Metro Manila (CNN Philippines, July 18) Â Senator Leila de Lima urged the Senate to probe the planned merger of the Land Bank of the Philippines and the United Coconut Planters Bank, citing the negative impact it may have on Filipinos being served by the two state-controlled banks.
De Lima filed Proposed Senate Resolution No. 771, dated July 12, seeking an investigation into the matter after credit rating agency Fitch Ratings warned the merger could harm Landbanks financial health.
The Senate must ensure that the rights of coconut farmers as well as Filipinos who are being served by the Landbank are not unduly compromised by this merger, the senator said in the resolution.
The Landbank and UCPB earlier said the planned move, approved by President Rodrigo Duterte on June 25, will “strengthen government efforts to build a stronger, unified banking institution capable of serving coconut farmers and other workers in the agricultural sector.”
Landbank President and Chief Executive Officer Cecilia Borromeo also said the clients of both banks can now rely on a “stronger and better capitalized institution.”
However, Fitch Ratings said the merger may negatively impact Landbanks standalone credit profile. It noted that while the merger with the UCPBÂ would increase Landbanks market share to make it the second largest bank in the country by assets, the risks could consume considerable managerial bandwidth and incur significant integration expenses.
UCPBs reported 22 billion bad loans at end-2020 could worsen the asset quality pressures that Landbank already faces due to the economic slowdown, Fitch Ratings added.
De Lima also said the two institutions have conflicting mandates,” adding this should be enough reason to terminate the merger proceedings.
With Landbanks charter mandating it to prioritize the banking needs of the agrarian reform program and other rural groups including the fisherfolk, as well as servicing the needs of OFWs, it should not be distracted therefrom to the possible detriment of these people whose welfare is at stake. UCPBs mandate is clear: to service Philippine coconut farmers, she said.
“Their interests should not be comingled and inescapably sidelined by executive fiat when evidence is incontrovertible that…it would not be prudent to proceed with the said merger,” De Lima added.
She also called on the Senate to look into the merger’s validity, as well as into the “anomalies” that may have given rise to the need for such.
