schemes: Circumvention of

MDIC; Conversion of

deposits; Two books

As of February 2015

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Status Number of Cases

Amount Involved (in Php)

Amount Involved (in US$)

Pending 49 199 million 4.5 million

Terminated 19 12 million 0.27 million

TOTAL 68 211 million 4.7 million

* With cases pending as early as 2003

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Enhancements on Claims Payment Timelines

Waiver of filing of claims of deposits with balances of Php50,000(US$1,126) and below

Project Management Team approach to Field Operations Claims Settlement

Enhanced communication strategy for reimbursing depositors

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RI on Record-Keeping Requirement to submit Operations Manual on

Record Keeping of Deposits, Features of Computerized Deposit Database, Schedule of Deposit Products

RI on Computerized Records of Bank Deposits Deposit Account View (DAV), backup and

recovery arrangement for depositor/deposit information and deposit transactions

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Exception in the conduct of insurance risk evaluation to enable PDIC to determine, among others, possible resolution mode

Statutory authority for the banks, their officers and employees to disclose to PDIC deposit account information

Unauthorized disclosure is subject to same penalty as Republic Act 1405

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Central Bank-Monetary Board’s decision to place a bank under receivership/liquidation

Final and executory May not be restrained or set

aside except on certiorari (Section

30, R.A. 7653)

As of February 2015

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* With cases pending as early as 2001.

Status Number of Cases

Pending 6

Terminated 13

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Partnership with the Philippine Judicial Academy on conduct of seminar-workshops for members of the Judiciary

Jurisdiction to issue TRO/Injunction by the appellate courts, or on constitutional issues by the Supreme Court

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In no case shall a bank be reopened and permitted to resume banking business after being placed under liquidation

PDIC decision on whether a bank may be the subject of purchase of assets and assumption of liabilities transaction shall be final and executory, and may not be set aside by any court.

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Scope of PDIC legal protection (R.A. 3591, as

amended by R.A. 9302 and R.A. 9576)

Rendered free and harmless to the fullest extent permitted by law from any liability Indemnified for any and all liabilities, losses, claims, demands, damages, deficiencies, costs and expenses of whatsoever kind and nature that may arise in connection with the performance of their functions

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Exclusions

PDIC directors, officers, employees agents were found to be: In willful violation of the PDIC Charter; Performed in bad faith, with malice and/or

gross negligence.

Case initiated by PDIC

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Coverage

PDIC incumbent, retired, and separated directors, officers, employees or agents, in connection with or by reason of performance of official functions

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PDIC forms of legal protection

Directors and Officers Liability Insurance with Php200 million (US$4.5 million) coverage for all losses

Self-insurance of Php200 million (US$4.5 million)

As of February 2015

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Nature of the Case Number of Cases

Criminal 10

Civil 8

Administrative 20

Total 38

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Guidelines to standardize policies and processes

Annual review of the sufficiency of the coverage

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MARAMING SALAMAT

THANK YOU

ARIGATOU