DBP, Land Bank merger 'just a matter of time'

By Jun Vallecera
Reporter

THE Development Bank of the Philippines said on Tuesday its reported merger with the Land Bank of the Philippines was a question largely of time than anything else.
           
DBP president and chief executive officer Rey G. David said he favors the union on both substantive and relevant grounds.
           
Such a union “bodes well for operational and financial efficiency,” he said.
           
“Mergers and acquisitions leading to the consolidation of the banking system are a positive trend that is quite clear. Another round of capital contributions is always an option that the monetary authorities can also use to enable consolidations and mergers,” David noted.
           
He said such a union was not an impossibility and in fact makes sense from a number of angles.
           
“A merger also bodes well for operational and financial efficiency. As you know, the cost of the banking infrastructure that is needed to meet the imperatives of Basel 2 and other Corporate Governance and Risk Management requirements are quite substantial.”
           
A combined enlarged institution will result in “substantial savings in terms of hardware, software and processes. So why would the national government need to have two independent structures that is practically doing the same business?” he asked.
           
Basel 2 pertains to a global risk management framework allowing banks to handle better the credit, operational and market risks to which they are routinely exposed to.
           
More importantly for them, Basel 2 forces compliance by penalizing noncompliant institutions with burdensome capital charges that sap their ability to lend and therefore limit their capacity to generate profits.
           
David also said the average age of its employees has risen significantly over the years, currently pegged at 46 years versus only 30 years at the private sector.
           
“Hopefully, with a Land Bank-DBP merger, we will have a younger, more streamlined organization that will poised to meet the developmental challenges and needs of the national government in the next decade,” he said.

Business Mirror
November 29, 2006