The president of the Development Bank of the Philippines tells Rappler that the bank will ‘breach’ its capital requirements after pouring billions into the Maharlika fund. Here’s why that matters.
MANILA, Philippines – The country’s two major state banks – Landbank of the Philippines and the Development Bank of the Philippines – are left weakened after thetook P75 billion of their capital to set up the controversial sovereign fund.
The challenge comes after Landbank and DBP had P50 billion and P25 billion respectively of their capital taken away from them to fund the Maharlika Investment Corporation. With billions in capital suddenly gone, that balance has now radically tilted. The state banks have to quickly start building up their own capital again to regain balance – or else they’ll violate the BSP’s requirement.
Although the regulatory relief wouldn’t eliminate the dangers of a weakened bank, De Jesus said that they’re nevertheless seeking for an exemption because otherwise, they would “be facing sanctions and penalties for any breach.” This could hurt the farmers, small businesses, and households that rely on the loans and programs of Landbank and DBP. In that sense, the lack of capital could get in the way ofIn the meantime, economists expect the state banks to use the period during regulatory relief to build up their capital again.
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