By Luisa Maria Jacinta C. Jocson, Reporter
ALLOWING state banks to contribute to the Maharlika Investment Fund (MIF) on a staggered basis is not an option because this might send mixed signals to investors, Finance Secretary Benjamin E. Diokno said.
“I think that’s not going to work because we want to send a strong message to foreign investors that we’re serious. It’s not an option to make a downpayment. We need stable capitalization. I think that’s the big picture,” Mr. Diokno told BusinessWorld on the sidelines of a Senate plenary hearing on Wednesday.
This after the Development Bank of the Philippines (DBP) recommended that its contribution to the MIF be remitted on an “as-needed” basis.
Under the law creating the country’s first sovereign wealth fund, the DBP and Land Bank of the Philippines (LANDBANK) must remit P25 billion and P50 billion, respectively, for the initial funding of the MIF. Both banks remitted their contributions in September.
The DBP also said it had filed a request to the Bureau of the Treasury seeking the return of its P25-billion contribution until the suspension of the implementing rules and regulations (IRR) of the MIF law are lifted.
In October, President Ferdinand R. Marcos, Jr. ordered the suspension of the Maharlika Investment Fund Act’s IRR pending review. This week, Mr. Marcos said the review has been finalized.
Mr. Diokno said there is no need to return the DBP’s contribution. “It’s deposited in their account anyway. It’s still in their account, nothing will be lost if the funds aren’t moved,” he said.
GlobalSource Partners Country Analyst Diwa C. Guinigundo said the law clearly indicates that the state banks’ contributions must be made in full.
“Unlike the Bangko Sentral ng Pilipinas (BSP) charter which provides for staggered recapitalization, nothing in the MIF law says about installment. Since full remittance is required by law, I don’t think the IRR can remedy that,” he said in a Viber message.
Mr. Guinigundo reiterated that requiring the banks to contribute would threaten their financial stability.
“It’s becoming more ludicrous that the government embarked on this MIF plan without complete staff work: requiring them to share in funding the MIF directly impinges on their capital and their ability to sustain lending to farmers and fishermen as well as other small businesses, and unless they are extended regulatory forbearance, they might turn out violating the BSP’s capital adequacy regulation,” he said.
He noted LANDBANK has been exempted from the legal requirement to remit its dividend to help in the capital buildup, and expects DBP be exempted as well.
Mr. Marcos earlier signed an executive order slashing LANDBANK’s remittances to the National Government to 0% of its net earnings last year from 50%.
Both state banks were also reported to be seeking regulatory relief from the BSP amid their contributions to the sovereign wealth fund. BSP Governor Eli M. Remolona, Jr. earlier said their contributions put the lenders at risk of being noncompliant with their capital requirements.
Under BSP regulations, all investments of banks, whether to allied or nonallied undertakings, will be fully charged against their capital. This means the investment of DBP and LANDBANK in the MIF will be deducted from the banks’ capital when they compute their capital adequacy ratio.
This ratio compares the available capital that a bank has on hand to its risk-weighted assets, which measure the risk profile of the bank’s lending and investing activities. The more risk a bank is taking, the more capital it will be required to have to protect depositors.