Admin junks DBP-Landbank merger

The Duterte administration will repeal former President Benigno Aquino III’s order to merge state-run lenders Development Bank of the Philippines and Land Bank of the Philippines, Finance Secretary Carlos G. Dominguez III said.

While the Department of Finance was still determining the legal way to repeal Executive Order No. 198 issued by Aquino in February, Dominguez told reporters that the current administration will not implement it.”

According to Dominguez, the merger of DBP and Landbank cannot be done through a mere executive order, stressing in an earlier statement that such requires legislative action.

The finance chief also pointed out that the two state-run banks have different mandates. “I’m really not sure that you’re going to be serving the public right because these institutions were put up to address two different kinds of problems: the problem of the farmers [in the case of Landbank] and the problem of the industry [in DBP’s case]. I don’t know how you can possibly think that by putting them together you’re going to serve the public better,” Dominguez said.

DBP and Landbank have yet to formally apply for a merger with the Bangko Sentral ng Pilipinas (BSP), Deputy Governor Nestor A. Espenilla Jr. told reporters Wednesday night.

The BSP nonetheless had received a business plan on the DBP-Landbank merger, which must get the nod of the BSP and state run Philippine Deposit Insurance Corp.

EO 198 ordered the merger of DBP and Landbank within a one-year timeline, with the latter as surviving entity.

The merger will result in a bank with combined assets of P1.71 trillion, based on end-2015 BSP data, which will make it the country’s second biggest bank in terms of assets and seen challenging local tycoons’ dominance in the banking sector.

The bigger lender to be established from the merger is being eyed to increase loans to infrastructure projects on top of initiatives under their developmental mandate.

“The merger will result in a combined single borrower’s limit (SBL) of P26 billion compared with DBP’s SBL at P9 billion and Landbank’s at P17 billion. A higher SBL enables the surviving bank to fund big-ticket infrastructure projects,” the Governance Commission for Government Owned or Controlled Corporations (GCG) had said in a briefing paper.