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There are more red flags where the banking and financial systems are concerned.
First, how safe are your deposits?
Just yesterday, October 16, I saw this article reporting that the assets of the Philippine Deposit Insurance Corporation (PDIC) fell by 18% in 2024 “after remitting over P117 billion in funds and dividends to the national government under the General Appropriations Act (GAA).”
The PDIC further explained: “The drop in net assets is primarily attributed to remittances to the Bureau of the Treasury aggregating P107.2 billion fund balance under the GAA and P10.7 billion dividends, P1.2 billion operating expenses and P300 million payment of insured deposits.”
Government corporations like PDIC regularly remit dividends to the public coffers. But the P107.2 billion that was cited above was unusual: it was remitted to the Treasury as a result of the “cash sweep” done at the behest of Finance Secretary Ralph Recto. In turn, this cash sweep was authorized by the 2024 national budget law.
As early as July 2024, I flagged that something was off in the Treasury’s income data. I saw in one of their Excel sheets that PDIC had remitted in May 2024 P30 billion, at the same time that PhilHealth remitted P20 billion. In a footnote, they said this was because of a memorandum circular from the finance department that essentially told government corporations to give up some money to help fund items in the 2024 national budget.
Apparently, that was just the start of the cash sweep. PhilHealth ended up remitting as much as P60 billion (they were supposed to give nearly P90 billion, but this was stopped by the Supreme Court through a temporary restraining order). Later, in January 2025, we learned that PDIC deposited an even larger amount of P107 billion. (The more exact figure turns out to be P107.2 billion.)
Amid the big drop in its assets, PDIC assured the public that it’s still in good shape. But in fact, this is more disturbing than they’re letting on.
Recall that it’s the job of PDIC to insure Filipinos’ deposits in the event one bank (or several banks) fail. That is, PDIC is supposed to return to you at most P1 million of your deposits (per account) should your bank fail.
But by getting P107.2 billion from PDIC to finance government projects, the Marcos government is using depositors’ protection money as a piggy bank to cushion the government’s finances.
In addition, this move by the Marcos administration to erode PDIC’s funds needlessly exposed depositors’ money to unnecessary risks, compromised the integrity of the banking sector, and will tend to undermine trust in the banking system.
Worse, on September 23, we got an admission from Representative Mika Suansing, chair of the House appropriations committee, that about P107 billion was released for flood control projects under the budget’s “unprogrammed appropriations” — the same section of the budget that allowed the cash sweep of PhilHealth and PDIC.
Suansing said specifically, “The UA releases for flood control projects for 2023 is P34 billion, and for 2024, it is P107 billion. So across 2023 and 2024, the UA releases for the flood control project is P141 billion.”
The amount of P107 billion is suspicious. It tells us that, very likely, PDIC’s money was used to finance flood control projects in 2024.
As if we don’t have enough reasons to get super angry yet…
Maharlika and the stock market
Next, let’s move on to the stock market, which for years now has been “sideways” and performing poorly relative to other stock markets in Asia.
In past weeks, there have been reports of a massive outflow of capital from the stock market owing to the flood control scandal that erupted. Francis Lim, chair of the Securities and Exchange Commission, initially said in a now-viral statement that the local bourse lost P1.7 trillion in capitalization: meaning that many people sold their stocks and the total value of companies listed on the PSE went down by that amount.
But actually, the true figure ranges from P186 billion (August 11–29) or P500 billion (August 25–29). The PSE itself said that capitalization dropped by “only” P273 billion from December 2024 to December 2025.
The drop in the PSE’s capitalization is nowhere near P1.7 trillion; Lim has since apologized.
Still, this doesn’t remove the fact that the local stock market has been underperforming. The patient may not be in the ICU, but it’s hospitalized nonetheless.
This led Bryan Ang, president of the Philippine Chamber of Commerce and Industry, to float the idea of using the Maharlika Investment Fund (President Marcos’ pseudo-sovereign wealth fund) to prop up the stock market.
According to Bilyonaryo.com, Ang said, “We have P200 billion in Maharlika funds. Why not use it to stimulate the PSE (Philippine Stock Exchange)?”
But this idea is not well-thought of. It’s even dangerous.
More than two years ago, 21 faculty members of the UP School of Economics (myself included) published a discussion paper contesting the necessity of Maharlika. That fund was set up using the capital from two state-owned banks (Land Bank of the Philippines and the Development Bank of the Philippines), as well as the Bangko Sentral ng Pilipinas’ net profits.
But we said that “the manner of funding the Maharlika Investment Fund poses huge risks to our already strained public coffers and is vulnerable to moral hazard.” In essence, there’s a risk that the government might be tempted to use the funds to finance dubious uses and investments.
So far, Maharlika has made only two major investments: 20% of the equity of the National Grid Corporation of the Philippines, and a bridge loan facility for a mining project in the Cordilleras. There’s a rumor that Maharlika plans to buy even more shares of NGCP.
Really, are these the best investments Maharlika can make to date? And should more of its money be gambled just to prop up the Philippine Stock Exchange?
I’d say the PCCI head’s proposal is preposterously dangerous. That is not at all how you promote capital market development.
If investors are flocking to safer havens abroad, because they’re losing confidence in the economy given massive corruption you can’t really blame them. Ideally, that should help pressure the Marcos government to fix its house as soon as possible. But I doubt it will come to that.
All in all, the Marcos administration allowed the banking sector to be compromised (by playing around with the funds of PDIC), and has invariably harmed the stock market as well by failing to root out large-scale corruption.
Bad governance is ruining our economy in more ways than one. – Rappler.com
JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. Follow him on Instagram (@jcpunongbayan).
