State-run Development Bank of the Philippines on Wednesday confirmed the suspension of the implementation of the Maharlika Investment Fund (MIF).
“DBP confirms receiving a memorandum from the Office of the Executive Secretary concerning Republic Act No. 11954 [Maharlika Investment Act of 2023]. The memorandum directs the Bureau of Treasury to suspend the implementation of the implementing rules and regulations of RA 11954 ‘…in coordination with DBP and Landbank of the Philippines’,” the bank said in a statement sent to Manila Standard.
“DBP shall strictly abide by the directive,” the bank said.
The Bureau of Treasury issued the IRR of RA 11954 on Aug. 28 for implementation of the MIF, while Land Bank and DBP remitted P50 billion and P25 billion, respectively to the Treasury in September as their share in the sovereign wealth fund. The banks’ contributions were put in escrow prior to the operation of Maharlika Investment Corp. (MIC) which would manage the fund.
MIC has an initial capitalization of P125 billion. LandBank and DBP already transferred their contributions on Sept. 14 and Sept. 15., respectively. The remaining P50-billion capitalization would come from the national government.
Finance Secretary Benjamin Diokno said the remittance of the two largest state-owned financial institutions in the country would pave the way for the full operationalization of the MIC.
The Office of the President, however, issued a memorandum on Oct. 12 asking the Treasury, LandBank and DBP to suspend the implementation of the MIF, pending further study to ensure the fund’s objectives are realized for the country’s development, with safeguards in place for transparency and accountability.
Both banks earlier requested regulatory relief from the Bangko Sentral ng Pilipinas to comply with the minimum capital requirements following their capital infusion to the MIF.
Under the BSP regulations, the contribution of the two banks to the MIF would be deducted from the computation of their capital. LandBank and DBP, which are both universal banks, asked the BSP for regulatory relief so that the amount would not be deducted against their capital requirement.
Landbank has an authorized capital stock of P200 billion, while DBP has an authorized capital of P35 billion. The banks asked for regulatory relief from the BSP because breaching the minimum capital ratios could incur hefty fines.
Bangko Sentral ng Pilipinas Governor Eli Remolona said the state-run banks remained compliant with the capitalization requirement, and the BSP could also provide forbearance, “which allows them not to comply for a period of time”.
The BSP usually extends regulatory relief to financial institutions affected by calamities. Such relief can be in the form of relaxed regulations, lower fees and fines or exemptions from specific requirements to help ease the cost burden of complying with regulations.
LandBank said its capital adequacy ratio (CAR) remained at a very healthy level of 16.61 percent as of June 2023, above the 10-percent minimum requirement of the BSP.
“Even with the bank’s P50-billion seed capital to the MIC as mandated by Republic Act No. 11954, otherwise known as the Maharlika Investment Fund Act of 2023, the bank will meet its CAR requirements,” LandBank said earlier.
Finance Secretary Benjamin Diokno wanted the merger of LandBank and DBP next year.
MIC would have a nine-member board of directors which consists of the Secretary of Finance as the chairperson in an ex-officio capacity; president and CEO of MIC; president and CEO of the Land Bank of the Philippines; president and CEO of DBP; two regular directors appointed by the President for a term of three years; and three independent directors from the private sector, appointed by the President for a term of one year.
President Ferdinand Marcos Jr. signed the Maharlika Investment Fund Law on July 18 this year, with the IRR taking full effect on Aug. 28, 2023.