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Thursday, March 28, 2024

Remove ‘regulatory overlap:’ Finance chief backs changes to PDIC charter

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Finance Secretary Carlos G. Dominguez III is backing the approval of proposed amendments to the charter of state-run Philippine Deposit Insurance Corporation (PDIC) that seeks to remove the “regulatory overlap” of the Department of Finance-attached agency and the Bangko Sentral ng Pilipinas (BSP).

Dominguez, who sits as chairman of PDIC Board of Directors, told senators on Friday that BSP should be the “only one regulator for banks” so that PDIC could focus on its mandate as deposit insurer and liquidator.

The finance chief added it would also be best to transfer PDIC as an “attached corporation to the BSP” to ensure better coordination between the two agencies.

“By sharpening the focus of the PDIC to that of a ‘pay box’ for insurance claims and as liquidator of failed banks, we will ensure even better institutional efficiency than what we have at present. All regulatory functions, such as the issuance of cease-and-desist orders relating to unsound banking practices will be ceded entirely to the BSP. This will help prevent confusing functions and confounding signals to the industry,” he said during the Senate’s Committee Hearing on the proposed measure.

At present, Dominguez also pointed out that liquidating is “not being done efficiently” by PDIC.

“You know at this point in time, they have around 30,000 individual titles of property to liquidate. At the rate that they have been doing it, it’s gonna take them forever to do the proper liquidation. That’s why we’re also asking for exemption from the Bulk Sales Law,” he said.

Asked about the value of these 30,000 individual titles of property, PDIC President and Board of Directors Vice Chairman Roberto B. Tan revealed during the hearing that they currently have an estimated book value of real-estate assets of over P19 billion.

Apart from the removal of regulatory overlap between PDIC and BSP, Dominguez said, he is also in favor of the proposed amendments providing the PDIC Board of Directors the flexibility to adjust the maximum deposit insurance coverage periodically based on prevailing economic indicators, such as elevated inflation rates or sharp currency fluctuations.

The last time the PDIC’s deposit insurance coverage was increased was 12 years ago, he recalled.

“The proposed amendments remove the tedious process of passing a law each time the maximum coverage needs to be adjusted. They will also do away with the requirement of a BSP-determined financial crisis to make a routine adjustment in the insurance coverage levels. In other words, the proposed bill will make the PDIC more responsive to the constantly changing financial landscape,” he said.

Moreover, Dominguez said the proposed amendments also included giving the PDIC Board the flexibility to set up insurance coverage for new technology-driven financial products, as well as for depositors in Islamic banks. This amendment, he said, would ensure adequate protection of depositors in the Islamic banking system and other financial services and could also lead to expansion of banking services in the country and broaden financial inclusion.

Further, the finance chief also supported the alignment of compensation structure of PDIC with other government-owned and -controlled corporations, which will provide base pay structures that are comparable with the private sector.

“With the proposal, the government will be able to adhere to its policy of equal pay for work of equal value,” he said.

Dominguez said the amendments will also clarify the application of the Dividend Law to the PDIC in remitting portions of its income to the Bureau of the Treasury, adding that a new clause on dividend remittances will be added to the PDIC Charter to provide the corporation the flexibility it needs to ensure that it has sufficient funds to pay insurance claims, if needed.

“Overall, the proposed amendments are reasonable. These will ensure that the PDIC will be fully capable of protecting our people’s hard-earned savings. The bill will also help in revitalizing our economy over the long term,” he added.

For his part, Tan said they recognize the need for the proposed amendments in their charter to help them prepare for the new challenges posed by the changing financial landscape.

“Given that we are now in the global pandemic and we are now moving forward, there may be developments in the banking sector which may require an effective response for regulators to make sure that stability and the soundness of the banking system is maintained,” he said.

Image credits: AP

Read full article on BusinessMirror

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