In a significant development, President Ferdinand Marcos Jr. has issued Executive Order No. 48, exempting the Development Bank of the Philippines (DBP) from remitting its 2022 net earnings, a move designed to fortify the bank’s capital position and align with the regulations of the Bangko Sentral ng Pilipinas (BSP). This executive action adjusts the percentage of net earnings to be declared and remitted by DBP for the calendar year 2022 from the standard 50% to an unprecedented 0%.
The rationale behind this decision, as communicated by the Presidential Communications Office (PCO) on Friday, emphasizes the imperative of strengthening DBP’s capital base. Finance Secretary Benjamin Diokno, in his recommendation, underscores the need for this adjustment to comply with BSP regulations while augmenting DBP’s pivotal role in providing essential resources to priority sectors for the country’s overall socioeconomic development.
This move follows a similar exemption granted to the LandBank of the Philippines in October, where Marcos also reduced their required share to the government from 50% to 0%. The decision comes after DBP and LandBank sought regulatory relief from the BSP to maintain the mandated 10% capital adequacy ratio. This measure is crucial in restoring capital reserves reportedly weakened after the initial remittance of P75 billion as the starting capital for the Maharlika Investment Fund (MIF).
DBP, ranked ninth in terms of bank assets, had remitted P25 billion as the initial fund for MIF, and its authorized capital of P35 billion is notably smaller than Landbank’s P200 billion capital. The adjustment in remittance requirements aims to alleviate concerns related to capital adequacy, particularly following the MIF’s flagged P500 billion capital, which was recently scrutinized by a Singapore-based think tank.
According to Republic Act No. 7656, government-owned or-controlled corporations are mandated to declare and remit 50% of their yearly profits as dividends to the national government. However, Section 5 of RA 7656 grants the president authority to modify the portion of yearly profits that a government-owned or-controlled corporation, such as DBP, must declare, based on the recommendation of the Finance secretary. This executive decision marks a strategic intervention to address immediate financial considerations and uphold DBP’s crucial role in the nation’s economic development.
