THE planned merger of the Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP)—a move previously opposed but is now being advocated by President Ferdinand R. Marcos Jr.—is not a walk in the park, according to government officials.
Citing the “long history” of merger attempts between state banks, Senator Imee R. Marcos has cited the need to “first clarify the procedure to be undertaken” in the merger.
The result of the merger should see the surviving entity will adequately serve the functions of both LBP and the DBP, according to Marcos, replying to a query sent via SMS from the BusinessMirror.
The senator recalled that “talks of mergers of government banks have always been going, with UCPB [United Coconut Planters Bank] and LBP being the latest of these government mergers. LBP and DBP have a long history of merger attempts, with the latest in 2014 under EO 198.”
However, she added, “the Duterte administration halted the process, with then Secretary of Finance Sonny [Carlos G.] Dominguez citing the need for any intended merger to pass thru Congress, given the distinct nature and purpose of each of these two banks.”
Words of caution
SENATOR Marcos stressed there is a need to “first clarify the procedure to be undertaken for the merger of the two state banks and be guaranteed that the surviving entity will adequately serve the functions of both LBP and DBP.”
LBP was formed under Republic Act (RA) 3844 in 1963, while DBP, originally called the Rehabilitation Finance Corp., was created under RA 85. These, she noted, mean “two different laws with differing powers and functions.”
A similar word of caution was aired earlier by Deputy Minority Leader Ana Theresia “Risa” N. Hontiveros, who preached against rushing the merger given the disparate mandates of the two banks and their intended constituencies.
Hontiveros cited “a painful lesson” from the “2008 Global Financial Crisis” and argued that large banks are riskier and tend to introduce more systemic risk into the financial system.
Minority Leader Aquilino Martin “Koko” dL. Pimentel III also counseled caution, citing the massive displacement of workers in the two banks, notwithstanding a promise by President Marcos that those not absorbed in the surviving bank will be compensated well.
“Don’t rush as a lot of employees will be affected,” he said in an SMS to the BusinessMirror when sought for reaction to an announcement by Finance Secretary Benjamin Diokno, that no less than the President himself is now pushing for the two banks’ merger, in order to create what is envisioned to be a big, stable bank that can carry out multiple mandates.
MEANWHILE, the Governance Commission for Government-owned and -Controlled Corporations (GCG) has committed to promptly submit to the Office of the President its recommendation regarding the proposed merger of the state-run lenders.
The agency noted the President’s concern that should the two banks’ merger proceed, such must not result in the abandonment of any of the mandates of the two banks.
“GCG will have to look into the specifics of the merger as it involves two major banks that are state-owned. We want to ensure that the merger is seamless and will not disrupt or cause issues or concerns in their respective operations and processes,” GCG Chairman Alex L. Quiroz said.
“It is within the jurisdiction of GCG to ensure that the merger of LBP and DBP is beneficial to the state,” Quiroz added.
He said the GCG evaluation will “cover all areas and is considered of utmost importance,” as LBP and DBP have been named as sources of the start-up funds for the government’s proposed sovereign wealth fund, or the “Maharlika Investment Fund.”
Quiroz stressed that the GCG remains steadfast in its mandate as the central advisory, oversight, and monitoring body for GOCCs, to institutionalize transparency, accountability, financial viability and responsiveness in corporate performance by monitoring and evaluating GOCCs’ performance.
Image credits: Voltaire F. Domingo/Senate PRIB