IMF urges restoration of LandBank, DBP capital after Maharlika Fund infusions

The International Monetary Fund (IMF) has called for the swift restoration of the capital of state-owned lenders following their infusions into the country's first sovereign wealth fund under the Maharlika Investment Corp. (MIC).

In a staff report, the IMF cited the importance of topping up the capital of both the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP), both of which contributed to the start-up capital of MIC.

"Implementing capital restoration plans for two state-owned banks following their contribution to the Maharlika Investment Corporation's start-up capital and exiting regulatory relief as soon as possible is important," the report read.

"While the establishment of the MIC can help address the country's investment needs; it should not come at the cost of a resilient financial system, sound regulatory framework, and level-playing field," it added.

To recall, LandBank and DBP sought regulatory relief from the Bangko Sentral ng Pilipinas (BSP) in 2023, as their respective capital infusions into the Maharlika Investment Fund (MIF) could render them non-compliant with central bank regulations.

This came after LandBank remitted P50 billion, and the DBP P25 billion to the Bureau of the Treasury (BTr) for the initial capital of the MIF.

Under BSP regulations, universal banks are required to have a minimum capitalization of P3 billion to P20 billion, depending on the number of branches. LandBank then had an authorized capital stock of P200 billion, while DBP had P35 billion.

In terms of total assets, LandBank was the second-largest big bank as of end-September 2024 with P3.185 trillion, and DBP the tenth with P965.438 billion.

For their part, the LandBank and the DBP have earlier allayed fears that depositors' savings would be affected by the capital infusion into the seed capital of the MIF.

"Depositors are with a bank that is liquid and stable. There is nothing to worry about," LandBank president and chief executive officer Lynette Ortiz said in October 2023.

"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," DBP president and chief executive officer Michael de Jesus said.

President Ferdinand "Bongbong" Marcos Jr. signed the MIF into law in July 2023, tapping state assets for investment ventures to generate additional public funds.

MIC president and chief executive officer Rafael Consing in February said the MIF is likely to make its first investment—with renewable energy, infrastructure, and agriculture the top three priorities—by the end of the year.

Senators, however, called out the MIC in November for the lack of concrete plans for investments on the power sector.

That same month, the MIC also earned flak from some senators for failing to establish guidelines for the hiring of employees, more than a year after the MIF's creation. — VDV, GMA Integrated News