DBP digs in, insists merger with Landbank needs new law

MANILA  -Development Bank of the Philippines is digging in, insisting that a merger with Land Bank of the Philippines must be done through a new law passed in Congress rather than at the behest of the President and the Governance Commission for Government-Owned or -Controlled Corporations (GCG).

DBP said in a statement it has filed an appeal with the Office of the President questioning GCG’s legal study for being “legally erroneous”, among other grounds.

The state bank was reacting to a statement of GCG, which is supervised by the OP, made on April 18.

GCG said it had submitted to the OP a study on the planned merger, with the conclusion that this could be done without the President waiting for Congress to file a bill and pass a law that would mandate the union.

https://business.inquirer.net/396305/gcg-green-lights-landbank-dbp-merger

“DBP stands firm on its position that unification of the two financial institutions requires Congressional action,” DBP said.

“We believe that GCG does not have the authority to decide on or to approve a merger of GOCCs as its powers, as defined in Republic Act No. 10149, are limited to evaluation of performance, determination of relevance of GOCCs, and implementation of mergers,” it added.

The GCG cited three laws and a Supreme Court decision as basis for its conclusion that it, as well as the President, has the authority to see the merger through.

https://business.inquirer.net/396358/gcg-legislation-not-needed-for-landbank-dbp-merger

These include RA 10149 or the GOCC Governance Act of 2011 that created the GCG; Article VII of the 1987 Constitution; and the Administrative Code of 1987.

The GCG also cited a Supreme Court decision that denied two petitions that argued about RA 10149 being unconstitutional.

It said these legal bases empower Mr. Marcos to implement the merger of the two state-owned banks without waiting for Congress to file and pass related bills.

The GCG’s position coincides with that of Finance Secretary Benjamin Diokno, who is an ex-officio member of the Commission.

Still, the DBP contends that none of the justifications invoked by the Department of Finance meets the exclusive standards prescribed by the GCG in justifying a merger.

The bank was referring to arguments for the merger, such as relevance and consistency with the national development policy of the State;
overlapping or duplicating functions with another GOCC; *

non-achievement of desired objectives as well as non-generation of “level of social, physical and economic returns vis-à-vis resource inputs”; dormancy or inoperability; GOCC activity can be best performed by the private sector; and functions, purpose or nature of operations of any group of GOCCs necessitate consolidation under a holding company.

“Among these standards, the closest rationale is the allusion to the elimination of perceived redundancy and inefficiencies in the two banks, which is readily debunked by the reality that DBP and LBP have different mandates,” DBP said.

DBP’s charter describes it as a development bank that may perform all other functions of a thrift bank, with the main objective of catering to agricultural and industrial enterprises, especially the small- and medium-scale firms.

Meanwhile, Landbank describes its major roles as carrying out a mandate to promote countryside development, and providing credit assistance to small farmers and fisherfolk, and agrarian reform beneficiaries.

“Yet, there is no showing of any redundancy and how the proposed merger would effectively address the alleged ‘inefficiencies,’” the DBP said.

“We will explore all options and available remedies to strongly articulate our position that the merger is unwarranted and ill-timed given the existing socio-economic milieu that necessitates a responsive and progressive development financing institution such as DBP,” it added.