Merger of DBP, LBP Sought

A lawmaker proposed the merger of the Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LBP) to strengthen their financial capabilities, improve the delivery of services, achieve economic efficiency and support the development thrust of the government.

“The merger of DBP and LBP is necessary as the functions or purposes of both banks duplicate and/or unnecessarily overlap with one another, which is one of the standards for implementing under Republic Act No. 10149 otherwise known as the GOCC Governance Act of 2011,” Rep. Sonny P. Collantes (3rd District, Batangas) said in filing House Bill 5350.

Collantes, chairman of the Committee on Banks and Financial Intermediaries, said the merger is also in line with the current regulatory thrust to encourage the consolidation of banks to achieve higher lending capacities, diversify risks and improve the quality of their services.

According to Collantes, the merger will result in synergies in the operations of the two government financial institutions. He said although DBP and LBP have different mandates under their respective charters, they have similar authority to engage in universal banking activities.

“The fusion of the universal banking activities of the two banks is therefore expected to result in the economies of scale of banking operations. Said merger will improve the balance sheet capabilities of the merged bank thus resulting in a stronger bank which will have a competitive edge over other banks not only in the domestic and global markets,” Collantes said.

Collantes said the consolidated entity would be more effective, efficient and sustainable in carrying out the mandates of both banks, particularly in anticipation of the wave of foreign banks that may enter the Philippine market upon the occurrence of ASEAN integration in 2015.

Under the measure, the LBP shall be the surviving entity being the larger bank in terms of assets and resources. It shall also exercise the powers of the DBP under its 1986 Revised Charter (Executive Order No. 81 dated December 3, 1986, as amended by R. A. No. 8523 dated February 14, 1998).

The existing capital of DBP and LBP shall be combined, provided that the combined existing authorized stock of DBP and LBP, which is in the amount of P60,000,000,000.00 shall be increased to P100,000,000,000.00. Said increase shall consist of 400,000 common shares with par value of P100.00 per share.

The bill also provides that the merger of DBP and LBP including all aspects of implementation shall be exempt from the payment of all national and local taxes, fees and charges, including but not limited to, the income tax, capital gains tax, creditable withholding tax, gross receipts tax, local transfer tax, documentary stamp taxes and registration fees.

The bill mandates the Bangko Sentral ng Pilipinas (BSP), the Bureau of Internal Revenue (BIR) and other government offices/agencies concerned to take the necessary actions to implement this Act.

Source: Media Relations Service, House of Representatives