PRESIDENT AQUINO APPROVES LBP-DBP MERGER; LBP CAPITAL STOCK RAISED TO PHP 200 B

MANILA — President Benigno S. Aquino III has approved the merger of the Development Bank of the Philippines (DBP) and the Land Bank of the Philippines (LBP) that will increase the capital stock of the latter as the surviving entity to Php 200 billion, meant to raise the financing of priority projects and sectors.

President Aquino signed Executive Order 198 on Feb. 4, approving the consolidation of the two government-owned or -controlled corporations (GOCCs) in a bid to boost financing of priority sectors such as infrastructure, public services, agriculture/agrarian reform and small and medium enterprises (SMEs).p>According to Executive Order No. 198, the merger was approved by the Board of Directors of both banks through Resolutions issued on March 25, 2015 for DBP and March 23, 2015 for LBP.

Operational merger of the two banks is “subject to the written consent of the Philippine Deposit Insurance Corporation and approval of the Bangko Sentral ng Pilipinas (BSP).”

As recommended by the Department of Finance (DOF), the authorized capital stock of LBP will be increased from Php25 billion to Php200 billion, in line with Republic Act (RA) 3844, otherwise known as the Agricultural Land Reform Code.

The merged banks’ new capital will be divided into two million common shares with par value of Php 100 per share.

“The merger of DBP and LBP 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 said.

In the EO, the Chief Executive directed the DOF and the Department of Budget and Management (DBM) to provide capital infusion to LBP of at least Php30 billion to enable the financial institution to continue supporting the government’s sustainable and inclusive growth agenda.

The amount shall be sourced from existing funds if allowed by law or to be included in the General Appropriation Act for the succeeding years.

The Governance Commission for GOCCs (GCG) also considered the merger of DBP and LBP important to remove duplicate or overlapping functions.

The DBP provides banking services for the SMEs in the agricultural and industrial sector, particularly those operating in the countryside.

On the other hand, the LBP mainly finances the acquisition and distribution of agricultural estates for division and resale to small landholders as well as the purchase of landholdings by agricultural lessees.

It is also designated by Republic Act 6657 as the financial intermediary for the Comprehensive Agrarian Reform Program (CARP).

The GCG said the consolidation would likewise provide better access and extend quality financial services and products to more unbanked and underserved areas.

The GCG shall implement the merger in consultation with DBP and LBP; and undertake a reorganization plan.

The EO assured that all personnel of the constituent banks separated from services due to the reorganization shall be entitled to a Merger Incentive Plan (MIP), in addition to the separation or retirement benefits allowed under applicable laws.

All employees of the constituent banks who will be retained under the said reorganization plan shall not suffer any break in service or tenure, or any diminution of salaries and lawful benefits.

President Aquino also directed all other government offices and agencies to promptly take actions necessary to implement the provisions of EO 198 within one year from its effectivity.

BSP Deputy Governor Nestor Espenilla Jr. said the EO was the legal way to merge the two government-owned financial institutions but stressed that this move still needed the approval of the central bank.

“Like all banks, they still have to get MB (Monetary Board) approval,” he said but cited that “no request for merger has so far been submitted to BSP.”

“Parties involved will have to file merger application with BSP for MB approval,” he added.

Finance Secretary Cesar Purisima is very positive on the merger saying it “bodes well for the stability of our 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,” he said.

LBP First Vice President and Corporate Affairs Department head Catherine Rowena Villanueva declined to comment on the EO saying that they have not officially received the information about the merger.

“We have only received thus far unofficial information regarding the approval of EO 198. We therefore reserve any comment until such time we receive the official advise,” she said. PNA / northboundasia.com