THE government is exploring ways to fast-track the merger of the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) to set up a strong government-owned bank that can compete with other banks in the Association of Southeast Asian Nations group.
Officials said a technical working group (TWG)—consisting of a Governance Commission for GOCCs (government-owned and -controlled corporations) (GCG) commissioner, a director from the Department of Finance (DOF), the president and executive vice president of DBP and the president and EVP of LandBank—will be created to work on the immediate passage of the law on the merger of the two banks.
GCG has invited a Bangko Sentral ng Pilipinas (BSP) representative to the TWG. Two other members from DBP and LBP were also named.
In a meeting called by Senate President Franklin M. Drilon on Friday, officials of DBP, LBP and GCG discussed the two options on how to effect the merger. The main discussant was GCG Chairman
Cesar L. Villanueva.
The first option was the exercise by GCG of its power granted under Republic Act 10149 to merge government-owned institutions, particularly those performing the same or similar functions.
“My guiding principle for the passage of the Government-Owned and -Controlled Corporation Governance [GOCCs] Act of 2011, or RA 10149, is to improve the governance of the GOCCs and to exact from them efficient and effective public service. To this end, we purposely passed a law that created a strong Governance Commission for GOCCs to conduct regular assessments and evaluations of the state firms’ performance, including the power to implement mergers of GOCCs,” Drilon said.
This option needs presidential approval since Section 40 of the Corporation Code requires ratification by the majority of the corporate shareholders.
Bank officials see that this option—even with President Aquino’s approval—will not be able to result in merger soon enough, as well as unable to amend the composition of the board. It cannot provide an acceptable Early Retirement Incentive Program, and move the privileges of DBP to LandBank.
The second option was to effect the merger through a law, which can make the merger move irreversible. This will provide for a new composition of the board and it can provide the statutory prerogatives of DBP, like tax exemption to LandBank.
“The recommendation of GCG was to pursue both options simultaneously, such as a presidential instruction to be issued to the two banks to work together to effect a ‘de facto merger’ even as Congress will be asked to pass, probably by mid-July, a law merging LandBank and DBP,” the bank official said.
The TWG will work out the evaluation and implementation of what can be done immediately even prior to the passage of a law. Some areas of focus are organizational structure and functions, physical inventories, information-technology capabilities, impact in subsidiaries and equity investments, products and services, policies, and a communications plan to correctly project to the public what is being done.
They will also seek approvals from the Philippine Deposit Insurance Corp., the BSP and the Bureau of Internal Revenue.
The merger of the two banks would make the resulting bank the second-largest bank in the country in terms of assets.
The merged bank is seen to readily compete with the other banks in the region, under Asean integration 2015.