Depositors have remained loyal to Philippine banks and have not withdrawn their money and gone elsewhere despite the fact that some countries in the region have recently extended 100-percent cover on their deposits.
Bangko Sentral ng Pilipinas Gover-nor Amando Tetangco Jr. said the global financial turmoil has made depositors in other parts of the world jittery about the safety of their bank deposits, forcing authorities to extend full or 100-percent cover on such deposits.
The Philippines has, for the moment, stuck to guaranteeing the return of only up to P250,000 worth per deposit account, although there are efforts to raise this amount to P1 million.
But even so, Tetangco said on Monday that while the cover on Philippine deposits is just partial, account holders have not taken their money elsewhere where the guarantee of principal is 100 percent.
“In the case of the Philippines, we are happy to report that there is no migration of deposit. People remain confident in the banking system,” he said.
Countries like Malaysia, Singapore and Australia guarantee 100-percent deposit cover such that their banks could close and still people get back every single ringgit or dollar put in.
Right now in the Philippines, however, existing legislation guarantees the return only up to P250,000 of P1 million worth of deposits, for example.
Tetangco said Thailand extended full deposit cover for its people long before the cited countries did.
Indonesia, however, is similarly catching up and, like the Philippines, has only increased its deposit cover rather than guarantee full return.
Tetangco said he supports broad plans to revisit the country’s deposit- insurance scheme and raise the limit to P500,000, as proposed.
He made it clear that raising this further to P1 million, as advanced by others, presents serious moral hazards that could encourage indiscriminate deposit activities knowing that the government could always return that much money regardless of their choice of banks.
“We much prefer keeping the insurance cover up to only P500,000,” Tetangco said.