Press Release
December 14, 2015

Senate passes bill to protect depositors from losing money
upon closure of banks

The Senate today approved on third and final reading a bill which seeks to protect depositors and creditors from financial ruin and maintain confidence in the banking system.

Senator Serge Osmeña, principal author and sponsor of Senate Bill No. 2976, noted in his sponsorship speech that, "depositors and creditors of closed banks have to bear the adverse consequences of bank closures. They experience significant loss of their hard-earned money and disruption of their business."

Senate President Franklin M. Drilon said that the new measure is part of the Senate's efforts in improving the country's business climate and increasing government's promotion and protection of consumers' rights and welfare, especially in the banking sector.

Osmeña, who is the chairman of the Senate Committee on Banks, Financial Institutions and Currencies, said the passage of the bill into law would reinforce the authorities of the Philippine Deposit Insurance Corporation (PDIC) so it could better provide "safety nets" for the bank's financial system.

Under the measure, Osmeña said PDIC would be able to assist banks in danger of closing while they are still operating and not after they have been close by the Bangko Sentral ng Pilipinas.

He said PDIC would also be able to give depositors immediate access to their insured deposits upon closure of their banks and increase their chances of recovering uninsured deposits by elevating the status of the claims of uninsured depositors in the hierarchy of claims against the remaining assets of the banks under liquidation.

He said the bill would also allow PDIC to sell all the assets and assume the liabilities of a closed bank as a mode of liquidation without the need for court approval.

At the same time, Osmeña said PDIC could increase the penalties for various offenses and provide for new offenses such as filing of fictitious and/or fraudulent claims, certifying the validity of fictitious deposit liabilities and bank fraud.

The bill is a product of extensive consultations with numerous stakeholders, such as the PDIC, the Department of Finance, the Bangko Sentral ng Pilipinas, the Governance Commission for GOCCs, the Securities and Exchange Commission (SEC), the Bankers Association of the Philippines, the Chamber of Thrift Banks and the Rural Bankers Association of the Philippines.

"This bill is an opportunity to advance and to apply the lessons learned from the past global crises and bank closures. It would permit us to introduce much needed reforms and address gaps in existing laws," Osmeña said.

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