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PDIC supports proposed hike in deposit insurance

abs-cbnNEWS.com | 11/19/2008 10:50 AM

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The Philippine Deposit Insurance Corporation (PDIC) supports the proposed increase in the maximum deposit insurance coverage in the country from P250,000 to P1 million, but only for a limited period of time.

PDIC president Jose Nograles said that raising the deposit insurance coverage was a proportionate response, considering the bold moves already undertaken by other countries to address the global financial crisis. He noted, however, that the increase would last for only three years, depending on the effects of the crisis in the domestic front.

The PDIC also proposed a 25-75 burden sharing mechanism with the national government so as not to unduly burden banks and make the increase in deposit insurance more manageable.

Nograles stated that the PDIC is set to meet with with members of the Senate next week to discuss the planned hike in deposit insurance. He said that they need congressional approval for the proposal since the PDIC can only provide P250,000 deposit insurance due to lack of funds.

Some economists earlier cautioned the government against the deposit insurance increase, saying this could encourage banks to take excessive risks. With a report from ANC