DOF backs Landbank-DBP merger

MANILA, Philippines - The Department of Finance supports a proposal seeking to create a megabank by merging state owned Land Bank of the Philippines and Development Bank of the Philippines.

According to the DOF, the merger of Landbank and DBP is necessary as the functions of both banks duplicate and unnecessarily overlap with one another.

The merged entity would be more effective, efficient and sustainable in carrying out the mandates of both banks, especially with the entry of more foreign banks into the country following the liberalization of the local banking sector, the DOF said.

The consolidation of the two banks is also expected to complement the implementation of the Treasury Single Account (TSA), a unified structure of government bank accounts.

Under the TSA, all government revenues deposited to accredited agent banks would be lodged in a single account with the central bank.

 The TSA forms part of the government’s public financial management reform program, which seeks to simplify, improve and harmonize the financial management processes and information systems of the public sector.

If the merger pushes through, the government expects the funding capability and branch network of the consolidated entity to expand.

 As of end-June 2013,  Landbank had a total of 337 branches while DBP had 104.   The union of the two banks would give the merged entity at least 441 branches, enabling them to increase their presence.

Redundant branches, however, may be closed,  which would result in savings that could be used to improve existing ones or open new branches in previously unbanked areas in the interest of inclusive growth, or even improve accessibility in already banked areas for better delivery of services.

Landbank, the largest government-owned bank, has transformed rural communities into areas of growth and development, while DBP has consistently accelerated sustainable growth among small-scale Filipino businessmen.

The consolidated entity is also seen to have enhanced retail and wholesale banking operations.

In terms of asset value, Philippine banks remain small when compared with their peers in  Malaysia and Thailand.