THE Marcos administration was reminded to “proceed cautiously and prudently” in contemplating the merger of the Land Bank of the Philippines (LandBank) and Development Bank of the Philippines (DBP), seen to create, if implemented, the largest bank in the Philippines.
Deputy Minority Leader Risa Hontiveros, citing a painful lesson from the 2008 Global Financial Crisis, argued that large banks are riskier, and tend to introduce more systemic risk into the financial system. For his part, Minority Leader Koko Pimentel cautioned against rushing the merger.
“Don’t rush as a lot of employees will be affected,” he said in an SMS to BusinessMirror when sought for reaction to an announcement by Finance Secretary Benjamin Diokno, that no less than President Ferdinand R. Marcos Jr. himself is now pushing for the two banks’ merger, in order to create what is envisioned to be a big, stable bank that can carry out multiple mandates.
Hontiveros noted that the LandBank and DBP carry out separate, and distinct, mandates: the DBP serves industry by financing infrastructure, logistics, and commerce. The LandBank, on the other hand, has been the primary institution mandated by the State to finance the acquisition of land estates, and assist small farmers, fisherfolk, and ARBs, among others.
“We have to understand exactly where the redundancies are and what efficiencies can be gained from this merger, and balance these against any risks that the merger may pose to the economy and financial system,” Hontiveros said in a statement Wednesday.
She recalled that in 2016, this was why then-Budget Secretary Diokno, together with Finance Secretary Carlos Dominguez, opposed the merger when it was proposed at that time. “What has changed since then?” she asked.
In 2016, even then-senator Marcos Jr. had opposed the merger, as Diokno himself recalled on Tuesday. At that time, Marcos Jr. was concerned about the possibly huge labor displacement among the two banks’ work forces. However, Diokno explained, now-President Marcos has changed his mind, after tracking international developments, including the spectacular collapse of three big banks in the west.
Hontiveros pointed out that the Governance Commission for Government-owned and -controlled corporations itself, the regulatory body established for the purpose of monitoring and exercising oversight over GOCCs such as the LandBank and DBP, has previously expressed doubts that the contemplated merger would produce a beneficial synergy.
The senator reminded the two institutions have very different mandates and very different client bases. “Bakit ipagsasama ang dalawang bangko na magkaiba ang misyon at layon [Why merge two banks with vastly different missions and objectives]?”
The DBP, because of the nature of its mandate, “has also been historically embroiled in controversies involving behest loans and other transactions tainted by undue influence and conflict-of-interest,” added Hontiveros. One such issue involved its funding facilities that were put up by government for the 2019 Southeast Asian Games. “Do we want to risk these same issues affecting LandBank?” the senator wondered aloud.
“We need a bank that remains focused on agriculture because this is the sector that does not really interest private commercial banks,” Hontiveros said, adding that the merger “may result in funds being diverted to the more bankable commercial and industrial sectors already adequately served by the private sector.”
She continued: “At the end of the day, what is this merger truly for? Bakit gagawin ito? Sino ba ang makikinabang dito [Why do this? Who will gain from it]? Certainly not the employees, whose jobs are suddenly at risk,” she asked, adding: “I stand by the workers of the LandBank and the DBP who report that they have not been properly consulted about the merger.”
As it is, Hontiveros quoted the two banks’ workers as telling her that “personnel and operational issues from the LandBank and UCPB merger remain unresolved, and if this is true, these should be settled first before proceeding with this new merger.”
The senator added: “I am also preparing a resolution, for filing at the soonest possible time, to urge the Senate to safeguard the stability of the financial sector by exercising oversight over the proposed merger.”
Image credits: Albert Calvelo/Senate PRIB