Financial Condition and Financial Reporting of the Philippine Deposit Insurance Corporation

By: Dani Rose Salazar and Seung Woog Kwag

[Purpose] This paper aims to: 1) assess the financial condition of the Philippine Deposit Insurance Corporation (PDIC) amidst continuous bank closures; 2) determine the compliance of PDIC’s financial reporting practices with the IFRS; and 3) compare both PDIC’s financial reporting practices and financial performance with the national deposit insurers of Indonesia and Malaysia.

[Methodology] We analyze the roles, financial reporting practices, and financial performance of the PDIC relative to two deposit insurance institutions in the region. To this end, literature review, descriptive statistics and comparative analysis are adopted.

[Findings] Our major findings are: 1) the PDIC’s financial reporting practices related to provisioning for insurance losses lag its neighboring counterparts in term of compliance with international standards; 2) the continuous occurrence of bank closures and the mandated financial assistance to the troubled banks have greatly affected the profitability of the PDIC; 3) borrowings from the central bank and the annual dividends to the Philippine government have further increased its financial leverage.

[Implications] This study reveals a striking difference in the number of bank closures and the financial performance between the PDIC and its major counterparts in the region.