The government should return the contributions of state-led banks to the Maharlika Investment Fund (MIF), a former central bank official said on Wednesday.
In a statement issued after President Marcos suspended the implementation of the MIF and ordered a review of it, former Bangko Sentral ng Pilipinas deputy governor Diwa Guinigundo said the P50 billion contributed by Land Bank of the Philippines and the P25 billion from the Development Bank of the Philippines (DBP) must be returned.
“In the first place, the money from LandBank and the DBP is not exactly owned by the government. Those are deposits by the public,” Guinigundo told ABS-CBN, speaking in a mix of English and Filipino.
Guinigundo said the suspension could be related to the request of the two government banks for regulatory relief from the BSP to comply with capitalization requirements set by the BSP.
Without regulatory relief from the BSP, both banks would have to ease their lending, Guinigundo said.
He said while the two banks may still be compliant with the BSP requirements, their capital would go down because of their commitment to the MIF unless the central bank granted them regulatory relief.
This means they would not be able to lend money, or they would be forced to cut back on lending, he added.
It was also possible that the two banks may no longer be compliant with the BSP requirements, making it urgent that the central bank grant them regulatory relief, he added.
Guinigundo said Mr. Marcos’ decision to put the brakes on the MIF was a welcome development, but said the government would have to decide on the fate of the fund soon.
“I hope they will just drop the whole idea of the Maharlika Investment Fund. I think the President was right in suspending the implementation of MIF and I support that decision of the President. But while the President is doing it, I suggest they should study if the MIF is really needed,” Guinigundo said.
The Palace on Wednesday said the President suspended the MIF to study the law’s implementing rules and regulations (IRR).
“President Ferdinand R. Marcos Jr. issued a suspension because he wanted to study carefully the IRR to ensure that the purpose of the fund will be realized for the country’s development with safeguards in place for transparency and accountability,” Executive Secretary Lucas Bersamin said in a statement.
Earlier, the President had assured the public that the wealth fund would be handled by proper economic managers as he vowed to insulate MIF from politics to ensure its success.
President Marcos signed the MIF into law on July 18 to boost the country’s economy through the use of the government’s economic assets and inter-generational management.
The DBP confirmed receiving a memo from the Office of the Executive Secretary ordering the Bureau of Treasury to suspend the implementation of the MIF in coordination with the DBP and LandBank.
LandBank also confirmed receiving the same instructions from the Palace.
LandBank 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 MIC to begin operating.
The Office of the President, however, issued a memo on Oct. 12 asking the Treasury, LandBank and DBP to suspend the implementation of 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 requirements.
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, however, 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.
The suspension of the MIF comes amid a challenge against its constitutionality before the Supreme Court, which has ordered the Palace and Congress to comment in 10 days on the petition filed by Senator Aquilino Pimentel III and three former congressmen for a temporary restraining order to stop the implementation of the Maharlika Fund.
The Office of the Solicitor General vowed to defend the constitutionality of the Maharlika Investment Fund Act before the Supreme Court, despite the suspension of its IRR.
Solicitor General Menardo Guevarra said his office has not received the official copy of the Supreme Court’s resolution that directed both the executive and legislative branches of government to comment on the petition against the MIF law.
“If the implementation is indeed suspended, it’s up to the petitioners if they wish to withdraw the petition. But if they don’t, and the SC does not suspend the proceedings either, the OSG will be prepared to submit its comment on the validity of the MIF law,” Guevarra said.
In the petition, Pimentel and former congressman and Bayan Muna Chairman Neri Javier Colmenares, and former Bayan Muna congressmen Carlos Isagani Zarate and Ferdinand Gaite said the MIF “requires intense congressional scrutiny, genuine consultation with stakeholders, and a careful study by independent economic experts.”
However, the petitioners lamented that “both houses of Congress, went in the opposite direction and rushed the Maharlika bills and short-circuited the constitutionally mandated legislative processes, through an unnecessary and constitutionally infirm Presidential certification of urgency.”
The President had earlier said that the MIF is a tool for economic development that will promote fiscal stability through strategic and profitable investments in key sectors.
Senate President Juan Miguel Zubiri said Mr. Marcos’ decision to suspend the MIF implementation was a presidential prerogative.
He said every policy has a pause button, or like a car, is equipped with a brake or can be put in park.
The President has the wheel. It is up to him whether to step on the gas or to slow down.
“I think the President’s act was to decelerate. And I see it as a very prudent move,” he said.
When so much money is at stake, Zubiri said it is better to proceed with an abundance of caution than to be reckless. During the debates on the Maharlika bill, we reminded the executive of the need for responsible stewardship, and, in fact, installed guardrails against fund placements that would result in losses.
“Let us trust the President’s wisdom in doing so, for I believe that he or his economic team had good and valid reasons to study the measure further.”
Senator Francis Escudero said he is thankful to the President for suspending the MIF.
Despite certifying it as urgent, he said the President might have seen that the law passed by the House of Representatives needed further study.
“Any loopholes and flaws can still be remedied in the IRR,” said Escudero.
Senator Risa Hontiveros also welcomed the decision to suspend the implementation of the MIF Act.
She noted that the suspension must stand until every flaw or concern raised about the law has been reviewed.
The government should never be reckless with the people’s hard-earned money, she said.
“I hope that the suspension of the rollout of the Maharlika Fund Investment means that the President is starting to heed our warnings. Indeed many provisions of the MIF Act require further study,” she said.
“My own view, of course, is that it is beyond repair — because the law was rushed, and the Philippines is simply not ready at this moment to support a wealth fund,” she added.
In fact, she said, Diokno misled the Senate when he said LandBank and the DBP had excess funds that were idle and that could be used for the MIF.
At best, he simply did not have the competence to understand the repercussions of messing with the finances of LandBank and DBP, she said.
Pimentel, who filed the challenge to the MIF before the Supreme Court, said the decision to suspend it was “a very good development.”
The concept of the MIF had not been fully studied from the very start, Pimentel said.
“Hence we should not wonder why apparently the law is not ready for implementation,” he added.
Senator Sherwin Gatchalian, chairperson of the Senate ways and means committee, said it is a prudent move to suspend MIF pending studies and the Senate should also study this matter through its oversight function.
He said the government should conduct a thorough study of the implications of the deposits made in MIF by the LandBank and DBP.
House Deputy Speaker and former president Gloria Macapagal-Arroyo said there is “nothing wrong” with supporting President Marcos’ decision to suspend the MIF, saying the Chief Executive must have his “reasons” for his action.
“The President must have his reasons and I trust his instincts on this so I think there’s nothing to lose if we support the President on the suspension, as he deems appropriate,” Arroyo told House reporters.
“You know, the President is the one who has access to data…. So we trust him in this,” Arroyo added.