Question & AnswerQ&A (EXECUTIVE ORDER NO. 198)
The Governance Commission for GOCCs (GCG) is empowered to implement such mergers under Section 5(a) of Republic Act No. 10149, also known as the GOCC Governance Act of 2011.
GCG considered that the functions of DBP and LBP duplicate or overlap unnecessarily, that the merger would enhance financing of priority sectors, improve access to financial services in unbanked areas, and create a stronger universal development bank for countryside and inclusive growth.
The operational merger is subject to the written consent of the Philippine Deposit Insurance Corporation and approval by the Bangko Sentral ng Pilipinas (BSP).
The authorized capital stock of LBP is increased to Two Hundred Billion Pesos (P200 billion), divided into 2 billion common shares with par value of P100 per share, with funding sources to be identified by the Department of Finance and Department of Budget and Management.
Employees retained by the merged banks shall not suffer any break in service or diminution of salaries. Employees separated due to reorganization are entitled to Merger Incentive Pay (MIP) based on years of service multiplied by basic monthly pay, with higher multipliers for longer service.
Section 81 of RA 3844, as amended by Section 4 of RA 7907, provides that the LBP Board, upon recommendation of the Secretary of Finance and with the President's approval, may increase the capitalization of LBP to achieve its objectives.
All concerned government offices and agencies are directed to promptly take necessary actions to implement the Executive Order within one (1) year from its effectivity.
The policy is to rationalize government financial institutions to strengthen their financial capabilities, improve service delivery, promote economic efficiency, ensure sustainable capital growth, and protect investments while fulfilling social mandates for priority sectors.
According to the separability clause in Section 7, if any provision is declared invalid or unconstitutional, the remaining provisions shall remain valid and subsisting.