The move bolsters deposit security and aims to strengthen public confidence in the Philippine banking system.
Despite the increase in coverage, PDIC said there would be no hike in the assessment fees levied on banks, ensuring that financial institutions remain stable while depositors enjoy enhanced protection.
Deposit protection and financial stability
The move to increase the MDIC is part of a broader initiative to maintain financial stability and protect depositors’ funds. By doubling the coverage, PDIC aims to:
Enhance depositor confidence, reducing the likelihood of panic-driven withdrawals.
Secure more savings, with the percentage of fully insured deposit accounts increasing to 98.6 percent of total deposit accounts (from 97.6 percent under the previous MDIC).
Support liquidity in the banking system, preventing potential bank runs.
Based on data as of Sept. 30, 2024, at the new MDIC level of P1 million, insured deposits will total P4.8 trillion, covering 24.5 percent of total deposits in the banking system. The previous cap of P500,000 covered only 18.3 percent of total deposits.
Sustaining insurance fund adequacy
While the increase in MDIC will expand coverage, PDIC assured that the Deposit Insurance Fund (DIF) remains sufficient to meet potential risks. The DIF-to-insured deposits ratio is projected to reach 5.3 percent in 2025 and further grow toward the target of 8 percent by 2031, following best international practices.
Historical adjustments, global benchmarking
The PDIC Board of Directors made this decision in accordance with Republic Act No. 3591 (PDIC Charter), which grants the authority to adjust the deposit insurance coverage based on inflation and economic trends.
The increase also aligns with a World Bank-recommended methodology aimed at restoring the real value of the MDIC, which has diminished due to inflation since its last adjustment in 2009—16 years ago.
Since its introduction in 1963, the MDIC has been adjusted five times, from P10,000 to P500,000 before this latest increase. The last adjustment in 2009 was in response to the 2008 global financial crisis. — Ed: Corrie S. Narisma
