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The Philippine Deposit Insurance Corp. (PDIC) has doubled the maximum deposit insurance coverage (MDIC) in banks from P500,000 to P1 million per depositor effective today, March 15.
According to the PDIC, the upward adjustment in the MDIC is aimed at providing enhanced protection to the depositing public and is a proactive measure to reinforce confidence in the Philippine banking system as well as to contribute to financial stability.
It explained that the higher MDIC will not only protect and secure more depositors’ savings but more importantly will help stabilize deposit movements, maintain liquidity in the banking system and prevent any possible panic-based runs.
The state deposit insurer also emphasized that at the new MDIC of P1 million, more deposits will be fully insured at 136 million in deposit accounts, or 98.6 percent of the total deposit accounts of 138 million, compared with 97.6 percent at the previous MDIC of P500,000 based on data as of Sept. 30 last year.
In terms of amount, insured deposits will increase to P4.8 trillion, or 24.5 percent of total deposits of P19.5 trillion, compared with 18.3 percent at the old MDIC.
The increase has been long overdue given that the last time the MDIC was adjusted was in 2009 as a preemptive confidence-building response to the global financial crisis in 2008.
In 1963, the MDIC was set at P10,000 per depositor per bank and then increased five times since then, to P15,000 in 1978, P40,000 in 1984, P100,000 in 1992, P250,000 in 2004 and P500,000 in 2009.
Deposits in all banks, including universal banks, commercial banks, savings and mortgage banks, rural banks, private development banks, cooperative banks, savings and loan associations and even digital banks, as well as branches and agencies in the Philippines of foreign banks and all other corporations authorized to perform banking institutions in the Philippines, are insured with the PDIC.
Excluded from deposit insurance coverage are investment products such as bonds, securities and trust accounts; deposit accounts which are unfunded, fictitious or fraudulent; deposit products constituting or emanating from unsafe and unsound banking practices; and deposits that are determined to be proceeds of an unlawful activity as defined under the Anti-Money Laundering Law.
It is interesting to know that 98.6 percent of total deposit accounts have up to P1 million in deposits but they only comprise 24.5 percent of the total amount deposited with banks. This means that 157,320 accounts out of the 138 million total have deposits of more than P1 million but they account for 75.5 percent of the deposit liabilities of banks.
Many Filipinos are still unbanked but the situation has improved remarkably.
According to the Bangko Sentral ng Pilipinas (BSP), an estimated 56 percent of Filipino adults have bank accounts in 2024, a significant increase from only 29 percent in 2019.
The number of deposit accounts in digital banks has also increased to 16.25 million while depositors stood at 10.55 million. As of September 2024, the amount of deposits in these banks stood at P87.39 billion, a 34.1 percent increase from P65.18 billion the year before.
There are currently six digital banks operating in the Philippines namely Overseas Filipino Bank, Tonik Bank, GoTyme Bank, Maya Bank, UNObank and UnionDigital Bank.
But according to BSP deputy governor Chuchi Fonacier, the public is still wary of using digital banks, with concerns emanating from potential cybersecurity risks which may affect market growth, customer adoption and loyalty and opportunities for financial inclusion.
Many Filipinos also hardly visit their brick-and-mortar bank branches anymore and would instead transact online – transferring money, making payments and even depositing checks.
But deposit insurance only covers the risk of bank closure ordered by the Monetary Board. Our deposits are not insured in case of loss due to scamming.
Kaspersky, in an article, noted that with the increasing digitalization of banks, it was only a matter of time before banking went almost completely online. It noted that most people now rely heavily on the convenience and ease of electronic banking but as with most things to do with the Internet, there are disadvantages.
It said that despite high-level security measures, internet banking is still vulnerable to cybercrimes, not to mention other drawbacks of electronic banking like daily transfer limits, inability of online banking to handle large or complex transactions, connectivity issues and difficulty of navigating for those not particularly tech-savvy.
Kaspersky likewise explained that although banks implement a variety of processes to ensure online bank security, these are not always foolproof as cybercriminals employ ever more sophisticated means to execute all types of cybercrimes. As such, phishing, credit card fraud and identity theft are ongoing concerns across the industry, it said.
It added that online banking users must also be aware of the inherent risks and put their own safety measures in place, including enabling all security features on their banking apps and websites, only accessing their accounts on secure WiFi connections and being wary of unexpected emails or phone calls purporting to be from their bank.
Easier said than done though.
According to an article for Asian Banking and Finance, cases of identity fraud in the Philippines increased by 121 percent in 2024, causing alarm across financial institutions, fintech companies and regulatory bodies. And while strides have been made to curb this growing menace, including the recent introduction of the Anti-Financial Account Scamming Act and measures taken by the BSP, the challenge is far from resolved, it added.
The Philippines, it noted, has also emerged as a hub for online scammers, home to around 15,000 individuals operating schemes that target victims globally.
Maybe it is still safer to keep your hard-earned money in traditional passbook accounts that are not linked online. Confidence in the banking system is eroding, no thanks to the inability of depositors to recover their money lost to online scams.
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