THE PHILIPPINE Deposit Insurance Corp. (PDIC) has partnered with the World Bank Group’s International Bank for Reconstruction and Development (IBRD) to study and develop a risk-based assessment system for deposit insurance in the country.
The state deposit insurer and the IBRD signed the advisory agreement on June 26, PDIC said in a statement.
“Having a sound risk-based assessment framework is not only essential but critical. This risk-based assessment system will help the PDIC better foresee and address potential problems as new challenges emerge from a more complex banking environment. With the global expertise of World Bank-IBRD and our commitment to see this project through, we are paving the way for an enhanced deposit insurance system in the country,” PDIC President and Chief Executive Officer Roberto B. Tan said.
The risk-based assessment system is a framework that will determine the premiums that banks need to pay for deposit insurance based on their risk profile.
The state deposit insurer earlier said that having a risk-based assessment system will help prevent banks from taking on too much leverage following the increase in the maximum deposit insurance coverage to P1 million per depositor per bank from P500,000.
At present, the PDIC employs a flat rate premium assessment system that applies to all banks, which is one-fifth of 1% of the total deposit liabilities of each institution.
The assessments are collected from member-banks semi-annually and form part of the Deposit Insurance Fund, which stood at P236.95 billion as of end-2024.
“Its goal is to align the cost of insurance with the level of risk each bank poses to the PDIC Deposit Insurance Fund, thereby promoting financial stability, reducing moral hazard, and incentivizing prudent risk management among banks… This approach will improve PDIC’s surveillance of banks through the implementation of an enhanced assessment system that is customized based on a member bank’s individual risk profile,” PDIC said.
Under the partnership, the IBRD will conduct a study on a risk-based premium system that is appropriate for the Philippine context. It will also provide technical assistance as it will come up with the framework, methodology, and implementing guidelines for the system.
“Drawing on international best practices, the initiative is aimed at enhancing the PDIC’s capability to more effectively incorporate institutional risk in its assessment of member banks and ensure a more equitable and sustainable funding mechanism for its Deposit Insurance Fund,” PDIC said. — A.M.C. Sy