THE Development Bank of the Philippines (DBP) said government banks’ contributions to the Maharlika Investment Fund (MIF) must be included in determining the institutions’ compliance with capitalization requirements.
“I understand both LANDBANK (Land Bank of the Philippines) and DBP requested for regulatory relief from the BSP (Bangko Sentral ng Pilipinas),” DBP President and Chief Executive Officer Michael O. de Jesus said in a Viber message.
“We seek relief that our contribution not be deducted from capital,” he added.
LANDBANK and DBP remitted their P50-billion and P25-billion contributions, respectively, to the Maharlika Investment Corp. (MIC) last month, in compliance with Republic Act No. 11954, which established the MIF.
The legislation was signed into law by President Marcos Jr. on July 18, with the Implementing Rules and Regulations taking effect on Aug. 28.
BSP Governor Eli M. Remolona, Jr. in a news conference on Wednesday acknowledged that both banks’ contributions put them at risk of not meeting the regulatory requirements for capital held.
“It may make (the state banks) non-compliant with our capital requirements,” Mr. Remolona said.
However, the banks may be allowed a degree of “forbearance” after providing capital to Maharlika, he said.
“In principle, we can provide forbearance, which allows them not to comply for a period of time. But they will be expected to comply at some point. Forbearance is always temporary,” he added.
BSP Supervisory Policy and Research Department Director Maria Cynthia M. Sison said if the central bank provides relief to the banks, it will be disclosed to the public.
“It will have to be disclosed that they are under forbearance so that other investors would know they’re in that situation,” she said.
She added that LANDBANK and the DBP do not want their capital positions to decline substantially due to their contributions to the MIC.
Finance Secretary Benjamin E. Diokno has said the completion of the remittance of the two largest state-owned financial institutions will pave the way for the full operationalization of the MIC.
The Maharlika fund is expected to be operational by the end of the year, and will begin market activities early next year.
Meanwhile, Mr. Remolona said the BSP has not received any application for the merger of LANDBANK and DBP.
“It’s not up to us. Once they decide to merge, then we will go in and look at the books of the merged entity,” he said.
LANDBANK was asked to comment on the impact of the contributions to its capital position, but it had not replied at the deadline. — Keisha B. Ta-asan