Senator Leila de Lima is urging the Senate to look into the validity of the reported planned merger of two state-owned banks—the Landbank of the Philippines (Landbank) and United Coconut Planters Bank (UCPB)—as well as into the anomalies that may arise if the government’s plan proceeds.

De Lima noted the transactions were purportedly made under questionable terms and conditions, and with serious apprehension and warning from a credible credit rating agency.

The senator said the Senate has to make sure that the rights of coconut farmers as well as Filipinos, who are being served by the Landbank, are not unduly compromised by the merger.

“It behooves upon the Senate to determine whether the Landbank’s absorptive capacity would allow it to carry the liabilities and obligations of UCPB without, or at least with very minimal impact, on the Filipinos its charter intends to cater and serve,” De Lima said in her Senate Resolution No. 771.

“The contrasting mandates of Landbank and UCPB should be reason enough to question, if not forthwith demand, the termination of the merger proceedings, as was done by the government when it halted the merger proceedings involving DBP and Landbank in 2016,” the senator added.

Last June 25, Executive Secretary Salvador Medialdea signed Executive Order (EO) 142 ordering the merger of Landbank and UCPB.

However, an analysis of the American Agency Fitch Ratings showed that the Landbank-UCPB merger may have a “negative impact on Landbank’s credit profile,” and inevitably hurt the former’s financial health given the latter’s weak financial position.

The American financial agency said UCPB’s reported ₱22-billion bad debts as of 2020 is among the biggest threats to the merger.

It also noted that the merger could worsen asset quality pressures that Landbank is already besieged with due to the current economic slowdown.

De Lima said it is imperative for the government to protect the public from disadvantageous negotiations, agreements and deals, of financial institutions—particularly those owned by the state—by strengthening existing laws and exercising its oversight functions to prevent financial institutions from engaging in wash sales.

“With Landbank’s 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 (overseas Filipino workers), it should not be distracted therefrom to the possible detriment of these people whose welfare is at stake. UCPB’s 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, with the conflicting mandates of these two institutions, and the already burdened Landbank clients who are still reeling from the impacts of the pandemics, it would not be prudent to proceed with the said merger,” she stressed.

She said it is only appropriate for Congress to look into the possible disadvantages and negative implications of such mergers.

“Because in the end, we cannot allow our farmers, who need to be served, be taken for a ride by these banks,” she said.