The Duterte administration has stopped the planned merger of state-run lenders

Development Bank of the Philippines and Land Bank of the Philippines given a go-
ahead by former President Benigno S. Aquino III early in 2016.
In a statement Tuesday, Department of Finance (DOF) spokesperson Paola Alvarez
said an en banc resolution of the Governance Commission for Government Owned
and Controlled Corporations (GCG) “resolved to cancel the implementation” of
Executive Order (EO) No. 198 issued by Aquino in February.
The resolution was signed by GCG Chairman Jaime Ma. Flores III as well as
Commissioners Michael Cloribel and Samuel Dagpin Jr.
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Finance Secretary Carlos G. Dominguez III and Budget Secretary Benjamin E.

Diokno, both sitting as ex-officio members of the oversight body for GOCCs, also
signed the GCG resolution.
Alvarez said the GCG would send President Rodrigo R. Duterte a memorandum to
inform him of the decision to scrap the merger.
The DOF pointed out that Dominguez had early on thumbed down the planned merger
of the two banks that would have resulted into a lender with combined assets of P1.71
trillion, based on end-2015 BSP data, which would make it the country’s second
biggest bank in terms of assets and seen challenging local tycoons’ dominance in the
banking sector.
Dominguez had said a merger of DBP and Landbank “would not serve the public
interest to transform the two institutions into one, given their different functions.”
“Landbank serves the agriculture sector, while DBP takes care of the needs of
industry. Both were created for different purposes. I don’t see any rational reason to
put them together,” Dominguez had said, adding that their merger “cannot be done
without a law passed by Congress.”
“DBP is mandated to provide long-term financing, which requires bankers with
markedly different sets of skills than those needed to extend short-term credit to
farmers—Landbank’s primary job,” according to Dominguez.
Finance Secretary Carlos G. Dominguez III (INQUIRER FILE PHOTO)
MANILA — The Duterte administration has stopped the planned merger of state-run
lenders Development Bank of the Philippines and Land Bank of the Philippines given
a go-ahead by former President Benigno S. Aquino III early in 2016.
In a statement Tuesday, Department of Finance (DOF) spokesperson Paola Alvarez
said an en banc resolution of the Governance Commission for Government Owned
and Controlled Corporations (GCG) “resolved to cancel the implementation” of
Executive Order (EO) No. 198 issued by Aquino in February.
The resolution was signed by GCG Chairman Jaime Ma. Flores III as well as
Commissioners Michael Cloribel and Samuel Dagpin Jr.
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Finance Secretary Carlos G. Dominguez III and Budget Secretary Benjamin E.

Diokno, both sitting as ex-officio members of the oversight body for GOCCs, also
signed the GCG resolution.
Alvarez said the GCG would send President Rodrigo R. Duterte a memorandum to
inform him of the decision to scrap the merger.
The DOF pointed out that Dominguez had early on thumbed down the planned merger
of the two banks that would have resulted into a lender with combined assets of P1.71
trillion, based on end-2015 BSP data, which would make it the country’s second
biggest bank in terms of assets and seen challenging local tycoons’ dominance in the
banking sector.
Dominguez had said a merger of DBP and Landbank “would not serve the public
interest to transform the two institutions into one, given their different functions.”
“Landbank serves the agriculture sector, while DBP takes care of the needs of
industry. Both were created for different purposes. I don’t see any rational reason to
put them together,” Dominguez had said, adding that their merger “cannot be done
without a law passed by Congress.”
“DBP is mandated to provide long-term financing, which requires bankers with
markedly different sets of skills than those needed to extend short-term credit to
farmers—Landbank’s primary job,” according to Dominguez.

Logos of the Development Bank of the Philippines and the Land Bank of the
Philippines (RADYO INQUIRER)
The DOF said that while former President Aquino “claimed that the GCG had the
power to merge state firms, like DBP and Landbank, without seeking prior approval
from the Congress,” Dominguez maintained that “the two banks were set up through
legislation, and, thus, only a law could legalize their merger.”
Landbank was formed under Republic Act (RA) No. 3844 in 1963, while DBP,
originally the Rehabilitation Finance Corp., had been created under RA 85.
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EO 198 ordered the merger of DBP and Landbank within a one-year timeline, with
the latter as surviving entity.
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 GCG had
said in a briefing paper.
Once merged with DBP, the surviving entity Landbank will not only be the second
largest lender in terms of deposits with nearly P1.3 trillion. “In terms of loans and
capitalization, it will be fourth [biggest] at P583 billion and P114 billion, respectively.
Thus, it shall provide a more stable and stronger base for developmental financing,”
the GCG had noted.
According to the GCG, “more underserved and unbanked areas will be reached by the
surviving bank through rationalization of the existing branch networks of DBP and
Landbank.”
“Planned branch openings and relocation of branches will expand the reach of the
surviving bank to 298 cities and municipalities. With its wider presence, the surviving
bank can offer more financial services to overseas Filipino workers, small and
medium enterprises, and the agriculture-agrarian reform sector who are the natural
customers of its branch network,” the GCG had said.
Also, the surviving bank will have an automated teller machine or ATM network of
1,670 nationwide, which the GCG said “can also provide access for beneficiaries of
the 4Ps [Pantawid Pamilyang Pilipino Program].”
The GCG earlier said the consolidated bank “will be more effective, efficient and
sustainable in carrying out the mandates of both banks, particularly in anticipation of
the wave of foreign banks that may enter the Philippine market upon the occurrence of
Asean integration in 2015.” SFM/rga

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

The Duterte administration has stopped the planned merger of state-run lenders
Development Bank of the Philippines and Land Bank of the Philippines that was
given the go-ahead by former President Aquino early this year.
In a statement Tuesday, Department of Finance (DOF) spokesperson Paola Alvarez
said that an en banc resolution of the Governance Commission for Government
Owned and Controlled Corporations (GCG) “resolved to cancel the implementation”
of Executive Order (EO) No. 198 issued by Aquino in February.
The resolution was signed by GCG Chair Jaime Ma. Flores III and Commissioners
Michael Cloribel and Samuel Dagpin Jr.
ADVERTISEMENT

Finance Secretary Carlos G. Dominguez III and Budget Secretary Benjamin E.

Diokno also signed the GCG resolution as they sit as ex-officio members of the
oversight body for GOCCs.
Alvarez said the GCG would send President Duterte a memorandum to inform him of
the decision to scrap the merger.
The DOF pointed out that Dominguez had early on thumbed down the planned merger
of the two banks that would have resulted in a lender with combined assets of P1.71
trillion, based on end-2015 BSP data, making it the country’s second-biggest bank in
terms of assets and seen challenging local tycoons’ dominance in the banking sector.
Dominguez had said that a merger of DBP and Landbank “would not serve the public
interest to transform the two institutions into one, given their different functions.”
“Landbank serves the agriculture sector while DBP takes care of the needs of
industry. Both were created for different purposes. I don’t see any rational reason to
put them together,” Dominguez pointed out, adding that their merger “cannot be done
without a law passed by Congress.”
“DBP is mandated to provide long-term financing, which requires bankers with
markedly different sets of skills than those needed to extend short-term credit to
farmers—Landbank’s primary job,” according to Dominguez.
The DOF said that while former President Aquino claimed that the GCG had the
power to merge state firms like DBP and Landbank without seeking prior approval
from the Congress, Dominguez maintained that the two banks were set up through
legislation and, thus, only a law could legalize their merger.
Landbank was formed under Republic Act (RA) No. 3844 in 1963, while DBP,
originally called Rehabilitation Finance Corp., was created under RA 85.
ADVERTISEMENT

EO 198 ordered the merger of DBP and Landbank within a one-year timeline, with
the latter as the surviving entity. The bigger lender to be established from the merger
was being considered 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 GCG had
said in a briefing paper.
Once merged with DBP, the surviving entity Landbank would not only be the second
largest in terms of deposits with nearly P1.3 trillion. “In terms of loans and
capitalization, it will be fourth [biggest] at P583 billion and P114 billion,
respectively,” the GCG had noted.
According to the GCG, more underserved and unbanked areas would be reached by
the surviving bank through rationalization of the existing branch networks of DBP and
Landbank.
“Planned branch openings and relocation of branches will expand the reach of the
surviving bank to 298 cities and municipalities. With its wider presence, the surviving
bank can offer more financial services to overseas Filipino workers, small and
medium enterprises and the agriculture-agrarian reform sector who are the natural
customers of its branch network,” the GCG had said.
Also, the surviving bank would have an automated teller machine or ATM network of
1,670 nationwide, which the GCG had said “can also provide access for beneficiaries
of the 4Ps (Pantawid Pamilyang Pilipino Program).”
FINANCE Secretary Carlos Dominguez III gave an early Christmas gift to thousands
of officials and employees of Development Bank of the Philippines (DBP) and Land
Bank of the Philippines (LBP) when he cancelled the proposed merger of the two
government-owned banks.
It will be recalled that early this year, then President Aquino, upon the
recommendation of the Governance Commission for Government-Owned and -
Controlled Corporations (GCG), issued an executive order approving the
consolidation of DBP and LBP, with the latter as the surviving bank.
The order stated that the fusion will be good for the country because the banks’
functions duplicate and overlap with one another, and that their combination will
build a stronger and more competitive universal bank.
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The order was not self-executory because it required approvals from the Securities
and Exchange Commission, Philippine Deposit Insurance Company, Bangko Sentral
ng Pilipinas and Philippine Commission on Competition.
At that time, some sectors expressed doubts about the deal being completed before the
end of the Aquino administration because of its complexity and limited time. The
prediction proved to be true.
Barring any change of mind by Dominguez (or President Duterte), the marriage of
DBP and LBP will not happen any time soon. Their employees have reason to be
hopeful that their jobs, at least for the time being, are secure.
Recommendation
Since the two banks are government-owned or -controlled corporations (or GOCCs),
the cancellation of their proposed merger will have to be done through a
memorandum of GCG to the President recommending the repeal of Aquino’s
executive order on the matter.
It is interesting to note that CGC, which has a new set of officers, is making a 180-
degree turn from its earlier finding that the unification of DBP and LBP will be in the
country’s best interests.
This time, CGC believes the two banks are better off operating separately and
attending independently to the financial requirements of their respective clientele.
Its stance jibes with Dominguez’s observation that the two banks were created for
different purposes and therefore it is not rational to put them together.
The similarity of position gives the impression that either Dominguez had earlier
advised CGC of his position on this issue and CGC did not offer any objections, or
CGC had prior consultations with him and agreed to take a common stand.
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Incidentally, CGC is not an attached agency of the Department of Finance or under its
administrative supervision. It is under the Office of the President of the Philippines.
From the looks of it, major financial decisions will henceforth be made in the finance
department, not Malacañang.
Consolidation
The DBP-LBP merger was on the bucket list of former Finance Secretary Cesar
Purisima. It was one of the things he talked about shortly after he was appointed by
then President Aquino.
The proposed consolidation reflects Purisima’s professional upbringing as financial
adviser to many of the country’s business conglomerates. He was for decades
connected with SGV & Company, one of the country’s premier accounting firms.
His Big Business exposure accounts for his belief that size is might in the banking
business and that by combining the assets and staff of DBP and LBP, the surviving
bank will be in a better position to contribute to national growth and development.
Purisima cannot be faulted for taking this stance because the name of the game in
financial institutions in our Asean neighbors has been continuing consolidation of
resources so they can ably compete in the global financial market.
In addition, a unified DBP-LBP can have the features of state investment funds that
some Asean countries have put up to meet the financial requirements of their
infrastructure projects and, at the same time, invest in profitable foreign ventures that
can bring additional funds to their country.
Development
Although actively engaged in business himself (and very successful at that),
Dominguez is not cut from the same cloth as Purisima.
Dominguez is a “promdi”—or somebody who grew up in the provinces—who served
as secretary of the Departments of Natural Resources and Agriculture during the Cory
Aquino administration.
In these government posts, he interacted with farmers, loggers and other people whose
livelihoods depended on the soil or the country’s natural resources.
Having also served as director of LBP, he knows the financial problems that farmers
confront during planting and harvesting seasons. As a businessman, he is no stranger
to the banking issues that his fellow businessmen have to contend with to keep their
businesses running and in good shape.
Thus, it does not come as a surprise that Dominquez has expressed his opposition to
the plan to strip DBP and LBP of their ability to attend to the financing requirements
of the clientele to which they have been assigned by the laws that created them.
True, merging DBP and LBP will create a bigger bank that can compete toe to toe
with its counterpart in the private banking sector in the country and provide additional
financial muscle to its prospective clientele.
But where would that leave the farmers, entrepreneurs and small businessmen who
look to LBP and DBP for financial support for their operational requirements?
The status quo is worth keeping and even strengthening.
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merger#ixzz53ahwAYsp
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