Foregone Landbank-DBP merger

Since President Marcos had given his go-signal to the merger of Land Bank of the Philippines (Landbank) and Development Bank of the Philippines (DBP), it is, for all intents and purposes, a done deal.

The only remaining question is how the merger shall be effected. Would it have to be done through Congress or would presidential action suffice?

Aside from questioning its wisdom, DBP had said that an enabling law is needed for the merger.

Not so, said the Governance Commission for Government-Owned and Controlled Corporations (GCG) as it maintained that, in line with its supervisory authority over government-owned and -controlled corporations (GOCCs), it can recommend to the President the consolidation of the two banks.

The resolution of the issue on what procedure should be followed in creating what would be the biggest bank, asset-wise, in the Philippines rests primarily on the contending parties’ charter.

The present DBP owes its existence to Executive Order (EO) No. 81 that then President Corazon Aquino issued in 1986. Since she exercised legislative powers at that time, that EO had the force and effect of law.

The EO stated that DBP shall have an authorized capital stock of P5 billion, which shall be subscribed by the national government, and “shall be a body corporate and shall exist for a period of fifty years.”

In 1998, Republic Act (RA) No. 8523 amended that EO and, among others, increased its capital stock to P35 billion with the national government subscribing to it and reinforced DBP’s corporate powers to enable it to more effectively accomplish its mission.

Based on its charter, therefore, there is no question DBP is a government-owned corporation.

Fast forward to 2011, in the wake of reports of wasteful activities by some GOCCs, Congress, through RA No. 10149, created the GCG to make sure the GOCCs’ operations are rationalized and monitored so that government assets and resources are used efficiently.

In line with that mandate, the GCG can, after evaluating the performance record of GOCCs based on certain criteria, “implement the reorganization, merger or streamlining of the GOCC, unless otherwise directed by the President.”

Note that the GCG can unilaterally order GOCCs to undergo any of the actions mentioned without need for prior presidential approval. That approval is required only if the GCG recommends the abolition or privatization of a GOCC.

To underscore the breadth of the GCG’s authority and responsibilities over GOCCs, whether created by law or executive action, RA No. 10149 stated that their charters and all other orders, regulations and decrees that “… are inconsistent with the provisions of this Act are hereby revoked, repealed or modified accordingly.”

And that includes DBP’s charter, with the net effect that the provisions of RA No. 10149 that relate to the exercise of some of DBP’s powers, e.g. organizational structure and staffing pattern, are, by virtue of the repealing clause cited above, have to be complied with by DBP.

Thus, if after evaluating the pros and cons of the proposed merger, the GCG concludes that the consolidation would be in the country’s best interests, DBP would have no choice but accept that determination, no matter how painful that may be to its management and staff.

The question is posed: Can DBP’s board of directors pass a resolution opposing or refusing to comply with a merger order from the GCG?

Of course it can, but that would be an exercise in futility because the President can simply revamp the board and appoint new directors who would approve the merger.

DBP’s charter states that the term of its directors shall be for a period of one year or until such time as their successors are appointed. The latter phrase means their continued stay in office is at the pleasure of the President.

Whether or not the Landbank-DBP merger would result to its touted economies of scale and fiscal benefits would depend on how it will be structured and the competence of the executives who shall manage it. INQ

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