Maharlika Investment Fund critics—are they right?

PHILIPPINES - In Brief 16 Oct 2023 by Diwa Guinigundo
This In-Brief is a follow-up to our previous In-Brief of October 14, 2023. The two government financial institutions (GFIs), Land Bank of the Philippines (Landbank) and Development Bank of the Philippines (DBP) were reported to be seeking regulatory relief from the Bangko Sentral ng Pilipinas (BSP) following the remittance of their respective shares to the seed fund of the Philippines’ Maharlika Investment Fund (MIF). The BSP governor on October 11confirmed their request for a reprieve in complying with the BSP’s capital adequacy requirements. Landbank’s share was P50 billion and DBP P25 billion. With a capital charge of 100% on their placement with the MIF, their ability to lend would be constrained. Their capital adequacy ratios, based on the statement of one of the BSP directors of bank supervision, “remain compliant with BSP requirements.” Why Landbank would issue a statement that it remains strong, adequately capitalized and compliant with regulatory requirements escapes us. If they are so, why sound the alarm bells? In the case of the DBP, its own president and chief executive officer admitted its request together with the Landbank for more time for capital buildup. On the same day that their request was confirmed by the BSP, the President of the Philippines issued Executive Order No. 43 reducing the percentage of net earnings to be declared and remitted by Landbank for last year 2022 from 50% to 0%. This is an effective override of Republic Act No. 7656 that requires all government-owned-and-controlled corporations to declare and remit 50% of their annual net earnings as either cash or stock or property dividend to the National Government (NG). The EO said the P...

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