Finance Secretary Carlos Dominguez III on Tuesday said the next president should consider further beefing up the capitalization of state-run lenders like Land Bank of the Philippines (Landbank) to reach more small borrowers.

Speaking before finance executives on Tuesday, Dominguez also urged the next administration to "really ... review the viability of [Development Bank of the Philippines or DBP] on its own," a potential softening of the Duterte administration's previous stance.

In the Duterte administration's first year in office, the Governance Commission for Government Owned and Controlled Corporations, which is composed of the President's appointees including Dominguez as an ex-officio member, canceled the Aquino administration's Executive Order No. 198, which would have merged Landbank and DBP. The planned merger in 2016 would have established the country's second-biggest bank in terms of assets, thus challenging local tycoons' dominance in the banking sector.

Different functions

Back then, Dominguez, who also oversees government financial institutions, had said a Landbank-DBP merger "would not serve the public interest to transform the two institutions into one, given their different functions." Landbank catered to agriculture, while DBP took care of industries, Dominguez had said.

Changing his tune, Dominguez told members of the Financial Executives Institute of the Philippines on Tuesday that DBP's viability would have to be reviewed "moving forward" now that the government has successfully resolved the troubles of another state-run bank, United Coconut Planters Bank (UCPB), via its merger with Landbank.

"I prioritized that over the merger of DBP because UCPB, if you analyzed it, we have a potential risk of failure of UCPB that will cost the [Philippine Deposit Insurance Corp.] P150 billion. So we decided we will put UCPB first in a safe place," Dominguez said.

Had the Landbank-UCPB merger not pushed through, UCPB's capital adequacy ratio was set to fall below the Bangko Sentral ng Pilipinas' mandatory level. The merger will take effect on March 1.

The merger would also end the government's direct support to UCPB. The latter's shares were acquired through Marcos-era coco levy funds, which the Supreme Court declared as publicly owned. INQ