Financial Crisis of 2008 and the Philippine Policy Responses Global Financial Crisis March 2008- Bear SfStearns fails July 2008 - Wall Street plunges FDIC bails out large US banks (IndyMac, Washington Mutual, Wachovia) Global Financial Crisis Sept 2008 - Lehman Brothers fails US government bails out Fannie Mae, Freddie Mac and AIG Global Financial Crisis Oct 2008 - Bailout of UK banks (Royal Bank of Scotland, HBOS and Lloyds TSB) Nov to Dec 2008 - Germany, Denmark, Ireland, Sweden,Italy, Britain, Eurozone, Japan, Hongkong and the US in recession Policy Responses to Global Crisis 1. Central Bank (Bangko Sentral ng Pilipinas Reclassification of Financial Assets from Held for Trading or Available for Sale to the Held-to- Maturity (HTM) or Liquidated Debt Securities classified as Loans categories. - Effective July 1. PliPolicy R esponses t o Gl GlblCiiobal Crisis Price of ROPs* from June ’08 to June ‘09 * Republic of the Philippines PliPolicy R esponses t o Gl GlblCiiobal Crisis Price of ROPs* from June ’08 to June ‘09 * Republic of the Philippines Policy Responses to Global Crisis • Amendment of PDIC Charter Oct 2008 - Bills filed in House of representatives to Dec 2008 and Senate to increase the Maximum Deposit Insurance Coverage (MDIC) Policy Responses to Global Crisis March 4, 2009 - Congress approved joint version of PDIC Charter amendments April 29, 2009 - Signed into law by the President of the Philippines June 1, 2009 - Charter Amendments took effect Policy Responses to Global Crisis Amendments to the PDIC Charter . Increase in the Maximum Deposit Insurance Coverage (MDIC) from P250,000 to P500,000 . Institutional Strengthening Measures 1. Explicit authority to determine insured deposits 2. Authority to conduct special bank examination 3. Authority to examine deposit accounts of ailing banks 4. Modified immunity from suit Policy Responses to Global Crisis AdttthPDICChtAmendments to the PDIC Charter . Financial Strengggthening Measures for PDIC 1. Tax benefits for PDIC 2. Flexibility to adjust maximum deposit insurance coverage (MDIC) in case of systemic threats as determined by the Monetary Board. The adjustment in the MDIC is determined by a unanimous vote of the PDIC Board and subject to approval by the President of the Philippines 3. Capability to Issue Bonds with sovereign guarantee. Philipp ine Se tting Dec 2008 - 12 Banks collectively known as LBklddLegacy Banks were placed under PDIC receivership - Total Amount of Deposits at P14.0B ((ppapproximately US $289.12M ) 0.33% of total deposits in the system - Total No. of Deposit Accts. at 134, 653 0.41% of total number of Deposit Accts (32. 76M) - Not related to Global Crisis - Problems of Legacy banks antedated Global Crisis Responses to Domestic Challenge Dec 2008 - PDIC fine t unes proposals to Charter onwards change to include institutional strengthening measures - Lawmakers included in the statement of policy that the State should “strenggythen the mandatory deposit insurance coverage system to gg,p,enerate, preserve, maintain faith and confidence in the country’s banking syy,pstem, and protect it from illegal schemes and machinations”. Responses to Domestic Challenge Jan 2009 - House Committee on Banks starts inquiry on Legacy Banks in aid of legislation Feb 2009 - Senate also conducts inquiries on Leggyacy Banks March 2009- Legacy Hearings continue Feb 2009 - PDIC starts reengineering of onwards process and systems to address the unprecedented number of depositors of the closed Legacy Banks and sizeable amount of payouts .