Marcos exempts Landbank from remitting share of earnings to gov’t

Land Bank of the Philippines is no longer required to remit a certain percentage of its 2022 earnings to the national government after President Ferdinand Marcos Jr. slashed the state-run lender’s dividend rate to 0%.

In his Executive Order No. 43 issued on October 11, Marcos adjusted the percentage of net earnings to be declared and remitted by Landbank for Calendar Year 2022 from 50% to 0%.

In 2022, Landbank booked a net income of P30.06 billion, up 38.2% from P21.7 billion net earnings recorded in 2021.

Under Republic Act (RA) No. 7656, all government-owned or -controlled corporations (GOCCs) are required to declare and remit 50% of their annual net earnings as cash, stock, or property dividends to the national government.

The same law states that the President, upon the recommendation of the Secretary of Finance, may adjust the percentage of annual net earnings to be declared by a GOCC, “in the interest of national economy and general welfare.”

EO 43 stated that “the Secretary of Finance has recommended the downward adjustment of the percentage of the net earnings that shall be declared by Landbank as dividends to the national government for Calendar Year 2022, in order to support the capital position of the Landbank, maintain its compliance with Bangko Sentral ng Pilipinas regulations on capital adequacy requirements, and expand its role in the economic recovery of industries adversely affected by the COVID-19 pandemic, in the interest of national economy and general welfare.”

To recall, state-run lenders Landbank and Development Bank of the Philippines have sought regulatory relief from the BSP as their respective capital infusions into the Maharlika Investment Fund (MIF) could render them non-compliant with the minimum capitalization requirements.

Landbank and DBP remitted P50 billion and P25 billion, respectively, to the Bureau of the Treasury for the initial capital of the MIF.

BSP Governor Eli Remolona said the regulatory relief being asked for by the banks was due to the capital infusion they provided to MIF, which “may make them non-compliant with our capital requirements.”

Under the BSP’s regulations, universal banks are required to have a minimum capitalization of P3 billion up to P20 billion, depending on the number of branches.

Landbank has an authorized capital stock of P200 billion, while DBP has an authorized capital of P35 billion.

DBP president and CEO Michael de Jesus said that under BSP regulations, the banks’ contribution to the MIF “must be deducted from the computation of capital.”

“We seek relief that our contribution not be deducted from capital,” de Jesus said.

Central bank rules also require banks to maintain a capital adequacy ratio - an indicator of a bank’s ability to meet its obligations - of 10%.

Apart from Landbank and DBP, the MIF’s initial capitalization would be sourced from the P50-billion contribution from the national government, which will come from the following sources:

• BSP's total declared dividends
• National government's share from the income of PAGCOR
• Properties, real and personal identified by the DOF-Privatization and Management Office
• Other sources such as royalties and/or special assessments.

Under the law, the MIF has an authorized capital stock of P500 billion.

The BSP’s Monetary Board has earlier declared a dividend of P31.859 billion “in favor of the national government,” which will then be used to bankroll the MIF.

The MIF, the country’s first sovereign wealth fund, is a pool of funds sourced from state-run financial institutions that will be invested in high-impact projects, real estate, as well as in financial instruments.