SCUTTLEBUTT

IMF stirs hornets’ nest

The recent International Monetary Fund (IMF) report on the Philippines mentioned the need to restore the capital of state-owned banks Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LandBank) which induced several interpretations from economic managers.

The IMF report’s exact words were: “Implementing capital restoration plans for two state-owned banks following their contribution to the Maharlika Investment Corp.’s (MIC) start-up capital and exiting regulatory relief as soon as possible is important.”

The IMF report said that “while the establishment of the Maharlika (wealth fund) can help address the country’s investment needs, it should not come at the cost of a resilient financial system, sound regulatory framework, and level playing field.”

MIC president and CEO Rafael Jose Consing Jr.’s take is that the IMF is not asking the corporation to return the P75-billion start-up capital for the sovereign wealth fund.

The start-up capital of the Maharlika Investment Fund came from a LandBank infusion of P50 billion and P25 billion from the DBP.

The IMF did not specifically say the MIC needed to return the contribution of the two state banks. They should, however, recapitalize to free themselves from regulatory relief.

In October 2023, Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said LandBank and the DBP applied for regulatory relief after the enactment of the Maharlika Investment Fund law.

With the infusion, LandBank’s capital adequacy ratio stood at 16.35 percent, higher than the 10 percent minimum requirement of the Bangko Sentral ng Pilipinas.

Meanwhile, the common equity tier 1 ratio settled at 15.46 percent, higher than 10.25 percent minimum regulatory requirement.

“The state-run bank maintains a stable and robust capital position, with year-end capital jumping to P266.8 billion on the back of strong profitability. This translates to 27 percent year-on-year growth from P210.6 billion last year,” LandBank said in a statement.

Consing said the MIC will not return the contributions of the two banks as they were already “infused” in the sovereign wealth fund.

The Department of Finance interpreted the IMF statement as encouraging the approval of the proposed new charters of the LandBank and DBP which will enable the banks to increase their capital through stock offerings to the public.

Last March, the DBP said it planned to increase its authorized capital stock from P35 billion to P300 billion.

To encourage more Filipinos to learn about investing, House Speaker Martin Romualdez proposed to Congress to lower taxes on stock transactions with Filipino companies and equalize the dividend tax.