THE impending merger of Development Bank of the Philippines (DBP) and Land Bank of the Philippines will be scrapped by the incoming administration saying that the main clientele of these banks do not care whether they are being served by a “mega bank” so long as they get their loans on time at reasonable interest rates.
In a press briefing over the weekend, incoming Finance Secretary Carlos Dominguez 3rd, said that the Executive Order (EO) 198 issued by outgoing President Benigno Simeon Aquino 3rd, is an act that is beyond the scope of the authority and power of the executive branch of the government.
EO 198 is an order approving the merger of DBP and LandBank.
“First of all, I do not think it can be done by an executive order. Although we still need to study that, my initial opinion is if those were created by legislation, how can you ignore legislations, they have their respective charters. Hence, only Congress can validly do that,” Dominguez said.
“But can you do it via an executive order? The answer is no. And even then, we will neither push nor endorse for its merger,” Dominguez added.
The former classmate of President-elect Rodrigo Duterte explained that the state-run lenders were first and foremost created by Congress for different purposes, adding that even though there be an overlap in some key functions, such an overlap “does not warrant a merger.”
“First of all, the two were created for different purposes. I do not see any rational reason to put them together. One is that of a development bank charged to give long-term financing. The skills you need to do that are very different from the skills you need to do with respect to short-term financing in LandBank, particularly for the farmers,” he said.
After EO 198 was issued in February, the business plan for the intended merger has been submitted to the Monetary Board for review and approval, the perceived “final step” to make the merger happen.
Outgoing Finance Secretary Cesar Purism admitted that inasmuch as they are pushing for the merger, there is no more time for the Aquino administration to complete the process.
The fate of the merger now depends on the will of the incoming administration, he said.
With the supposed merger, LandBank-DBP will have a combined asset of P1.71 trillion, making it the second largest bank in terms of assets, based on BSP data as of end-2015.
“In what parts do these banks overlap? Both take deposits and grant loans. So what if there is kiskisan [friction]? That is actually good to keep them sharp,” Dominguez said.
Should the merger push through, LandBank as the surviving entity would surpass Metropolitan Bank and Trust Co. (Metrobank) in terms of asset at P1.367 trillion and Bank of the Philippine Islands with P1.158 trillion.
BDO Unibank remains the country’s largest bank with total assets of P1.884 trillion.
The merger was also meant to make the state-owned banks more resilient and stronger against competition, especially with the Asean integration that opens up the Philippine market to foreign banks.
“Who cares, what it is to be number two, what it is to be number one. It does not matter. Being number one only matters in boxing,” Dominguez said.
So long as the DBP and LandBank are providing the services expected of them under their respective charters, and provided they are doing it efficiently, a merger is unwarranted, the incoming finance chief noted.
“I mean, this idea that wow we got to be number one, I mean, you are serving the public. You know the farmer does not give a shit if you are number one, what the farmer gives a shit about is that if you can give him a loan on time at a reasonable interest rate,” he said.