DBP dividend cut not connected to Maharlika, DoF’s Diokno says

FINANCE Secretary Benjamin E. Diokno rejected on Monday speculation that the reduction in the Development Bank of the Philippines’ (DBP) dividend was intended to retain capital for use by the proposed Maharlika Investment Fund (MIF).

The Department of Finance (DoF) said in a statement that government banks like the DBP and Land Bank of the Philippines are routinely allowed to reduce their dividends.

“Long before the MIF was conceived (dividend reductions were resorted to) in order to improve the ability of both government banks to deliver on their mandates and, at the same time, maintain their financial standing.”

He was responding to a statement by Representative France L. Castro, the House deputy minority leader from the ACT-Teachers Party-list, that Executive Order (EO) No. 8, which reduced the rate of DBP’s dividends to the National Government to 0%, “was issued to increase DBP’s capital for the Maharlika fund.”

Mr. Diokno said President Ferdinand R. Marcos, Jr. issued EO No. 8 last week to support the capital position of the DBP, allow it to comply with central bank regulations, and “sustain its role in the economic recovery of industries adversely affected by the pandemic.”

“The grant of dividend relief aims to provide DBP with a stronger capital base in support of its mandated developmental programs,” he said.

Part of the proposed MIF’s initial funding was to come from the DBP, which will pitch in P25 billion.

“Consequently, because DBP would not remit anything to the National Government, this would be a huge loss from the people’s coffers and the source of funds for the next General Appropriations Act (GAA),” Ms. Castro said in her statement.

Republic Act No. 7656 requires all government-owned or -controlled corporations to declare and remit at least 50% of their annual net earnings as cash, stock or property dividends to the National Government.

 “The President of the Philippines, however, may adjust the percentage of annual net earnings to be declared by a government-owned and -controlled corporation, in the interest of the national economy and general welfare, according to RA 7656,” the Palace said in a statement. — Kyle Aristophere T. Atienza