Development Bank of the Philippines Chairman Dante O. Tinga raised "conflicts of interest" of Finance Secretary Benjamin E. Diokno in his determination to push for the bank's merger with Land Bank of the Philippines (LBP). The DBP Chairman, a former law dean, congressman and jurist who served as Associate Justice of the Supreme Court, recalled that Diokno repealed the proposed merger during the past administration but has suddenly turned about to become its most staunch proponent. Now, "We are wondering why DOF is pursuing a discontinued (merger) proposal," he told reporters during a press briefing at DBP this morning, Tuesday, May 9. The finance secretary is an ex-officio member of the GCG, the Governance Commission for Government Owned and/or Controlled Corporations (GOCCs), to which the merger proposal was submitted. Also, he is the ex-officio Chairman of LBP and will remain so after LBP becomes the surviving "superbank" following the merger. On top of that, Diokno, who was Governor of the Bangko Sentral ng Pilipinas (BSP) before his appointment to the Cabinet, is a member of the Monetary Board of the BSP, which regulates banking in the country. It was also the GCG, where Diokno is a member, which conducted a "legal-study" recommending the DBP-LBP merger. But the DBP Chairman branded the study as "legally erroneous, done with inordinate haste and encroaches on the mandate of the Office of the Solicitor General (OSG) and the Office of the Government Corporate Counsel (OGCC)" . The GCG conducted the study in less than three weeks and concluded that President Marcos can implement the merger of the two Congress-created state banks, without the need for legislative action. Legally, Tinga said, the President of the Philippines has no power to merge GOCCs like DBP and LBP, without an enabling legislation. The power to issue a legal opinion on GOCC issues belongs to the OSG or the OGCC, he maintained. Hence, the GCG"s interpreting its own Charter is a "self-serving declaration" favorable to its interest and is "not admissible as proof of the facts asserted," he argued. The biggest legal issue cited by DBP in opposing the merger, is that since the two state-owned banks were created by acts of Congress, the merger requires an enabling law, stressed Tiñga. DBP maintains there is "no convincing justification or compelling need for the DBP and LBP to be merged." DBP and Land Bank were created by law with different mandates. DBP's mandate is to develop industry; LBP's is to develop agriculture. At the very least, the union of two institutions created to serve different mandates may only result in the dilution of their respective missions and focus. "Bigger is not always better and stronger," Tiñga reiterated. The concentration of risks can leave the superbank more vulnerable to financial market bubbles and cyberattacks. Contrary to Diokno's projections, the combined branches of the two banks will result in a network of the same size and reach. While the merged bank may become the largest bank in the country in terms of assets and deposit size, it will still suffer from capital shortage, bad loans, and lazy banking. The biggest banks in the world are not state-owned. In fact, the best practice in Southeast Asia is to have specialized development banks, he pointed out. Without a plan of integration, there will only be consolidation of assets and LBP as the surviving entity will just have the same strengths and weaknesses pre-merger. Thus, having all financial resources of the National Government, its agencies, GOCCs, government instrumentalities and local government units in one official depository bank may be more perilous than beneficial for the country. He warned of dire impact on the Philippine government and the whole economy if the merger between the DBP and LBP, with combined assets of over P4 trillion, fails. The merged super bank meant to be "too big to fail" may turn out to be "too big to save", he maintained. History proved this a decade and a half ago, in the case of Iceland, which experienced a "volcanic economic collapse" and declared bankruptcy when three of its big banks failed. Even the world's wealthiest country, the USA, had seen its own biggest private banks fail. "If it happened to them, it can happen to our economy. How can we recover from an over P4 trillion loss? Why risk it?" Tiñga asked. "That's why you never put all your eggs in one basket," he reasoned. "And that's why officials in the past administrations (when the merger was brought up) were convinced it's not a good idea." However, if a merger is indeed inevitable, the DBP, with its richer legacy, more extensive experience and expertise and better track record in development financing, is more deserving to be the surviving bank, Tiñga underscored. "DBP is a big success, but LBP is a failure," he stressed. "Although LBP has the larger capital, it was not able to accomplish its mandate. It was a failure in agrarian reform and in food security."