Relief for banks funding Maharlika still under study, central bank says

By Keisha B. Ta-asan, Reporter

THE Bangko Sentral ng Pilipinas (BSP) said it has yet to determine whether it will extend regulatory relief to state-owned banks designated as funders of the proposed Maharlika Investment Fund.

Deputy Governor Chuchi G. Fonacier, head of the central bank’s Financial Supervision Sector, said the Monetary Board will decide on possible regulatory relief measures for Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LANDBANK).

“Given the scenario, the Monetary Board will relate and look at the banks’ financial condition first. That’s how the BSP assesses the basis to grant regulatory relief,” Ms. Fonacier said.

“We don’t want to grant the relief measures right away. The Monetary Board should determine whether the regulatory relief can be extended. We do not grant the relief at the onset,” she said. 

She added that even though DBP and LANDBANK are government banks, the BSP will still have to consider the implications on the banking system if the state-owned banks are to supply seed money to Maharlika.

Senate Bill No. 1670 proposes that the two banks provide Maharlika initial capital of P75 billion.

According to Ms. Fonacier, the government banks are in talks with the BSP on possible exemptions from the BSP’s ceilings on equity investments.

“If they have equity investments, they will be subject to a ceiling. So, they are looking to be exempted from those limits and ceilings,” she said.

“But again, (only) the Monetary Board has the authority to grant them regulatory relief measures. Not us (in the Financial Supervision Sector),” she added.

According to the BSP’s Manual of Regulations for Banks, the equity investment of a bank in a single financial allied undertaking is capped at a certain ratio relative to the bank’s total subscribed capital stock and the total voting stock of the allied undertaking. 

In January, BSP Governor Felipe M. Medalla, who also heads the Monetary Board, expressed his support for the objectives of the Maharlika legislation.

“We support the provisions that say that (the central bank) may extend regulatory relief to the DBP and LANDBANK,” Mr. Medalla said.

“Some critics may say that it gives undue advantage to LANDBANK and the DBP, relative to private banks, but one must be aware, too, that LANDBANK and DBP are also quite restricted by their mandates (as government financial institutions) and do not really directly compete very much with the private banks. So, we do not see that as (posing) a major competition problem,” he added.  

The BSP has also been proposed as a Maharlika funder at some point in the legislative process. The plans involve the central bank remitting all of its dividends to Maharlika in the first and second fiscal years after the fund’s establishment.

In succeeding years, the proposals involve the BSP providing half of its dividends to the fund.