The Department of Finance (DOF) has ordered the two state pension funds -- Social Security System (SSS) and Government Services Insurance System (GSIS) -- to limit their investment in corporations to 30 percent of the total shareholders' equity of the company, Finance Secretary Jose Pardo said yesterday.
"We want it limited to about 30 percent because when you take about one-third already in a company, you have to be more active," he said. With over 30 percent, he said SSS and GSIS would have their hands full attending to the operations of the company and would have less time managing the pension funds.
In a speech before a conference on corporate governance, Pardo said he was instructed by Malacañang "to secure the quick implementation of the provision for gradual restriction of SSS and GSIS portfolio to passive investment."
This directive comes following criticism of the SSS and GSIS for participating in the bid of Equitable Bank to take over PCI Bank. SSS and GSIS each have 15-percent stake in the merged bank. Pardo said transactions like this put other firms at a disadvantage, especially since SSS and GSIS have the financial muscle to take over a company.
"Similar transactions (Equitable-PCI Bank acquisition) will be avoided. Any takeover or transactions will be avoided. Also, when they venture into speculative transactions, it does not level the playing field," Pardo said.
He said the government would still exercise flexibility and allow state-owned banks and funds to own more than 30 percent "on a case-to-case basis." "We do not want to be inflexible," the finance chief quipped.
Aside from its participation in the Equitable-PCI Bank deal, Pardo said the SSS was also criticized for its investment in the now closed Urban Bank where it has substantial holdings equivalent to two board seats.
Pardo said he has asked the SSS, GSIS, and other government financial institutions to review their investment and lending portfolio.
Aside from Equitable PCI Bank and Urban Bank, SSS has investments in Security Bank, Union Bank, and Philippine National Bank.