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Wednesday, April 24, 2024

DBP, LandBank money in Maharlika Fund should yield more than current investment–Escudero

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DESPITE an apparent commitment by the Senate leadership for the chamber to pass the Maharlika Investment Fund bill before Congress goes on recess on June 2, several senators signaled their intent to take out controversial provisions and put in more protection for the funders of the original investment pool.

Sen. Chiz Escudero, for one, batted for “more earning guarantees” in the Maharlika Fund bill, which he expects would allow the sovereign fund to surpass the 6-percent income threshold that the two state-owned banks presently earn from their investments.

Without a benchmark in yields, billions from the Land Bank of the Philippines (LandBank) and the Development Bank of 

Philippines (DBP) placed in the Maharlika Investment 

Corp. (MIC) will be earning less than their present return on investment (ROI), he warned.

“Ang ideya ay dapat lumago ang pera ng LandBank at DBP, at hindi 

malugi [The point is to grow the money of Land Bank and DBP, not to have them incur losses],” Escudero said.

Noting, “the bill makes their equity compulsory,” he asked: “So, in exchange, will there be guarantees as to their returns as well?” 

The bill, as presently worded, “is a leap of faith to the great unknown,” he added.

He summed up his question thus: “Simple lang naman ang tanong: Kaya n’yo bang lampasan ang kita ng dalawang bangko sa investments nila? Kung may pag-aalinlangan, bakit napaka-aggressive yata ng marketing ng bill na ito [The question is simple: Can their Maharlika investment yield surpass what these banks are currently earning from their investments? If there is equivocation, why is this bill being marketed so aggressively?]” he asked.

The senator added, in a mix of English and Filipino: “If a ten-peso headache pill carries therapeutic guarantee, why is it that in this fund, with its price tag in the hundreds of billions, there seems to be none?”

At the Senate plenary deliberations last Wednesday, Escudero noted  he has yet to hear a full explanation on how much these banking giants  will earn from their Maharlika investments.

He recalled, “LandBank and DBP, during the hearings, said they were earning on average 6 percent to 8 percent. So, let us average it up at 7 percent. You have to give LandBank and DBP a return of at least 7 percent per annum on what they invested in MIC.”

The senator added that on top of that is the 2-percent administrative fee cap the MIC may use.” Escudero also noted: “Then we have to factor in inflation. So easily, the yield will be in the two-digit zone.”

In any investment pitch, he stressed, the return on investment “is the most important bottomline. An investment is made because one is convinced that it will make money.”

He then added: “Not behest. Not something coerced through legislation.”

As filed, Senate Bill 2020 states that of the total authorized P500 billion in capital stocks of the MIC, the initial P125 billion worth of MIC common stocks to be subscribed by the national government, amounting to P75 billion, shall be fully paid by the following: P50 billion by the LBP and P25 billion by the DBP.

Under the bill, the two banks can seek regulatory relief from the Central Bank if their position falls below standards.

Pero dapat hindi umabot sa ganoon [But it need not go this far]. And to dangle this as the standard reply to issues validly raised is not the comforting answer we want to hear,” he added.

A veteran legislator, Escudero pointed out that once a regulatory relief is sought, “that means the banks already lost a lot of money.”

Before Escudero’s lengthy interpellation last Wednesday of Maharlika bill sponsor Sen. Mark Villar, two other senators—Sherwin Gatchalian and Joel Villanueva—grilled the latter on the implications of delaying the capitalization buildup of the Bangko Sentral ng Pilipinas (BSP), the implied result of the central bank’s being mandated to turn over dividends also to the initial investment pool for Maharlika.

They worried that with the delayed capitalization buildup, the BSP might not be in a strong enough position to withstand shocks in the banking and financial system.

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