By Lee C. Chipongian
After some months of review, the Bangko Sentral ng Pilipinas (BSP) and its co-regulator Philippine Deposit Insurance Corp. (PDIC) has decided that it will not exempt banks with basic deposit accounts from paying insurance premiums.
PDIC President Roberto B. Tan said it will not be possible to waive insurance premiums under its current charter which is what the PDIC earlier communicated with the BSP. “We can’t do that right now based on the PDIC law,” said Tan.
BSP Deputy Governor Chuchi G. Fonacier said PDIC was studying proposals to exempt banks from paying annual premiums if they have basic deposit account products but signalled early on that there are some issues for the PDIC in reconciling the legal implications for such exemptions.
Fonacier reiterated what Tan said, that there will be no waiver of insurance premium. Had it been possible, the waiver would have been one more incentive for offering basic deposit account products. Removing the PDIC premium would have reduced the costs for banks.
Insurance premiums paid by banks go to PDIC’s deposit insurance fund or DIF which is the agency’s capital account and consists of the permanent insurance fund from the government, reserves for insurance losses and retained earnings.
PDIC – which has a maximum P500,000 insurance per depositor – charge banks with insurance premium of 1/5 of one percent per year.
Banks with basic deposit accounts enjoy zero reserve requirement ratio as perks. However, the BSP will impose reserves when the account balance exceeds P50,000 to “prevent misuse of basic deposit account”. When it is more than P50,000, the host bank will convert a basic deposit account to a regular account.
Basic deposit accounts also enjoy reduced KYC or “Know Your Customer” requirements but the moment the balance increases above the threshhold, they will automatically be shifted to an enhanced KYC scrutiny.
Banks are generally granted the “liberty to customize their product offerings” according to their niche market or “based on the needs of the identified market” when it comes to basic deposit accounts.
By BSP definition, a basic deposit account is an interest- or non-interest-bearing account designed to promote financial inclusion. The minimum key features of the basic deposit account include an opening amount of less than P100; no minimum maintaining balance; and no dormancy charges.