PDIC pushes wider deposit insurance, faster payouts

The Philippine Deposit Insurance Corporation is seeking legal authority to extend deposit insurance beyond banks to eligible deposits in nonbank financial institutions and cooperatives as part of a broader reform agenda aimed at making the country’s financial safety net more responsive to emerging risks.

For ordinary savers, the proposed changes could widen protection to funds placed outside traditional banks while giving payroll, pension, retirement and other qualifying accounts greater protection when balances temporarily rise above the standard insurance ceiling.

The reforms could also reduce disruptions to households, communities and payment systems when financial institutions fail, while strengthening confidence in an increasingly diverse financial system.

PDIC presented the proposals during a government stakeholder consultative workshop attended by representatives from the Bangko Sentral ng Pilipinas, Department of Finance, Cooperative Development Authority, Securities and Exchange Commission and Office of the Government Corporate Counsel.

International financial institutions, including the World Bank, participated as reactors and provided perspectives on global practices in deposit insurance and financial stability frameworks.

The state deposit insurer said the proposed amendments would strengthen its mandate as financial risks evolve while providing greater protection for depositors and financial consumers.

The legislative package covers four major areas: expanding insurance coverage, accelerating claims payments, strengthening asset recovery mechanisms and improving preparedness for systemic financial shocks.

Among the most significant proposals is extending the deposit insurance safety net to deposit products offered by nonbank financial institutions, or NBFIs, and cooperatives.

PDIC said the proposal recognizes the growing role of these institutions in financial inclusion, particularly among small savers who may keep their money outside the traditional banking sector.

Drawing from the United Kingdom’s Financial Services Compensation Scheme, PDIC is proposing a fund of last resort that could be tapped to protect eligible depositors when an NBFI or cooperative can no longer meet its obligations.

The reform agenda also proposes differential deposit insurance coverage for accounts considered to have recognized social value or economic impact.

These would include payroll, pension, retirement and settlement accounts, other similar accounts and deposit accounts carrying temporary high balances arising from qualifying life events.

Under the proposal, the PDIC Board of Directors would determine which accounts qualify, the applicable insurance coverage and the implementing rules through appropriate regulations.

The approach is intended to protect depositors whose balances may temporarily exceed the normal ceiling because of the nature or purpose of their accounts, rather than applying the same limit to every type of deposit.

Current PDIC insurance remains capped at PHP 1 million per depositor, per bank, regardless of the type of depositor or account.

That PHP 1 million ceiling took effect March 15, 2025, when PDIC doubled the maximum deposit insurance coverage from PHP 500,000, marking the first independent adjustment by the PDIC Board following amendments to its charter.

Existing law authorizes the PDIC Board to review and adjust the maximum coverage based on inflation or other economic indicators, with the maximum deposit insurance coverage subject to review every three years.

The proposed legislative changes would go further by allowing different insurance levels for eligible accounts instead of relying solely on the uniform PHP 1 million ceiling.

PDIC said the proposals draw from more advanced deposit insurance systems overseas.

South Korea, for example, extends its deposit insurance framework beyond banks to life and nonlife insurance companies, investment traders and brokers, merchant banks and mutual savings banks.

Japan’s system likewise covers banks as well as cooperative deposit-taking institutions, including Shinkin banks, credit cooperatives and labor banks.

PDIC cited these systems as examples of how broader deposit protection can support financial stability and strengthen public confidence as financial services expand beyond conventional banks.

Participants expressed broad support for the legislative package at the end of the two-day workshop, according to PDIC.

The proposals remain legislative initiatives, meaning the expanded protections and differential coverage would require amendments to the PDIC Charter before they could become part of the country’s deposit insurance framework.