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Cross-Border Issues: Core Elements and Effective Practices in Public Awareness and Consumer Protection

Cross-Border Issues: Core Elements and Effective Practices in Public Awareness and Consumer Protection. Mr. Michael A. Osmeña President, PDIC May 3, 2007 Basel Switzerland. Outline. BCCI Case and Cross-Border Issues Importance of Public Awareness and Consumer Protection

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Cross-Border Issues: Core Elements and Effective Practices in Public Awareness and Consumer Protection

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  1. Cross-Border Issues: Core Elements and Effective Practices in Public Awareness and Consumer Protection Mr. Michael A. Osmeña President, PDIC May 3, 2007 Basel Switzerland

  2. Outline BCCI Case and Cross-Border Issues Importance of Public Awareness and Consumer Protection III. Core Elements / Effective Practices IV. PDIC’s Practices in Public Awareness and Consumer Protection V. Public Awareness and Consumer Protection During Cross-Border Failure

  3. I. BCCI Case and Cross Border Issues Closed in 1991 Supervisory gaps and regulatory arbitrage Need for collaboration and greater integration of regulators D. Non-systemic but with spillover effects Effective application of insurance cover, etc. Basel Concordat

  4. Financial globalization, a reality • How will Public Awareness and Consumer Protection apply to Cross-Border Failure?

  5. II. Importance of Public Awareness & Consumer Protection “For a DI to be effective, it is essential that the public be informed about the benefits and limitations of the system.” -FSF

  6. Why Public Awareness is Important Promotes public understanding of DIs. Helps maintain credibility of DIs. Enhances public confidence in the system. Helps counteract effects of failures. Gives DIs proactive edge. Provides consumer protection.

  7. Public Awareness and Consumer Protection • Public Awareness is a means of Consumer Protection. • Informed Depositors are protected depositors.

  8. III. Effective Practices Public awareness viewed in a long term context Clear and consistent messages Creating image of stability Communication strategies with best returns vs. objectives Building strong stakeholder relations

  9. Philippine Data Population: 88 million English proficient Low financial literacy Per capita GDP: $2,000 Savings rate: 27% No. of deposit accounts: 29.58 M Fully insured: 95.19%

  10. Period of reforms Mergers and Consolidation Closure of a number of banks 1998: 40 banks closed 1999: 33 banks closed 2004-2006: 24 banks closed or (8/year average) Scenario after Asian Crisis

  11. PDIC Member Banks Number Deposits (in billion US $) Share (%) Commercial (Foreign) 39 (17) 61.2 (8.14) 87.9 (11) Thrift 84 6.4 9.5 Rural 742 1.8 2.6 Total 865 69.7 100.0 Note: Data as of end-2006 Foreign Banks in the Philippines

  12. III. PDIC’s Practices in Public Awareness and Consumer Protection Regular activities Closure-related activities Special activities

  13. A. Regular Activities • Press releases • TV and radio guestings • Publications • Depositor Assistance Bureau • quick action counter • fliers / brochures • outreach • Depositor Protection and Awareness Week

  14. B. Closure Related Activities • Media releases • Activation of crisis communication plan • appointment of spokesperson • briefing of field personnel • Stand-by statements • Deployment of DAB field personnel • depositor queries • assist depositors in claims process • local media • local government, others • Announcement of payout

  15. C. Special Projects PDIC corporate video Instructional video on filing claims Participation in Phil FSF Baseline awareness survey Financial literacy program

  16. V. Cross-Border Failure of Foreign Bank • Manage expectations • crisis communication plan • closure-related activities • pitch information to target • Reassure the public • Enlist allies • Coordinate with home country DI and regulators

  17. Education • Foreign Deposits • private banking • Big OFW presence overseas • $19 B remittances • Some OFW host countries have no DI • Necessity to educate

  18. In an era of globalization, it is good practice to grid up for cross-border failure A Public Awareness program should be part of a deposit insurer’s arsenal Conclusion

  19. Thank You

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