{"id":7120,"date":"2009-03-02T09:47:55","date_gmt":"2009-03-02T01:47:55","guid":{"rendered":"https:\/\/www.quezon.ph\/?p=7120"},"modified":"2013-11-29T10:46:22","modified_gmt":"2013-11-29T02:46:22","slug":"the-explainer-legacy-redux-2","status":"publish","type":"post","link":"https:\/\/www.quezon.ph\/2009\/03\/02\/the-explainer-legacy-redux-2\/","title":{"rendered":"The Explainer: Legacy redux"},"content":{"rendered":"
That was taken from episode of Niall Ferguson\u2019s documentary series, \u201cThe Ascent of Money,\u201d on which his best-selling book with the same name was based.<\/span><\/p>\n Tonight we continue our discussion on the collapse of the Legacy group, the PDIC\u2019s woes, and introduce a new topic: pending legislation that will spread the risk from banks to the taxpaying public.<\/p>\n I\u2019m Manolo Quezon. The Explainer.<\/p>\n <\/p>\n I. A viewer\u2019s personal plea<\/strong><\/p>\n <\/p>\n Depositor in Legacy are between a rock and a hard place.<\/p>\n Here\u2019s a simple demonstration of the concept of deposit\u00a0 insurance, at it\u2019s most basic level.<\/p>\n Imagine the front row of our audience to be depositors in a bank. Each depositor puts money in the bank, expecting interest.<\/p>\n The bank, in turn, uses the deposits to lend money at interest to the public, in this case, the second row.<\/p>\n When the second row pays up, the banks then mnakes a profit and pays the interest to its depositor.<\/p>\n Niall Ferguson, in his book, calls it the 3-6-3 rule. Pay 3% interest on deposits. Charge 6% interest on loans. Go and play golf at 3 pm.<\/p>\n Now to make money, money can\u2019t be left idle, but this then leads to a potential problem when banks suddenly face panicking depositors, who all of a sudden, and all together, want their money back.<\/p>\n This sort of panic is what deposit insurance is meant to prevent.<\/p>\n The PDIC gets its money from insurance premiums paid not by you, the depositor, directly, but rather, from the banks themselves.<\/p>\n http:\/\/www.pdic.gov.ph\/index.php?nid1=6&nid2=1&nid3=10<\/a><\/p>\n According to the PDIC insurance premiums are charged the banks according to this formula:<\/p>\n The bank is assessed 1\/5 of 1% per annum of the assessment base of the bank as insurance assessment.<\/i><\/p>\n The PDIC makes insurance available on the basic expectation that not all banks fail, but when one does, there are enough premiums from everyone to cover the depositors, up to a basic limit, on the bank that fails.<\/p>\n But this isn\u2019t how it\u2019s turned out.<\/p>\n Think of it this way. Here\u2019s a clip from the show, \u201cLittle Britain\u201c,take a look.<\/p>\n <\/p>\n That bit of British humor reminded of a lengthy comment left on our blog by David Whittall. Now his story isn\u2019t funny at all.<\/p>\n