Depositors’ tranquility pawned

Efforts to hold public officials accountable have been rekindled after the recent Supreme Court proceedings that indicated the justices’ clear abhorrence for the collusion of the Executive and Congress to revive the pork barrel.

Criminal and civil cases are now being considered against public officials over the transfer of P107 billion in “excess funds” of the Philippine Deposit Insurance Corp. (PDIC) to the National Treasury.

The amount was larger than the P60 billion transferred earlier out of the Philippine Health Insurance Corp. (PhilHealth).

The Department of Finance took idle funds from government-owned and controlled corporations (GOCC) to cover the unprogrammed allocations (UA) in the 2024 national budget that included crucial projects that were displaced in favor of legislators’ insertions that were essentially pork barrel items.

The large-scale transfer was authorized under the 2024 General Appropriations Act and defended by PDIC president Roberto Tan as a “one-time” remittance of “excess” funds.

It nonetheless raised apprehensions that it would impair the deposit insurance fund’s (DIF) ability to protect depositors, especially with the plan to raise the benefit coverage to P1 million.

This hits the poor communities harder as rural banks teeter amid systemic risks due to the global recession and local corruption scandals.

Depositors will face delays, partial payouts, or total losses if the DIF runs dry, all while the government shrugs and points to infrastructure projects built on the former’s dime.

The real cost to depositors isn’t just the guarantee on their deposits but the betrayal of a system meant to protect them pawned off for political objectives.

If the filching of P107 billion isn’t challenged, trust in the financial system would be the ultimate victim.

PDIC’s core mandate, enshrined in Republic Act 3591, is to protect depositors by insuring their savings up to the Maximum Deposit Insurance Coverage (MDIC) currently at P500,000, soon to rise to P1 million on the 15th of this month.

Siphoning off P107 billion, roughly a third of the DIF’s P310.1 billion at the end of 2023, slashes its ability to weather a banking crisis.

PDIC’s Tan touted the remaining P202.85 billion as “adequate,” but not for a systemic failure.

The banking sector might be “healthy” now, as Tan asserts, but history — from the 1997 Asian Financial Crisis to the 2008 Global Financial Crisis — shows how quickly stability can unravel.

The transfer of the huge amount raised the direct risk of insufficient funds for the lifeline of small savers, retirees and micro entrepreneurs.

With P8.5 trillion in total deposits across the banking system as of 2014 and insured deposits likely a significant fraction of that, a P107-billion cut leaves the DIF perilously thin.

A single mid-sized bank failure could exhaust it, leaving depositors in the lurch, waiting for slow government bailouts or face massive losses.

Stripping a deposit insurer to fund “economic activities” has the inescapable translation of mismanagement.

Eroded trust risks a deposit flight to larger banks perceived as “too big to fail” or a shift to unregulated alternatives like cryptocurrencies or cash hoarding.

Fragile rural banks, which are the first line of the financial network that serves the poor majority, could see depositors pull out, triggering a domino effect of closures.

PDIC’s assurances have little effect when its buffer is gutted while the justification that these funds will “spur economic growth” via infrastructure and social programs is nothing but a flimsy excuse.

The government’s track record on project efficiency is spotty as billions vanish into corruption and mismanagement yearly.

The PhilHealth fund transfer fiasco, halted by a Supreme Court temporary restraining order, was a warning against the reckless mangling of the budget.

The cost of the move to an ordinary bank depositor may include sleepless nights wondering if their life savings are safe.

The P107-billion grab isn’t about “excess” funds but a betrayal of the PDIC’s mission for an opportunistic political agenda.