Hontiveros warns DBP, LandBank merger could result in ‘too big to fail’ bank

Senate Deputy Minority Leader Risa Hontiveros on Wednesday warned against the proposed merger of the Landbank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP), saying it could result in a financial entity that is “too big to fail.” 

The opposition lawmaker said the government must proceed cautiously and prudently as the merger would create the largest bank in the country, adding that one of the lessons from the 2008 global financial crisis is large banks are riskier and they tend to introduce more systemic risk into the financial system.

Hontiveros shared Senator Sherwin Gatchalian’s concern that the two state-owned banks were created for different mandates.

“We have to understand exactly where the redundancies are and what efficiencies can be gained from this merger, and balance these against any risks that the merger may pose to the economy and financial system,” she said.

“[T]his is why then-DBM Secretary Ben Diokno, together with DoF Secretary Dominguez, opposed the merger, when it was proposed at that time (2016). What has changed since then?” she asked.

Apart from this, Hontiveros mentioned that the Governance Commission for Government-owned and -controlled corporations itself previously expressed doubts that the planned merger would produce beneficial synergy.

Further, she noted the history of controversies, such as behest loans and other transactions that were allegedly tainted with undue influence and conflict of interest, wherein the DBP was involved.

She cited as an example the facilities that were created for the country’s hosting of the 2019 Southeast Asian Games.

“Do we want to risk these same issues affecting LandBank?” she asked. “We need a bank that remains focused on agriculture because this is the sector that does not really interest private commercial banks. The merger may result in funds being diverted to the more bankable commercial and industrial sectors already adequately served by the private sector.”

“At the end of the day, what is this merger truly for? Bakit gagawin ito? Sino ba ang makikinabang dito?” she added.

Hontiveros also raised the concerns of both banks' employees, whose jobs may be at risk.

Citing information from the employees, Hontiveros said the merger of LandBank and UCPB resulted in personnel and operational issues that remain unresolved.

“If this is true, these should be settled first before proceeding with this new merger,” she said.

Hontiveros will file a resolution to urge the Senate to protect the stability of the financial sector by exercising oversight on the planned merger.

On Tuesday, Finance Secretary Benjamin Diokno disclosed that President Ferdinand “Bongbong” Marcos Jr. has approved the proposed merger of the LBP and DBP. — BM, GMA Integrated News