LBP-DBP merger to cover up illegal deals – lawmaker

Malacañang’s move to merge two state- owned financial institutions the LandBank of the Philippines (LBP) and Development Bank of the Philippines could be aimed at covering up mismanagement, huge losses and illegal transactions in the DBP, a senior administration lawmaker warned yesterday.

Valenzuela City Rep. Sherwin Gatchalian raised alarm over the merger amid questions as to why President Aquino rushed the issuance of Executive Order 198 earlier this month to merge LBP and DBP despite protests from the Bangko Sentral ng Pilipinas (BSP) and members of Congress.

The lawmaker noted the DBP and some entities under it have been subject of at least four negative reports from the Commission on Audit for 2014 alone. The COA has yet to release its audit reports on the DBP for 2015.

There were reports that Finance Secretary Cesar Purisima was among those who strongly lobbied for Aquino to sign the EO despite a pending bill in Congress that mandates the merger of the DBP and LBP. “Once the LBP and DBP is completely merged, then it’s very possible that whatever poor record, performance or even illegal transactions will be erased in the pro- cess,” Gatchalian said.

“For example, the DBP’s non-performing assets or bad provisions will be greatly reduced in terms of ratio to performing assets once they are diluted or merged with those of the LBP,” he said.

The merger is expected to be finalized in June.

He said a merger of two large institutions should have undergone a lengthy and comprehensive process of due diligence.

With the merger, the surviving entity that is the LBP will be the second largest bank in terms of assets, overtaking Metropolitan Bank and Trust Co. with P1.367 trillion and Bank of the Philippine Islands with P1.158 trillion.

BDO Unibank is still the country’s biggest bank with total assets of P1.884 trillion.

A COA report pointed to the DBP’s losses of P876.7 million in sale of government securities, and the bank’s P2.158 billion past due commercial loans that tied up its fund to slow moving accounts that reduced the amount of resources for lending and re-lending that could have generated additional income.

The COA also had earlier issued notices of disallowances to the DBP totalling P2.5 billion, which is under appeal.

Gatchalian said the merger would leave local government units and the agriculture sector at the losing end.