Push Admin

Maharlika fund should have borrowed from LandBank, DBP: investment banker

Article (news)

ABS-CBN News

MANILA -- The Maharlika Investment Fund (MIF) shouldn&#x27;t have taken from the equity of Landbank and Development Bank of the Philippines (DBP), an investment banker said Thursday. Steven CuUnjieng&#x27;s statements came after President Ferdinand Marcos, Jr. suspended the implementation of the MIF, shortly after Land Bank and DBP requested regulatory relief for flexibility to comply with the capitalization requirement set by the Philippine central bank.<ul class="op-related-articles">	<li><a href="https://news.abs-cbn.com/business/10/18/23/govt-urged-to-return-maharlika-money-from-landbank-dbp">Gov&#x27;t urged to return Maharlika money from Landbank, DBP</a></li>	<li><a href="https://news.abs-cbn.com/news/10/18/23/maharlika-fund-implementation-suspended-for-further-study-palace">Maharlika Investment Fund implementation suspended &#x27;for further study&#x27;: Palace</a></li></ul>CuUnjieng recalled that in an earlier interview with ANC, he said it&#x27;s &quot;critical&quot; that the MIF is taking equity from the two banks for its capital infusion.&quot;Because in a bank, you normally have about 10 percent Tier 1 capital. What does that mean? Now this is the problem when you don’t carefully study the implications of your provisions. So P1 of equity supports P10 of loans,&quot; he said.&quot;If they&#x27;re going to put P50 billion and P25 billion, so P75 billion that means you reduce the Landbank’s borrowing capacity by P500 billion, not P50 billion. And you reduce the DBP’s lending capacity by not by P25 billion but P250 billion.&quot;&quot;So now you have reduced their ability to lend to the agricultural center, to lend to infrastructure upfront,&quot; he explained.<figure class="op-interactive"><iframe height="315" src="https://www.youtube.com/embed/xr9YBacc_zI?enablejsapi=1" width="560"></iframe></figure><div class="iwantbar">Watch more News on <a href="https://www.iwanttfc.com/#!/browse/Genres/News/tag_id_genres/id_news" target="_blank">iWantTFC</a></div>&quot;I would have structured the way DBP and Landbank as hybrid debt,&quot; the banker told ANC on October 19.&quot;Not equity. Why? Then it is not accounted against the equity and taken away from the Tier 1 capital support loans,&quot; he said.&quot;I mean imagine if let’s say--DBP and Land Bank used that P75 billion to put P750 billion of loans at risk--let’s say there’s a 2 percent margin on the loans, on P750 billion. (At) 2 percent, that’s already P15 billion income.&quot;CuUnjieng also questioned why Landbank and DBP were made to remit their contributions to the MIF before fund management was put in place.&quot;Why did you have to prefund the equity when there is no Maharlika management, no Maharlika board, but more important no use of proceeds yet? It’s like Mona Lisa capital, to use the old Nat King Cole song. It just lies there and it dies there. Walang gamit,&quot; he said.&quot;In the meantime, that P75 billion could be supporting P750 billion of more loans,&quot; he lamented.CuUnjieng said economic managers who were involved in drafting up the MIF guidelines are highly qualified. He noted, however, that most of them came from the government or academe.&quot;I don’t know how the levers of government work. How the levers of bureaucracies work. Someone who’s been in government does. But the same way, someone who’s been all his life in government and universities doesn’t know how these things are structured and solved,&quot; he said. &quot;That’s why it’s normally good to have a blend of expertise and background. And from the way the law was rushed, I don’t think they took time to consult people,&quot; he said.<div>--ANC, 19 October 2023</div><ul class="op-related-articles">	<li><a href="https://news.abs-cbn.com/news/10/19/23/marcos-maharlika-fund-operational-by-year-end-despite-suspension">Marcos says Maharlika fund &#x27;operational by end of the year&#x27; despite suspension</a></li>	<li><a href="https://news.abs-cbn.com/news/10/18/23/pimentel-to-marcos-time-to-abandon-maharlika-project">Pimentel to Marcos: Time to abandon the Maharlika project</a></li></ul>

An investment banker said the Maharalika Investment Fund shouldn't have taken from Landbank and DBP's equity. 