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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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slide1

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

slide2

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

slide3

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

slide4

Financial globalization, a reality

  • How will Public Awareness and Consumer Protection apply to Cross-Border Failure?
slide5

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

slide6

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.

slide7

Public Awareness and Consumer

Protection

  • Public Awareness is a means of Consumer Protection.
  • Informed Depositors are protected depositors.
slide8

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

slide9

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%

scenario after asian crisis
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
slide11

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

slide12

III. PDIC’s Practices in Public

Awareness and Consumer Protection

Regular activities

Closure-related activities

Special activities

slide13

A. Regular Activities

  • Press releases
  • TV and radio guestings
  • Publications
  • Depositor Assistance Bureau
    • quick action counter
    • fliers / brochures
    • outreach
  • Depositor Protection and Awareness Week
slide14

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
slide15

C. Special Projects

PDIC corporate video

Instructional video on filing claims

Participation in Phil FSF

Baseline awareness survey

Financial literacy program

slide16

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
slide17

Education

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