MANILA, Philippines – The country’s economic managers blocked the previous administration’s planned merger of state-owned banks Land Bank of the Philippines (Landbank) and Development Bank of the Philippines (DBP).
In an en banc resolution, the Governance Commission for Government-Owned and -Controlled Corporations (GCG) resolved to cancel the implementation of Executive Order No. 198 signed by former president Benigno Aquino III earlier this year that green-lighted the Landbank-DBP merger.
This was announced by Department of Finance (DOF) spokesperson Paola Alvarez in a statement on Tuesday, September 6.
GCG Chairman Jaime Maria Flores III and commissioners Michael Cloribel and Samuel Dagpin Jr, as well as Finance Secretary Carlos Dominguez III and Budget Secretary Benjamin Diokno signed the resolution.
Dominguez said the main rationale behind the decision was that the two institutions serve different functions – the Landbank serves the agriculture sector, while the DBP serves the needs of industry.
“Both were created for different purposes. I don’t see any rational reason to put them together,” the finance chief said.
Dominguez added that both institutions require bankers with different skill sets: the DBP is mandated to provide long-term financing while the Landbank’s primary role is to provide short-term loans to farmers.
Differing legal interpretations
Under EO 198, signed on February 4, Landbank would be the surviving entity and in the process, become the country’s second largest bank in terms of assets.
Besides authorizing the merger, EO 198 also mandated an increase in Landbank’s capital stock to P200 billion from P25 billion.
According to the DOF, Aquino said the GCG had the power to merge state firms, like the DBP and Landbank, without seeking approval from Congress.
Dominguez, however, asserted that the two banks were set up through legislation, and, thus, only a law passed by Congress can legalize their merger.
“Being number one or number two doesn’t matter because what is important is for the two banks to perform their respective functions efficiently, with service to the public their top priority,” he said.
Landbank was created in 1963 through Republic Act 3844, while the DBP was originally named the Rehabilitation Finance Corporation under RA 85. – Rappler.com