Recto ditches Landbank-DBP merger plan

The proposed merger of state-run lenders Land Bank of the Philippines and Development Bank of the Philippines (DBP) is no longer on the table, Finance Secretary Ralph Recto said Tuesday.

At the sidelines of the Bureau of Customs’ 122nd anniversary celebration in Manila, Recto confirmed that the plan to merge the two state-owned banks, with Landbank as the surviving entity, is already scrapped.

“I think we’re better off with two government depository banks,” the Finance chief said.

Recto’s predecessor, former Finance Secretary Benjamin Diokno, was pushing for the merger of Landbank and DBP, which he said would generate at least P5.3 billion in savings annually or at least P20 billion for the next four years.

The merger was seen to create the largest banking institution in the Philippines with an estimated asset size of about P4.18 trillion, a deposit base amounting to P3.59 trillion, and a capital of P288 billion based on figures as of December 31, 2022.

The proposed merger of Landbank and DBP received the go-ahead from President Ferdinand "Bongbong" Marcos Jr. in March last year, with Diokno saying that a merger would eliminate redundancy and inefficiency in operations.

Concerns, however, were raised against the proposal with Senator Risa Hontiveros airing her misgivings, saying it would create a bank that was “too big to fail.”

The DBP also sounded the alarm over the merger, saying 3,000 employees, or 75% of its workforce, could lose their jobs, and that the prospect was a "dangerous experiment"

The DBP also said that the merger needs enabling legislation since the two banks were created by acts of Congress.

But the Governance Commission for Government-Owned and Controlled Corporations (GCG) submitted to the Office of the President its study, which stated that the Landbank-DBP merger could proceed without legislation.

The plan was put on limbo when Malacañang asked the GCG to run further studies on the proposed merger of two of the government’s biggest banks.

In scrapping the merger plan, Recto said, “It’s as simple as we need two government depository banks.”

“Their mandates are totally different so I think we are better off with two of them,” the Finance chief said.

The merger of Landbank and DBP, to recall, was approved by then-President Benigno Aquino III in 2016 but was abandoned by the Duterte administration due to concerns that transforming the two institutions into one would not serve the public interest because the banks were created for different purposes.

Landbank serves the agriculture sector while DBP takes care of the needs of industry. —NB, GMA Integrated News