Can the PDIC truly save us?

Bank deposits are insured up to 500,000 pesos per depositor by the Philippine Deposit Insurance Corporation. We are usually comforted when we hear that our bank is insured by the PDIC, but can they truly pay all insured depositors if one of the big Philippine banks fail?

The PDIC recently reported that it has 243.87 billion pesos in its DIF or Deposit Insurance Fund. Is this enough to pay off insured depositors of a big bank in the Philippines?

According to its latest financial report, BPI ended the previous year with P2.1 trillion in deposit. No data was given on how much of its deposits were insured but we know that even if only 1% of its deposits were insured and it fails, the PDIC won't be able to afford to pay all insured depositors of BPI. 

Another thing that most people assume is that getting their back money back is quick and easy. However, the PDIC reports that people who had deposit accounts in the 12 banks that failed last year actually had to wait more or less a month to get paid. As can be observed from this report, the wait time is longer depending on the size of the bank.

However, you can rest assured that the government will definitely backstop the PDIC if ever a big bank is poised to fail. The US has definitely set a precedent with the decision to pay all insured and uninsured depositors of SVB. While it is touted not to be a bailout, eventually people will pay for it either through inflation or increased taxes.

Having been established before the era of too big to fail banks, the PDIC can only afford to pay insurance claims from depositors of small banks. For people with deposits in big banks, the PDIC, realistically speaking, only acts as a security blanket.

It is therefore, very prudent to have a stash of cash at home equivalent to at least one or two months worth of expenses. Very soon, we might learn that the too big to fail banks are actually too big to bail.

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