More on insurance aside from insured deposit: Matters Involving Enforceability of Insurance Policies
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Philippine Deposit Insurance Corporation has the duty to grant or deny claims for deposit insurance
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Deposits are insured up to Five Hundred Thousand Pesos (Php 500,000)
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In determining such amount, all deposits are added together
Maximum deposit insurance coverage refers to the ceiling which a depositor may claim from a bank.
What is deposit?
The law says:
The term deposit means the unpaid balance of money or its equivalent received by a bank in the usual course of business and for which it has given or is obliged to give credit to a commercial, checking, savings, time or thrift account, evidenced by a passbook, certificate of deposit, or other evidence of deposit issued in accordance with Bangko Sentral ng Pilipinas rules and regulations and other applicable laws.
But, any obligation of a bank which is payable at the office of the bank which is located outside of the Philippines is not considered deposit or included as part of the total deposits. In other words, it is not considered as part of the insured deposit.
However, any insured bank incorporated under the Philippine laws which maintains a branch outside the Philippines may elect to include for insurance its deposit obligations payable only at such branch subject to the approval of the Board of Directors of the PDIC.
What is an insured deposit?
The law says:
The term insured deposit means the amount due to any bona fide depositor for legitimate deposits in an insured bank as of the date of closure. The amount of insured deposit does not exceed Five Hundred Thousand Pesos (Php500,000). Take note that a bona fide depositor refers to a natural or juridical person (such as a corporation), or entity who/which is the owner of a deposit as determined by Philippine Deposit Insurance Corporation (PDIC) and whose deposit is recorded in the books of the bank.
In determining the amount due to any depositor, all deposits in the bank maintained in the same right and capacity for his or her benefit either in his or her own name or in the name of others shall be added together.
For deposits in different banking institutions, such deposits are to be insured separately. However, if a bank has one or more branches, the main office and all branch offices are considered as one bank. Thus, deposits at the main office and at one or more branch offices of the same bank are added together when determining deposit insurance coverage, the total amount of which shall not exceed P500,000.
For an illustration, let us take the case of Philippine Deposit Insurance Corporation vs. Manu Gidwani, G.R. No. 234616, June 20, 2018.
In this case, several rural banks owned and controlled by the Legacy Group of Companies (Legacy Banks) were ordered closed. Manu, together with his wife and other individuals represented themselves to be owners of 471 deposit accounts with the Legacy Banks and filed claims with the Philippine Deposit Insurance Corporation (PDIC). The claims were processed and granted resulting in the issuance of crossed checks in favor of the individuals excluding Manu and his wife. The crossed checks indicate “Payable to the Payee’s account only”.
Despite the explicit instructions, said individuals did not deposit the crossed checks in their respective accounts. Rather, the face value of all the checks were credited to a single account owned by Manu. When the PDIC discovered such irregularity, it conducted an investigation on the true nature of the deposit placements of said individuals. Based on bank documents, Manu and his wife maintained a total of 471 deposit accounts with the different Legacy Banks, and that 142 of these accounts, with the total amount of Php20,966,439.09 were in the names of helpers and rank-and-file employees of Manu and his wife.
Thus, they allegedly did not have the financial capacity to deposit the amounts recorded under their names, let alone make deposits in various Legacy Banks located nationwide. Manu and his wife made it appear that the deposits for which the insurance was paid were owned by several individuals when, in truth and in fact, all the deposits were maintained for their sole benefit.
Who really owns the deposits?
The law says:
All deposits in a bank maintained in the same right and capacity for a depositor’s benefit, either in his name or in the name of others, shall be added together for the purpose of determining the insured deposit amount due to a bona fide depositor. Thus, the entitlement to a deposit insurance is based not on the number of bank accounts held, but on the number of beneficial owners.
In relation to the above case, the Supreme Court said that it is this government policy and the maximum deposit insurance coverage that Manu tried to violate by conspiring with said individuals. With this, the Supreme Court agreed with the Department of Justice in finding that there is sufficient ground to file the necessary criminal case of Estafa through falsification of documents against Manu.
Relevant to this article is the term Deposit Splitting. What is Deposit Splitting? A related article will be posted in a few days.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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