Finance Secretary Benjamin E. Diokno, the government’s chief economic manager, maintained on Tuesday, May 9, that the proposed Land Bank of the Philippines -Development Bank of the Philippines merger is consistent with the principle of sound fiscal management, which the "DOF upholds to the highest degree.”

Diokno issued the statement after DBP Chairman Dante Tiñga stated that the merger will only create a “superbank” considered as “too big to fail, [but] too big to save.”

Thus, Tinga believes that the planned unification of the two government-run banks “a dangerous experiment” being initiated by the finance department.

Diokno, however, countered Tiñga, saying “contrary to the claim that the merger is a ‘dangerous experiment,’ the proposal is the result of a careful analysis of the costs and benefits of this merger, based on solid financial and economic evidence.”

“The merger creates a bigger and stronger bank to better serve the country's development needs,” Diokno said.

After the merger, Landbank, as the surviving entity, will have much higher authorized capital stock of P800 billion, compared to DBP's P35 billion, and overall stronger financial position.

“With DBP nearing its authorized capital stock, which is currently at P32 billion, the merger will help avoid the need for DBP to recapitalize and seek capital infusion from the National Government,” Diokno added.

He also said the the merger will introduce synergies that can result in financial and operational benefits for the new entity.

According to the DOF, the Ppojected operating cost savings due to the merger could reach at least P5.3 billion per year, or more than P20 billion over the next four years.

“Moreover, the improved financial position will allow the new entity to lend more for priority development projects. With the projected operational savings from the merger, it can lend an additional P80.3 billion per year,” Diokno said.

“Having a single government bank is the best practice in the region and streamlines procedures with counterparts banks and both regional and multilateral development banks. This is not the first of its kind,” he added.

Diokno said the merger presents an opportunity for the government to build a stronger and better bank that will help create a more inclusive and resilient society for future generations of Filipinos, given the increasing scale of global development challenges.