BSP can handle loss of dividends to Maharlika Investment Fund – Medalla

Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla said the central bank is comfortably on a positive financial condition to let go of its profits in favor of the Marcos government’s Maharlika Investment Fund (MIF) for which the central bank will contribute 100 percent of its declared dividends in the first two years of the wealth fund.

“This postpones the buildup of the capitalization of the BSP but at this point, the balance sheet (of the BSP) is quite good and we could easily take the postponement,” Medalla told a Senate public hearing on Wednesday, Feb. 1.

Under the revised New Central Bank Act, amended in 2019, the BSP has a higher capitalization of ₱200 billion versus its old 1993 charter which only allowed for ₱50 billion. The new BSP law, however, states that the additional ₱150 billion will come from its own dividends. Since the proposed MIF law will divert these dividends, the BSP will continue to have to work on a mere ₱50-billion capitalization until it is freed by the wealth fund.

Medalla also told the Senate Committee on Banks, Financial Institutions and Currencies that the BSP is prepared to provide the two government-owned banks Land Bank of the Philippines (Landbank) and Development Bank of the Philippines (DBP), which will contribute to the MIF and also part of the Maharlika Investment Corp. (MIC) to be created, the necessary regulatory relief measures if or when needed.

National Treasurer Rosalia V. De Leon, when she presented the government’s plan of sourcing for the MIF requirements, reiterated that DBP will initially contribute ₱50 billion while Landbank will put in ₱25 billion.

The government financial institutions (GFIs), including BSP, will fund the MIC which will mobilize and utilize the investment fund to maximize returns. The GFIs will later increase their contributions to the MIC.

To make sure the two GIFs will not collapse due to unforeseen events in the future, De Leon said the BSP will extend regulatory relief measures for their continued financial soundness while contributing to the fund.

Meanwhile, the BSP for the first two years of the MIF or MIC will remit 100 percent of its declared dividends to the fund. In the succeeding years, the BSP will remit 50 percent of its declared dividends to the fund while the remaining 50 percent will go to National Government until the increase in the BSP capitalization has been fully paid. Thereafter, the BSP will remit 100 percent of its declared dividends to the fund.

Medalla said the BSP will back up Senate Bill No. 1670 or the Maharlika Investment Fund Act, for the establishment of an independent fund that “adheres to the principles of good governance, accountability and promotes economic development.” (Lee C. Chipongian)