Landbank-DBP merger shelved

Posted on September 07, 2016

THE GOVERNANCE Commission for Government-owned or -controlled corporations (GCG) has formally dropped the plan of the Aquino administration to merge the state-run lenders Land Bank of the Philippines (Landbank) and the Development Bank of the Philippines (DBP).

In a statement, the Finance department said the GCG en banc canceled Executive Order 198 signed by former President Benigno S.C. Aquino III, with the new government keen on keeping the two government-owned banks as they cater to different markets.

“Both were created for different purposes. I don’t see any rational reason to put them together,” Finance Secretary Carlos G. Dominguez III was quoted as saying in the statement.

Mr. Dominguez said the DBP provides long-term financing for borrowers, while the Landbank serves as an avenue for short-term credit to farmers and agricultural workers. Apart from Mr. Dominguez, Budget Secretary Benjamin E. Diokno, GCG Chairman Jaime Ma. F. Flores II and Commissioners Michael P. Cloribel and Samuel G. Dagpin, Jr. signed the order.

Efforts to merge the two state-run banks started during the 16th Congress, with Landbank chosen as the surviving entity given bigger assets and a wider branch network. The proposal sought to “rationalize government operations” as it is deemed redundant to have two state-owned banks.

The House of Representatives approved the proposal, but it failed to clear the Senate.

The merger is also seen to float the fused entity to be among the top 25 banks in Southeast Asia upon economic integration.

However, Mr. Dominguez said the focus in keeping the banks was public service rather than combining assets to end up with a bigger entity.

The Cabinet official added that the planned merger needs a law from Congress before being carried out, contrary to the previous government’s attempt to implement using an Executive issuance as basis.

Landbank was the third biggest bank in terms of assets as of the first quarter with P1.285 trillion, while DBP came in seventh with its P483.083-billion asset base, according to central bank data. -- Melissa Luz T. Lopez