Upon learning the type of deposits, read also: WHO IS ENTITLED TO THE INSURED DEPOSIT?
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Deposits maintained in branches of foreign banks operating in the Philippines are insured by the Philippine Deposit Insurance Coverage (PDIC)
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Deposits outside the country may be insured with the PDIC
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Foreign currency deposits are insurable by PDIC
Managing your deposits may be challenging. Are your deposits insurable?
The law says:
Deposits of all banks as well as branches and agencies in the Philippines of foreign banks and all other corporations authorized to perform banking functions in the Philippines, are insured with the Philippine Deposit Insurance Corporation (PDIC).
As for Philippine banks with branches outside the country, it may elect to include for insurance its deposit obligations payable at such branch. This however is still subject to the approval of the Board of Directors of PDIC.
For a better understanding, let us take the case of Philippine Deposit Insurance Corporation vs. Citibank N.A. and Bank of America, S.T.&N.A. G.R. No. 170290, April 11, 2012.
In this case, Citibank is a banking corporation while Bank of America, S.T. & N.A. (BA) is a national banking association. Both are duly organized and existing under the laws of the United States of America. At the same time, both are duly licensed to do business in the Philippines, with offices in Makati City.
In 1977, PDIC conducted an examination of the books of account of Citibank. It discovered that Citibank, in the course of its banking business, from September 30, 1974 to June 30, 1977, received from its head office and other foreign branches a total of Php11,923,163.908.00 in dollars, covered by Certificates of Dollar Time Deposit that were interest-bearing with corresponding maturity dates. These funds, which were lodged in their books were not reported to PDIC as deposit liabilities that were subject to assessment insurance. As such, PDIC assessed Citibank for deficiency.
Similarly, sometime in 1979, PDIC examined the books of accounts of BA which revealed that from September 30, 1976 to June 30, 1978, BA received from its head office and its other foreign branches a total of Php629,311,869.10 in dollars, covered by Certificates of Dollar Time Deposit that were interest-bearing with corresponding maturity dates and lodged in their books. Because BA also excluded these from its deposit liabilities, PDIC assessed BA for deficiency.
Both BA and Citibank state that the money placements they received from their head office and other foreign branches were not deposits and did not give rise to insurable deposit liabilities. As a consequence, the deficiency assessments made by the PDIC were improper and erroneous. Therefore, both BA and Citibank are not liable to pay the respective deficiencies issued to them.
The question now is, “Are the money placements Citibank and BA received form their head office and other foreign branches insurable?”
The Supreme Court says:
To answer the question, it must first be determined whether the money placements are considered deposits under the Philippine law.
As explained by both Citibank and BA, the transfer of funds, which resulted from the inter-branch transactions, took place in the books of account of the respective branches in their head office in the United States. Hence, because it is payable outside of the Philippines, it is not considered deposit under the law.
The law says:
Any obligation of a bank which is payable at the office of the bank located outside the Philippines shall not be a deposit or included as part of the total deposits or of the insured deposits. However, any insured bank which is incorporated under the laws of the Philippines may elect to include for insurance its deposit obligation payable only at such branch subject to the approval of the Board of Directors of the PDIC
Having determined that the funds in question are not deposits, they are not excluded from assessment.
Are there any other exclusions from deposit insurance coverage? A related article will be posted in a few days.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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