The central bank may not be able to approve the P14-billion loan application of the Philippine Deposit Insurance Corp. (PDIC) unless the latter can prove the insufficiency of its P61-billion Deposit Insurance Fund (DIF), sources said.
Sources from the Bangko Sentral ng Pilipinas (BSP) said the Monetary Board (MB) has not made a decision on the loan request, hinting that the PDIC is unlikely to get an approval since it still has a substantial balance on its DIF, or the pool of funds from insurance premium paid by banks.
PDIC President Jose Nograles said the P14-billion loan would be used to pay some 135,000 depositors of 12 rural banks padlocked by the BSP.
Nograles earlier described the loan request as a "business decision," reiterating that the PDIC was allowed by law to borrow from BSP to beef up its DIF, which was valued at P60.5 billion.
However, the MB source said all banks pay insurance premium to the PDIC precisely for the purpose of ensuring that depositors would be paid off in case of bank failure. Since PDIC's DIF is still substantial, the source said the PDIC could easily pay the depositors without difficulties or seriously depleting the said fund.
"That means the PDIC has funds precisely for this purpose, they can use that fund because that's what it is for," the MB source said.
More than enough
Earlier, Nograles said the PDIC would not wait for BSP to approve the P14-billion loan and would start settling the claims of depositors caught in the collapse of rural banks using its own funds.
During the recent Congress hearing on the failed rural banks, Nograles said the PDIC has so far validated about 35,000 small accounts which, he said, could be paid out next week using the DIF.
In total, the PDIC estimated it would be paying out around P14 billion worth of insured deposits below P250,000. Nograles said the PDIC would be prioritizing depositors with accounts of less than P100,000, or 62 percent of all deposit accounts involved in the 12 rural banks.
Although there was no dire need for the loan from the central bank, Nograles said the PDIC board decided to make the loan request as a "prudent measure" to protect its DIF.
Meanwhile, Nograles also asked lawmakers to grant PDIC the authority to issue its own commercial papers with sovereign guarantee to give it access to cheap funds.
"We can always borrow from the BSP if it would make good business sense to do so but of course it would be good if we had more options," Nograles said.