HAVING just one state lender through the planned merger between the Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LANDBANK) could endanger the economy in the event of a bank failure, the DBP said.
“Too big to fail, too big to save. If there is one state bank and that collapses, imagine what would happen to the economy? The conventional wisdom here is do not put all eggs in one basket… It is good to have two banks,” DBP Chairman Dante O. Tiñga said at a briefing in Makati City on Tuesday.
Asked whether the government could go bankrupt if the merger proceeds and the new entity fails, he said “there is a danger that it may happen.”
“That superbank would have assets totaling P4 trillion. If it collapses, that would be gone to waste. We cannot (recover) from that loss,” Mr. Tiñga said.
The DBP said in a statement that “the concentration of risks can leave the ‘superbank’ more vulnerable to financial market bubbles and cyberattacks.”
“Having all financial resources of the National Government, its agencies, government instrumentalities and local government units in one official depository bank may be more perilous than beneficial for the country,” it added.
In March, Finance Secretary Benjamin E. Diokno announced that President Ferdinand R. Marcos, Jr. is in “support” of the merger of the state-run lenders.
The merger aims to consolidate resources, simplify transactions with counterparty banks and multilateral lenders, and enhance efficiency. It will also serve as the sole authorized government depository bank.
Last week, Mr. Diokno said that Mr. Marcos will likely issue an executive order on the merger this month. The legal merger of the banks is seen to be completed by November.
The merged entity will have an asset size of P4.185 trillion and deposits of P3.588 trillion, according to data from the Finance department.
The government is also estimated to generate up to P975 million in savings annually due to the consolidation of the banks’ operations and cuts in personnel expenses.
“While the merged bank may become the largest bank in the country in terms of assets and deposit size, it will still suffer from capital shortage, bad loans, and lazy banking,” the DBP said.
Mr. Tiñga said the legal study by the Governance Commission for Government-Owned and -Controlled Corporations (GCG) is “erroneous.”
Last month, the GCG released the results of its study, which showed that it had the authority to merge both state-run banks without legislation, citing a Supreme Court ruling.
“That study concluded that Mr. Marcos can implement the merger of the two banks, though they were created by law, without the need for legislation. We are not in agreement,” Mr. Tiñga said.
“The power to issue a legal opinion on the matter, legally, normally, and ethically, does not belong to the GCG. No government office has the power to interpret its mandate, its charter,” he added.
He also noted that the authority of the GCG is “recommendatory.”
“If the President does approve the recommendation, there is a need for an enabling legislation. There is nothing in the GCG Law itself which supports the proposition that the President can effect the merger even without the law,” he added.
Mr. Tiñga said that the DBP’s employees are also opposed to the merger.
“Most of the workforce will be losing their jobs if the merger pushes through,” he added.
The merger is expected to slash three-fourths of the workforce of the DBP, which has around 4,000 employees.
Should the merger push through, Mr. Tiñga said the DBP should be the surviving entity.
“(This is) because of its richer legacy, more extensive experience and better track record in development financing. It’s more deserving to be the surviving entity,” he added.
Mr. Tiñga also recommended giving both banks “more powers.”
“Their capital should be increased, and the law should also give them the marching order,” he said.
“There are pending bills where our authorized capital stock will be increased from P35 billion to P100 billion. With that authorized capital increase, we could expand our lending operations and lending activities considering that our lending capacity is limited,” DBP First Vice-President for Corporate Affairs Zandro Carlos P. Sison added. — Luisa Maria Jacinta C. Jocson
