President Benigno S. Aquino III has approved the proposed merger of two state-owned lenders Land Bank of the Philippines and Development Bank of the Philippines (DBP).
With the merger, Land Bank – DBP will be the second largest bank in terms of assets in the country at P1.604 trillion, dislodging Metropolitan Bank and Trust Company (Metrobank) with P1.367 trillion as of September 2015. BDO Unibank is still the country’s biggest bank with total assets of PP1.884 trillion.
In his Executive Order No. 198 published Tuesday, Aquino also approved, upon the recommendation by Finance Secretary Cesar V. Purisima, the increase in Land Bank’s authorized capital stock from P25 billion to P200 billion.Aquino said that Land Bank, as the surviving entity of the merger, requires higher capital to absorb the country’s seventh-largest bank in terms of assets.
“The merger of DBP and Land Bank will build a stronger and more competitive universal development bank able to fulfill its mandate of providing banking services to propel countryside development and to contribute to sustainable and inclusive growth,” the President’s EO read.
Aquino also said there is a need to rationalize the state-run banks’ operation to strengthen their financial capabilities, improve the delivery of services, achieve economic efficiency and support the development thrust of the government.
The functions of DBP and Land Bank duplicate and unnecessarily overlap with one another, the chief executive also noted.
“The merger of DBP and Land Bank will further enhance the financing priority projects and sectors such as infrastructure, public service, agriculture/agrarian reform and small and medium enterprises,” he added.
Meanwhile, Purisima said the planned merger bodes well for the stability of the local banking system.“With better capital adequacy and robust resources, we can expect government banking to continue growing, especially in terms of efficiency and size of the public served,” Purisima said in a mobile message sent to reporters.President Aquino’s EO came as a surprise after the the agency tasked to implement the merger had said that there was lack to time to implement the planned merger due to forthcoming presidential elections.
Governance Commission for Government-Owned and Controlled Corporations (GCG) Chairman Cesar L. Villanueva said last month that the government will need about six months to do a functional merger between Land Bank and DBP.
Villanueva pointed out that the term of Land Bank and DBP’s boards are only good until June 30 this year.He also added that President Aquino is prohibited, under the Omnibus Election Code, to appoint new employees, create new position promotion, or give salary increases and transfer officers and employees in the civil service 45-days before regular elections.
Read more at http://www.mb.com.ph/aquino-approves-land-bank-dbp-merger/#yVEKQvCtPdSrxST2.99