STATE-RUN lender Land Bank of the Philippines (LANDBANK) may set up its own bond exchange if Philippine Dealing System Holdings Corp. (PDSHC) stakeholders continue to snub purchase offers.
“We are not confiscating anybody’s shares. It’s up to them to sell it to us. If they don’t want to sell it, fine… It will be very clear now who doesn’t want to develop the capital market, and who are those? Shareholders of PSE (Philippine Stock Exchange) and PDS,” Finance Secretary Carlos G. Dominguez III told reporters late Thursday at LANDBANK’s Makati headquarters.
“[T]hat is not going to stop us from doing that. There are other things we can do — we can promote the bond business ourselves. If they don’t want to sell it, we will set up the bond system. We can do it,” Mr. Dominguez added.
He said improving the capital market is part of the government’s mandate.
“I said from the very beginning: our goal is to improve the capital markets in the Philippines. It means to say, among other things, that MSMEs (micro, small, and medium enterprises) have access to loans other than bank loans so they can go into the bond market. That is our goal,” said Mr. Dominguez.
This comes after the bank sent out P360-per-share purchase offers to stakeholders of the fixed-income bourse last March 5 to April 5 to get a majority share, with only one agreeing to the proposal, according to LANDBANK President and Chief Executive Officer Alex V. Buenaventura.
The lender also launched on April 20 a second round of offers valid for one month, with the same price of P360 apiece.
Although the PSE has received an offer to sell its 20.98% stake in the PDSHC, it said that it remains keen to unify the fixed-income and equities exchanges to make capital market transactions more efficient.
Mr. Dominguez, ex-officio chairman of LANDBANK, said it would be easier to set up the bond market using the existing infrastructure of the PDSHC as it would take time to create the bank’s own system, even as the latter would cost about the same amount as its total offer for the PDSHC shares.
“That won’t stop us from developing a department or section to do the capital market to start selling bonds because we are a universal bank — we can do it,” he however noted, adding that the Development Bank of the Philippines can conduct the sale as well.
“We will start promoting a bond. We will tell our clients, you want the bonds? We will offer to package the bonds for you. We’ll sell it to insurance companies. It’s not going to be as efficient as if we were doing it through a trading system, but we can do it,” Mr. Dominguez added.
The Finance chief said he is not against the PSE-PDSHC merger, but said the implementation of such a plan has taken “so long,” since the stock exchange pledged to the Duterte government seal the deal 18 months ago.
“And apparently this has been going on for five years,” he said.
Before the merger could occur, the PSE would need exemptive relief from the Securities and Exchange Commission (SEC) rule that limits industry ownership of an exchange to 20%.
Although the Philippine Competition Commission approved the PSE-PDSHC merger last November 2017, proving the deal would have no negative impact on the public, the SEC still required the equities bourse to bring down broker ownership to less than 20% — which the PSE has failed to meet even after its stock rights offering last month.
The stock exchange’s share-purchase agreements with other PDSHC stakeholders — which would have given them 69.03% share had they secured exemptive relief from the SEC rule — also lapsed on March 31.
“We are begging them to comply with the law. Can you imagine a country begging, please follow the law? We’ll just do it ourselves,” Mr. Dominguez said.
LANDBANK currently owns 1.56% of PDS through the Bankers Association of the Philippines, which holds a cumulative 13.26% share for itself and its member-banks. — E.J.C. Tubayan