Wednesday, March 07, 2007

Bank Deposit Insurance Coverage

Nightmare scenario. Your entire life savings was deposited into a bank that has a bank run and has declared bankruptcy and is no longer allowing withdrawals or simply does not have the resources to do so. What do you do? In the first place remain calm and do not panic, chances are your bank is covered by an insurance agency as well as your deposits there up to a certain degree.

Almost all banks in different countries are covered by insurance. In our case, it is covered by the Philippine Deposit Insurance Corporation (PDIC). PDIC is a government owned and controlled corporation (GOCC) created in 1963 by virtue of Republic Act 3591 for the purpose of insuring bank deposits up to P250,000 per depositor, up from P100,000 prior to the latest amendments to RA 3591 are contained in RA 9302 enacted on July 27, 2004.

But remember, the P250,000 insurance is per depositor not per account. If you have one million pesos, dividing that amount into four accounts with P250,000 each will only get you P250,000 insurance in case the bank goes under. A way around this is opening four joint accounts with different people. For example, first account is in your name, second account is your name and/or you wife, third account is your name and/or your son and finally fourth account your name and/or your daughter.

For deposits that are over and above the P250,000 amount insured, if the closed bank is not rehabilitated or taken over by another bank, amount in excess of the P250,000 coverage can still be claimed upon the final liquidation of the remaining assets of the closed bank, but it will take sometime. The claim may be filed with the Liquidator assets of the closed bank. However, if the closed bank is rehabilitated, the excess deposits are usually assumed by the rehabilitator. The claim for insured deposit should be settled within six months from the date of filing but the claim must be filed within twenty four months after bank closure. The six month period shall not apply if the documents of the claimant are incomplete or if the validity of the claim requires the resolution of issues of facts and law by another office, body or agency, idependently or in coordination with PDIC.

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