When OCCIDENTAL Bank folded up due to insolvency, Manuel had the following separate deposits in his name: P200,000 in savings deposit; P250,000 in time deposit; P50,000 in a current account; P1 million in a trust account; and P3 million in money market placement. Under the Philippine Deposit Insurance Corporation Act, how much could Manuel recover? Explain. (2%)
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Manuel can recover a total of P500,000 from the Philippine Deposit Insurance Corporation. Under Section 4 of R.A. 3591 (PDIC Charter), as amended, maximum deposit insurance coverage is P500,000 per depositor. Deposit
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Quick check
What is the maximum deposit insurance coverage (MDIC) provided by the PDIC per depositor per bank under R.A. 3591, as amended?
Under R.A. 3591, as amended, the maximum deposit insurance coverage is set at P500,000.00 per depositor per banking institution.
Under Section 4 of the PDIC Charter, how are multiple deposit accounts held by a depositor in the same right and capacity treated?
Section 4 mandates that all deposit accounts held in the same bank by a depositor in the same right are aggregated for insurance limits.
Which of the following financial products is expressly EXCLUDED from PDIC deposit insurance coverage?
Money market placements are investment products and non-deposit obligations, rendering them strictly excluded from PDIC insurance coverage.
Why are trust accounts excluded from PDIC deposit insurance coverage upon bank insolvency?
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If a depositor holds P200,000 in savings, P250,000 in time deposit, and P50,000 in a current account in a closed bank, how much can he recover from PDIC?
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Learn more about these topics
1. PDIC Coverage Limit
Under Republic Act Number 3591 (PDIC Charter), as amended, the Maximum Deposit Insurance Coverage provided by the Philippine Deposit Insurance Corporation is Five Hundred Thousand Pesos (P500,000.00) per depositor per bank. The deposit insurance scheme is designed to protect small retail depositors and maintain public confidence in the banking system. Regardless of the total aggregate amount or number of legitimate deposit accounts maintained by an individual in a single closed bank, PDIC's statutory liability to that depositor cannot exceed the P500,000.00 maximum ceiling.
2. Deposit Aggregation Rule
Under Section 4 of Republic Act Number 3591, as amended, all deposit accounts maintained in the same bank by a depositor in the same right and capacity are aggregated for deposit insurance purposes. Savings deposits, time deposits, demand or current accounts, and negotiable order of withdrawal accounts belonging to the same individual owner are added together to determine total insured coverage. If the aggregated balance of these eligible deposit accounts exceeds the maximum statutory limit, the depositor receives insurance payment only up to Five Hundred Thousand Pesos (P500,000.00).
3. Uninsured Investment Exclusions
Under Republic Act Number 3591, as amended by Republic Act Number 9576 and Republic Act Number 10846, deposit insurance coverage applies exclusively to deposit obligations. Non-deposit products, including trust accounts, money market placements, bond investments, and derivative instruments, are expressly excluded from PDIC coverage. Trust funds and money market placements create investment or fiduciary relationships rather than ordinary bank deposit liabilities. Consequently, when a bank suffers insolvency and enters liquidation, holders of money market placements and trust accounts cannot claim insurance reimbursement from the PDIC.