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Gatchalian warns LBP-DBP merger will create a monopoly; will leave LGUs at the losing end

Photo by International Banker/Creative Commons

Nationalist People’s Coalition (NPC) senatorial bet Win Gatchalian warned the Central Bank of the consequences of green-lighting the merger between the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP), saying such union will leave local government units (LGUs) on the losing end.

Gatchalian cautioned the Central Bank, which has to approve the yet-to-be-received application for merger, that the fusion of the two banks will not lead to improved access to credit.

“LBP and DBP are the dominant lending institutions that finance LGU projects. If their union will be approved, they will create a monopoly and hold the growth of underdeveloped provinces and municipalities hostage,”

President Benigno Aquino recently approved the proposed merger of the two state-run banks under Executive Order 198, which states that such fusion will solve their overlapping functions and ” further enhance the financing of priority projects and sectors such as infrastructure, public services, agriculture/agrarian reform and SMEs.”

According to EO 198, the merger will “build a stronger and more competitive universal development bank” and “provide better access and extend quality financial services and products to more unbanked and underserved areas.”

Gatchalian pointed out that the merger, which will leave the LBP as the surviving entity, “can kill competition and lead to inefficiency since it is too big to cover all the financing needs of LGUs and other concerned sectors.”

The head of the Bankers Association of the Philippines, Lorenzo Tan, aired a similar view on the downside of such union: “If not governed and managed properly, it can be a ‘too big too fail’ situation.”

The proposed merger was delayed last year after Aquino refused to it, questioning bank executives about the discharge of employees. (Monica Cantilero)