Senator Chiz Escudero has called for more “earning guarantees” in the Maharlika Fund bill, which would allow the sovereign fund to surpass the 6% income threshold that two state-owned banks presently earn from their investments.
Without a “benchmark in yields,” Escudero warned that the billions the Land Bank of the Philippines (LBP) and the Development Bank of Philippines (DBP) will be forced to put in the Maharlika Investment Corp. (MIC) will be earning less than their present return on
investment (ROI).
“Ang ideya ay dapat lumago ang pera ng Land Bank at DBP, at hindi malugi. Remember, the bill makes their equity compulsory. So, in exchange, will there be guarantees as to their returns as well?” Escudero asked.
Escudero said the bill, as presently worded, “is a leap of faith to the great unknown.”
“Simple lang naman ang tanong: Kaya n’yo bang lampasan ang kita ng dalawang bangkong ito sa investments nila? Kung may pag-aalinlangan, bakit napaka-aggressive yata ng marketing ng bill na ito?” he said. “If a ten-peso headache pill carries therapeutic guarantee, bakit sa pondong ito, with its price tag in the hundreds of billions price tag, tila wala?”
During the floor debates on the bill last Wednesday, Escudero said he has yet to hear a full explanation of how much these banking giants will earn from their Maharlika investments.
“Landbank and DBP, during the hearings, said they were earning on average 6% to 8%. So, let us average it up at 7%. You have to give Landbank and DBP a return of at least 7% per annum on what they invested in MIC,” he said.
On top of that is the 2% administrative fee cap the MIC may use, Escudero pointed out.
“Then we have to factor in inflation. So easily, the yield will be in the two-digit zone,” he said. “In any investment pitch, kung ano ang kita is the most important bottom-line. An investment is made because one is convinced that it will make money. Not behest. Not something coerced through legislation.”
Senate Bill No. 2020 states that of the total authorized Php500-B in capital stocks of the MIC, the initial Php125-B worth of MIC common stocks to be subscribed by the national government amounting to P75 billion shall be fully paid by the following: Php50-B by the LBP a Php25-B by the DBP.
Under the bill, the two banks can seek regulatory relief from the Central Bank if their position falls below standards.
“Pero dapat hindi umabot sa ganoon. And to dangle this as the standard reply to issues validly raised is not the comforting answer we want to hear,” he said.
The veteran legislator pointed out that once a regulatory relief is sought “that means the banks already lost a lot of money.”