State deposit insurer Philippine Deposit Insurance Corporation (PDIC) and the World Bank Group, through the International Bank for Reconstruction and Development (IBRD), signed a landmark advisory agreement on the study and development of a Risk-Based Assessment System (RBAS) for deposit insurance, seen as a major milestone for the Philippine banking system and the Philippine deposit insurance system.
PDIC President and CEO Roberto B. Tan and IBRD Country Director Mr. Zafer Mustafaoglu signed the agreement in Makati City on June 26, 2025.
RBAS for deposit insurance is a framework to determine the premiums that banks pay for deposit insurance based on each institution’s risk profile. Its goal is to align the cost of insurance with the level of risk each bank poses to the PDIC Deposit Insurance Fund, thereby promoting financial stability, reducing moral hazard, and incentivizing prudent risk management among banks.
The collaboration marks a critical first step to aligning bank assessment with global standards. Under the agreement, IBRD will conduct a comprehensive study to evaluate the need, feasibility, and design of a risk-based premium system tailored to the Philippine context consistent with the provision of the amended PDIC Charter requiring the conduct of a study on the need to establish a risk-based assessment system. This approach will improve PDIC’s surveillance of banks through the implementation of an enhanced assessment system that is customized based on a member bank’s individual risk profile.
Under the advisory engagement, IBRD is also expected to provide technical assistance by crafting the framework, methodology, and implementing guidelines for a risk-based assessment system. Drawing on international best practices, the initiative is aimed at enhancing the PDIC’s capability to more effectively incorporate institutional risk in its assessment of member banks and ensure a more equitable and sustainable funding mechanism for its Deposit Insurance Fund.
PDIC President Tan expressed optimism that the collaboration with IBRD will result in a deposit insurance system that is stronger, more effective, and more responsive to changing times and evolving risks.
“Having a sound risk-based assessment framework is not only essential but critical. This Risk-Based Assessment System will help the PDIC better foresee and address potential problems as new challenges emerge from a more complex banking environment. With the global expertise of World Bank-IBRD and our commitment to see this Project through, we are paving the way for an enhanced deposit insurance system in the country,” President Tan said.
Mr. Mustafaoglu, whose portfolio also includes Malaysia and Brunei, highlighted the role of a well-designed risk-based assessment system in promoting sound risk management and strengthening public confidence in the financial safety net. He cited that the agreement supports financial sector reforms that are timely, data-driven, and aligned with international benchmarks.
The partnership of the PDIC and WB-IBRD is seen as a welcome development as the sate deposit insurer pursues a more consequential role in promoting financial stability by way of key legislative reforms. These reforms aim to amend the deposit insurance law, particularly to enhance the mandate of the PDIC, expand its authorities, and modernize its operations, for a more responsive, resilient and future-ready deposit insurance system. (PDIC)
