The government should proceed cautiously and prudently with respect to the contemplated merger of the Land Bank of the Philippines (Landbank) and the Development Bank of the Philippines (DBP) which, if implemented, would create the largest bank in the Philippines; perhaps resulting in a financial entity “too big to fail.”
One painful lesson from the 2008 Global Financial Crisis is that large banks are riskier and tend to introduce more systemic risk into the financial system.
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 (agrarian reform beneficiaries), 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.
In 2016, this is why then Department of Budget and Management Secretary Ben Diokno, together with Department of Finance Secretary Dominguez, opposed the merger, when it was proposed at that time. What has changed since then?
The Governance Commission for Government-owned and -controlled corporations (GOCCs) 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.
These two institutions have very different mandates and very different client bases. Bakit ipagsasama ang dalawang banko na magkaiba ang misyon at layon (Why combine two banks that have different missions and goals?)
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... Do we want to risk these same issues affecting Landbank?
We need a bank that remains focused on agriculture because this is the sector that does not really interest private commercial banks. The merger may result in funds being diverted to the more bankable commercial and industrial sectors already adequately served by the private sector.
At the end of the day, what is this merger truly for? Bakit gagawin ito (Why do it)? Sino ba ang makikinabang dito (Who will benefit)? Certainly not the employees, whose jobs are suddenly at risk. I stand by the workers of the Landbank and the DBP who report that they have not been properly consulted about the merger. According to them, the personnel and operational issues from the Landbank and UCPB merger remain unresolved. If this is true, these should be settled first before proceeding with this new merger.
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.
March 29, 2023
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