(UPDATE) We put our money in banks, whether as savings or investments, to keep it safe. So when our bank is in trouble, and there are reports of bankruptcy and closure, it’s natural to panic and ask who can we run to for help?

This was the question raised by depositors of Silicon Valley Bank and Signature Bank – both based in the United States – after reports they were struggling led to bank runs and their eventual collapse.

Renowned actress Sharon Stone breaking down in tears in the middle of her public speech seemed to confirm she was one of the affected depositors when she mentioned financial hardships saying “I just lost half my money to this banking thing.”

Stone’s outburst during a fundraiser hosted by the Women's Cancer Research Fund, days after SVB fell apart, put a public face to the affected depositors.

Fortunately for Stone, she and the other depositors do have somewhere to run to, and help came very quickly. The US government announced a series of assistance including giving clients full access to their deposits within days of the banks’ closures.

So our next question should be, what about us? If this were to happen to us, will we have the same quick happy ending as Stone? Sadly, not quite, and history will show while some were fortunate, there are many others still waiting to recover their deposits.

Here are some useful information when it comes to bank stability, and to understand why it is important to choose your bank partner wisely.

#1 Bank closures happen more often than you think

They may not be the big banks that are familiar to most of us, but bank closures happen all the time. The Bangko Sentral ng Pilipinas (BSP) is the government agency tasked to look into every bank’s ability to perform its fiduciary functions, and when they are found wanting and unable to turn around the situation, banks are ordered to close. This year, BSP has so far ordered the closure of two banks: the Rural Bank of San Marcelino Inc. in Zambales; and the Rural Bank of San Agustin in Isabela.

Last year, the BSP closed down nine problematic banks. This is slightly better than the 13 closed down in 2021. These banks were mostly hard-hit and unable to recover from the impact of the COVID-19 pandemic.

#2 Once a bank is closed, PDIC steps in

In accordance with Republic Act 3591, the Philippine Deposit Insurance Corp. (PDIC) will be designated as Receiver and will proceed with the takeover and liquidation of the closed bank. As Receiver, the PDIC administers the assets, records and affairs of the
closed bank; and preserves its assets for the benefit of the bank’s creditors. Depositors with deposits in excess of the deposit insurance coverage, or uninsured deposits are considered creditors.

PDIC as Liquidator will work to convert real and other properties acquired (ROPA) and other assets to liquid assets to facilitate distribution to creditors. There is also a hierarchy here because the distribution to creditors requires approval of the courts in accordance with the rules on concurrence and preference of credits. Based on provisions of the law, secured creditors are paid first and any balance after payment of receivership and liquidation expenses and settlement of preferred and secured creditors shall be distributed to ordinary creditors which include depositors’ claims in excess of the maximum deposit insurance coverage.

#3 Are your deposits insured?

The answer to this is mostly yes. PDIC guarantees deposits up to P500,000 per depositor. If you have several accounts with the same bank that was closed, note it is not P500,000 per account, but P500,000 for you as depositor. This is why some prefer to own deposits in several banks, and keeping under the P500,000 ceiling to ensure their funds are insured.

The coverage also only applies for deposits, and not investment products, which is why you should always read the fine print when you invest. The PDIC insures savings, checking and time deposits, whether owned by a single depositor or a joint account or the account is held in trust for (ITF) another person. The coverage applies to Philippine Peso deposits and also other acceptable foreign currencies.

Fraudulent accounts, laundered money and deposit products from unsafe and unsound banking practices are not covered by the PDIC insurance.

#4 Automatic payment for accounts with P100,000 and less

Those with deposits of P100,000 or less no longer need to file claims. According to PDIC, if valid, these accounts will be settled through automatic payment.

To qualify, make sure you do not have any outstanding obligations or loans with the closed bank , or have not acted as co-makers of these obligations, or are not spouses of borrowers. Note automatic payment only applies to individuals and not for accounts under the name of business entities.

Your address needs to be updated in the closed bank’s records as PDIC will send the payment through postal money order to the depositor’s address on record. These money orders may be encashed in any of the local post offices or branches of the Landbank of the Philippines.

If a few weeks have passed and you did not receive a check, visit the local postal office nearest your residence. If the check is not available there, you may call the PDIC Public Assistance Hotlines at 8841-4141 (for clients within Metro Manila), or using toll-free number 1-800-1-888-7342 (for clients outside Metro Manila). You can also send an e-mail to pad@pdic.gov.ph. There are cases when some accounts below P100,000 need further verifications, and this may have resulted in your payment being held back.

#5 File your claim for deposits worth P100,001 and more

I guess it’s true that more money, more problems, because those with deposits of over P100,000 will need to personally file their claim. This is usually in the premises of the closed bank or at a designated site during the onsite Claims Settlement Operations. The designated site will be announced in the Notice to Depositors through posters and in the newspapers. The Notice is also posted in the PDIC website, www.pdic.gov.ph.

The Notice to Depositors will also indicate the period of the Claim Settlement Operations at the bank premises or designated site; and the requirements and procedures for filing claims. Note depositors of closed banks only have up to two years from the actual takeover of the closed bank to file their claims.

* * *

Between filing your claim and getting your money back, expect a bit of wait. According to the PDIC, they usually settle deposit insurance claims within six months from bank closure provided that deposit insurance claims are filed within two years from takeover and provided that documentation to the claim are complete. All those caveats and disclaimers make me feel it’s better to choose your bank wisely, and always keep up with the news to make sure you can quickly move your funds when needed.

Editor's note: An earlier version of this article said the maximum amount of deposit balance that is eligible for outright payment via postal money order payment, without the need to file a deposit insurance claim, was P50,000. PDIC has informed us that this had been increased to P100,000.

• PH banking system 'sound, resilient' amid SVB collapse: Medalla
• PH banks say ‘no substantial impact’ from US bank failures

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