By Fel V. Maragay

The proposed doubling of insurance for bank deposits from P250,000 to P500,000 comes both as a boon and bane to depositors.

Under a bill that is being fine-tuned by a bicameral conference committee, the cost to the depositors may take the form of additional premium.

The bill provides that the Philippine Deposits Insurance Corporation, in order to build up its capitalization, may prescribe an additional premium assessment of a maximum of one-half percent. The bill states that the additional premium may be imposed by the PDIC on the third year from the day the proposed law takes effect.

“The PDIC must have sufficient funds, but not to the point of unduly burdening the banks. A half-percent increase in premiums on the third year of the law’s effectivity is just the right amount for this,” said Senator Mar Roxas, who introduced this particular amendment.

Roxas, who also authored the bill, said the PDIC may ask the government for additional funding to cover the cost of the increased insurance cover for bank deposits.

“For the first six years from effectivity of the proposed law, the PDIC shall have the right to collect reimbursement from the government for the amount exceeding P250,000 up to P500,000,” he said.

The increase in the maximum amount of insurance for bank deposits is intended to calm the apprehensions of the public about the safety of their money. This will prevent possible bank-runs that may be caused by anxiety that some banks may be encountering troubles caused by the global financial crisis.

Roxas, chairman of the committee on trade and commerce, said the raising of the deposit insurance to P500,000 will cover 97 percent of all bank deposits, while the current P350,000 ceiling covers 91 percent.

Senator Edgardo Angara, chairman of the committee on banks, currencies and financial institutions, said the Senate version of the bill also incorporates a provision waiving the right of depositors to secrecy of bank records if they are making use of the adjusted amount of insurance under this legislation.

This provision was proposed by Minority Leader Aquilino Pimentel Jr. who said that “in effect, we are moving towards that direction where the government will have a more adequate supervision even over bank deposits.”

Angara said he accepted this amendment to the bill because “if the bank has gone under, the regulator must be able to look into the reasons and underlying cause for its collapse.”