DBP firm against merger with Landbank

MANILA, Philippines — The Development Bank of the Philippines (DBP) remains firm against its proposed merger with the Land Bank of the Philippines, this time questioning the authority of the Governance Commission on GOCCs (GCG) to proceed with the plan.

In a statement, the DBP said it has filed an appeal before the Office of the President questioning GCG’s legal study “for being legally erroneous, among other grounds.”

The bank is also standing firm in its position that merging the two financial institutions requires congressional action.

“We believe that GCG does not have the authority to decide on or to approve a merger of GOCCs as its powers are limited to evaluation of performance, determination of relevance of GOCCs and implementation of mergers,” DBP said.

Earlier this week, the GCG submitted its legal study for the merger, noting that the proposal can actually proceed without legislative action.

According to the GCG, President Marcos can implement the merger, through the issuance of an executive order, without waiting for Congress to file and pass related bills.

GCG commissioners Gideon Mortel and Geraldine Martinez said there is no draft EO yet on the merger as they are still awaiting final decision by the commission convened as a whole.

In its appeal, DBP asserted that none of the justifications invoked by the Department of Finance meets the exclusive standards prescribed by the GCG in justifying a merger.

These include relevance and consistency with the national development policy of the state, overlapping or duplicating functions with another GOCC and non-achievement of desired objectives as well as non-generation of “level of social, physical and economic returns vis-à-vis resource inputs.”

It also covered dormancy or inoperability, GOCC activity can be best performed by the private sector and functions, purpose or nature of operations of any group of GOCCs necessitate consolidation under a holding company.

“Among these standards, the closest rationale is the allusion to the elimination of perceived redundancy and inefficiencies in the two banks, which is readily debunked by the reality that DBP and LBP have different mandates: DBP is to develop industry; Landbank, agriculture,” the DBP said.

“Yet, there is no showing of any redundancy and how the proposed merger would effectively address the alleged ‘inefficiencies,’” it said.

The DBP has maintained that a merger is unwarranted and ill-timed, given the existing socioeconomic milieu that necessitates a responsive and progressive development financing institution.

In March, finance chief Benjamin Diokno said Marcos had already approved the merger, which would effectively make the surviving entity Landbank surpass BDO Unibank Inc. as the largest banking entity in the country in terms of assets and deposit size.

Currently, Landbank is mandated to finance the agriculture sector while DBP is focused on infrastructure development. Landbank’s assets stood at P3.1 trillion as of end-2022 while that of DBP is at a little over P1 trillion.

Based on initial mapping, only 22 branches of DBP will be retained and the plan is for Landbank to have a branch across all local governments in the Philippines.

Right now, Land Bank has 752 branches while DBP has 147. Projected operating costs savings due to the merger could reach at least P5.3 billion per year or over P20 billion in the next four years.