All institutions, public or private, that have their stakeholders’ best interest at heart have a wish list. The Philippine Deposit Insurance Corporation (PDIC) is no exception. PDIC, which, as its name suggests, is the government institution charged with providing insurance for the deposits of this country’s bank depositors, has a wish list. The PDIC wish list has a number of items in it.
At the top of PDIC’s wish list is a law that will establish a mechanism for facilitating the acquisition by an appropriate body of the assets – along with the assumption of the liabilities – of a failed bank. PDIC calls the mechanism bridge banking. What the nation’s deposit insurance institution wants to see is flexibility in the handling of failed banks; the choice should not be between allowing the continued operation of a clearly failing bank and ordering its liquidation. PDIC believes that a resolution mechanism like bridge banking is a middle-ground approach that will preserve the stakes of all the stakeholders.
Another item on PDIC’s wish list involves the nation’s dwindling population of rural banks. PDIC would like to see the completion of work on a Uniform Core Banking System for rural banks. The system is designed to strengthen the rural banks’ management and accounting capabilities. PDIC believes that strengthened rural-bank capabilities will make possible better PDIC monitoring of the bank’s financial conditions.
A further item in PDIC’s wish list relates to bank fraud. The nation’s deposit insurer wants to see a program designed to enhance the capabilities of bank examiners – personnel of the Bangko Sentral ng Pilipinas (BSP) and of the PDIC – to detect fraud. PDIC recognizes that technology has made the task of fraud detection increasingly harder; but it knows that technological change cuts both ways. It can also be harnessed to make the operations of bank fraudsters. Although it is aware that anti-bank-fraud training is a permanent concern of the BSP, PDIC clearly would like a strong program of its own.
The first item on PDIC’s wish list likewise requires legislation. Although the Revised Penal Code embodies definitions of punishable acts and appropriate penalties therefor, PDIC appears eager to see the passage of legislation targeted specifically at erring bank officials, stockholders and auditors, whose activities are more insidious because they operate from the inside and have access to resources and information not available to outsiders.
Those are the things that the nation’s deposit insurance institution would like to see materialize. Unfortunately, PDIC is one of those government institutions that are low-key, are not glamorous and are out of the limelight until a major bank fails. As a result, it doesn’t have steadfast friends in Congress sufficient in number to convert into law the items on its wish list.
It’s a great pity because the nation needs an institution that is there not only to make indemnity payments to depositors of failed banks but also is there to prevent the need to make such payments.
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