Landbank, DBP allay depositors' fear about Maharlika contribution

Land Bank of the Philippines (Landbank) and Development Bank of the Philippines (DBP) on Tuesday allayed fears of depositors that their savings would be affected by the state-run lenders’ remittance to the seed capital of Maharlika Investment Fund (MIF).

This, after Landbank and DBP sought regulatory relief from the Bangko Sentral ng Pilipinas (BSP) as their respective capital infusions into the MIF could render them non-compliant with central bank regulations.

“Depositors are with a bank that is liquid and stable. There is nothing to worry about,” Landbank president and CEO Lynette Ortiz told GMA News Online.

For his part, DBP president and CEO Michael de Jesus said, “We are seeking regulatory relief because if we breach the minimum capital requirements, there will be fines and penalties.”

“This [is what] we want to avoid,” De Jesus said in a Viber message, adding that “depositors of DBP should not worry.”

“The P25-billion Maharlika contribution of DBP will not have an adverse effect on our depositors. The P25 billion will come from existing assets. We sell existing assets then invest in Maharlika (which is also an asset),” he said.

Landbank and DBP remitted P50 billion and P25 billion, respectively, to the Bureau of the Treasury —which will put in escrow the seed funds for the initial capital of the MIF until the sovereign wealth fund and the state-run firm that will manage it become operational.

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.

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%.

In a separate statement, Landbank said its capital adequacy ratio (CAR) remains at a “very healthy level” of 16.61% as of end-June 2023, well above the 10% minimum requirement of the BSP.

“Even with the bank’s P50 billion seed capital to the MIC (Maharlika Investment Corp.) as mandated by Republic Act No. 11954, otherwise known as the Maharlika Investment Fund Act of 2023, the bank will meet its CAR requirements,” Landbank said.

President Ferdinand Marcos Jr. recently issued Executive Order No. 43, which adjusted the percentage of net earnings to be declared and remitted by Landbank for Calendar Year 2022 from 50% to 0%.

EO 43 stated that the secretary of Finance recommended the downward adjustment of Landbank’s dividend rate “to support the capital position of the Landbank, maintain its compliance with BSP 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.”

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 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.

The two state-owned banks are among the largest in the country. Landbank is the second-largest bank with assets worth P2.76 trillion, next to the Sy family’s BDO.

DBP ranks eighth with P1.035 trillion worth of assets. —AOL/VBL, GMA Integrated News