Senate probe into ‘potential risks’ of proposed Landbank-DBP merger sought

A resolution seeking to investigate the "potential risks" of the proposed merger of the Landbank of the Philippines and the Development Bank of the Philippines (DBP) has been filed in the Senate.

Senator Sherwin Gatchalian filed proposed Senate Resolution 697 aimed at determining the propriety, viability, compliance, and potential effects of such a merger and amending existing laws.

The lawmaker said that the Senate needs to "weigh in on whether the merger of these two government banks will better serve the country’s development needs in the agriculture, infrastructure, and industrial sectors, particularly among micro, small, and medium enterprises, and to ensure that the proposed merger will not dilute the government’s focus on developing these target sectors."

"The Senate needs to look into concerns [about] the potential risks the contemplated merger may bring to the stability of the banking industry and the economy, as the consolidation of these banks to form the largest bank in the country could concentrate risks and increase vulnerability to financial market stress and economic shocks," Gatchalian said in his resolution.

GMA News Online has sought comments from Landbank corporate affairs head Butch Garcia and DBP legal services head Rene Gaerlan, but they have yet to respond as of posting time.

The proposed merger of Landbank and DBP received the go-ahead of President Ferdinand "Bongbong" Marcos Jr. in March, with Finance Secretary Benjamin Diokno later saying that a merger would eliminate redundancy and inefficiency in operations.

The proposed merger will create the largest banking institution in the Philippines with an estimated asset size of about P4.18 trillion, a deposit base amounting to P3.59 trillion, and a capital of P288 billion based on figures as of December 31, 2022.

This merger is expected to result in savings estimated at P5.3 billion a year.

The lawmaker cited the Government Commission for GOCCs’ (GCG) report submitted to the Office of the President, which affirmed that the proposed merger does not require new legislation and that existing laws have given the President the authority to implement such a merger.

But Gatchalian noted the appeal of the DBP to the GCG’s study, arguing that the latter did not study the propriety of the merger and that the legal authority of the GCG is at best recommendatory and not binding on any government agency.

The DBP asserted the need for congressional action over the unification of the two financial institutions.

Gatchalian also said that Diokno is still pushing for it and stated that it will likely be finalized by November despite the rejection of the merger plans by previous administrations.

Apart from Gatchalian, Senate Deputy Minority Leader Risa Hontiveros is also seeking a Senate inquiry into the matter.

Hontiveros' proposed resolution raised concerns about the potential risks and benefits that it may bring to the economy, the stability of the financial system, and various stakeholders, including the employees of both banks. — VBL, GMA Integrated News