Rules and Regulations Governing Deposits Not Covered by Deposit Insurance

Regulatory Issuance No. 2011-02 was published by the Philippine Deposit Insurance Corporation (PDIC) last January to clarify which deposit accounts and transactions are excluded from the coverage of deposit insurance. It will be recalled that Congress passed Republic Act No. 9576 in 2009 which increased the maximum amount of deposits covered by PDIC insurance to P500,000. The same law excluded from the coverage of the PDIC insurance the following accounts or transactions: (i) investment products, such as bonds and securities, (ii) deposit accounts which are unfunded, or that are fictitious or fraudulent, (iii) deposit accounts constituting or emanating from unsafe or unsound banking practices, and (iv) deposits determined to be the proceeds of unlawful activity.

Under the PDIC regulation, the account is an investment product if no debtor-creditor relationship exists between the bank and the client, and instead, the relationship is that of trustor-trustee or principal-agent; the principal amount is not protected; the amount is not withdrawable on demand; and other analogous features.  On the other hand, deposit accounts are unfunded or are fictitious or fraudulent if the bank did not receive the money alleged to be deposited, or when the deposit is simulated or feigned, as when it was made to appear that money was received by the bank but in fact was not, or when the bank employed means calculated to deceive.

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