The International Monetary Fund (IMF) has urged the Bangko Sentral ng Pilipinas (BSP) to prioritize the restoration of capital for two state-owned banks that contributed to the Maharlika Investment Corp. (MIC), and to end their regulatory relief measures promptly.
In a statement, the IMF emphasized that while the establishment of the MIC could bolster investment in the Philippines, it should not come at the expense of a resilient banking sector or sound regulatory practices.
The IMF called for the restoration of capital at the Land Bank of the Philippines (Landbank) and the Development Bank of the Philippines (DBP) following their combined ₱75 billion contribution to the MIC’s startup capital.
“Restoring capital for these banks and exiting regulatory relief as soon as possible is essential for maintaining financial stability,” the IMF said.
In September 2023, Landbank and DBP remitted their initial contributions of ₱50 billion and ₱25 billion, respectively, to the MIC, which has an authorized capital stock of ₱500 billion.
The government portion is being funded through a mix of central bank dividends, income from the Philippine Amusement and Gaming Corp., and proceeds from privatization over a five-year period.
However, the substantial capital outflow has strained the liquidity positions of both banks, which could lead to non-compliance with regulatory capital requirements. The BSP has acknowledged the impact of these contributions on the banks’ financial health, with concerns about their ability to meet capital adequacy standards.
The IMF’s recommendation underscores the need for the Philippine government to balance the development of the MIC with the maintenance of a strong and stable banking sector.
As the country moves forward with large-scale investments in infrastructure and development, the IMF stressed the importance of adhering to regulatory frameworks that protect financial stability and ensure a level playing field for all institutions.
The BSP is expected to work with the banks to restore capital and ensure compliance with financial regulations, as it continues to support national development goals.
