Republic of the Philippines
HOUSE OF REPRESENTATIVE
Quezon City

FIFTEENTH CONGRESS
First Regular Session

House Bill No,_3731

Introduced by Honorable Rex Gatchalian

Explanatory Note

It is the policy of the present administration to streamline the functions
of existing Government agencies and offices including government-owned
and/or-controlled corporations to achieve operational and financial efficiency
as well as derive substantial savings in terms of hardware, software and
processes,

Certain Government Financial Institutions (GFis) like the Development
Bank of the Philippines (DBP) and the Land Bank of the Philippines (LBP)
were created for distinct purposes but had recently been venturing into similar
activities geared to implement the Government's socio-economic programs.

The Development Bank of the Philippines (DBP), which was
established on October 29, 1946 pursuant to R.A. No. 85, is the government
financing institution charged with providing principally medium and long-term
credit facilities for agriculture, industry, export development and the
government sector.

The Land Bank of the Philippines (LBP), which was established on
August 8, 1963 pursuant to R.A. No. 3844, is tasked to provide timely and
adequate financial support in all phases involved in the execution of needed
agrarian reform

While the function of the LBP js limited by law to providing financial
support in all the phases involved in the execution of needed agrarian reform
and granting credit facilities principally to the agricultural sector particularly the
farmer's cooperatives, the DBP has been charged by law with providing
principally medium and long-term credit facilities for agriculture, industry,
export development, the government sector and for infrastructure and
development projects of the govemment

The DBP is the main conduit for most if not all Official Development
Assistance to the Philippines from bilateral and multilateral sources which
responds to the financing needs of a very wide spectrum of development
Priority areas such as infrastructure and logistics, micro, small and medium


enterprises, social services, and environment and industrial lending, among
others

Said role of DBP as main conduit for Official Development Assistance
has enabled the DBP for many years to be independent of Government for
funding.

There is a need to rationalize the operations of government agencies
and GFis to improve the delivery of government services, to achieve
economic efficiency and to support the development thrust of the government.
Such rationalization may be achieved by merging government
offices/agencies with overlapping functions.

Said merger will improve the balance sheet capabilities of the merged
banks thus resulting in a stronger bank which will have a competitive edge
over other banks not only in the domestic but in the global market as well.

Considering the broader and more varied functions given by law to
DBP, the resulting broader expertise of its personnel and its invaluable role as
the main conduit for Official Development Assistance to the Philippines, the
DBP should be the surviving entity in the merger.

Hence, the passage of this bill is earnestly reqyested

Representative
1 District of Valenzuela


Republic of the Philippines
HOUSE OF REPRESENTATIVE
Quezon City

FIFTEENTH CONGRESS
First Regular Session

House Bill No. 3731

Introduced by Honorable Rex Gatchalian

AN ACT AUTHORIZING THE MERGER OF THE DEVELOPMENT
BANK OF THE PHILIPPINES (DBP) AND THE LAND BANK OF THE
PHILIPPINES (LBP) WITH DBP AS THE SURVIVING ENTITY AND FOR
OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the
Philippines in Congress assembled:

SECTION 1. Declaration of Policy. There is a need to rationalize the
operation of government agencies and Govemment Financial Institutions
(GFis) to strengthen their financial capabilities, to improve the delivery of
government services, to achieve economic efficiency and to support the
development thrust of the government. Towards this end, the State shall
therefore:

a. Recognize the importance of strengthening the government financial
institutions to give it competitive edge over other banks not only in the domestic
but in the global market as well;

b. Encourage sustainable growth and development in capital and credit
facilities in our govemment financial institution thereby achieving a sound,
stable and efficient government banking facility for the protection of the public;

c. Ensure that the social mandate of providing assistance to priority
sectors are continuously fulfilled and investments are amply protected.

SECTION 2. Merger of the Development Bank of the Philippines and the
Land Bank of the Philippines. The Development Bank of the Philippines (DBP)
and the Land Bank of the Philippines (LBP) are hereby merged, with DBP as
the surviving entity.

All assets and liabilities of LBP are hereby transferred to DBP.
In addition to the powers of DBP under its 1986 Revised Charter (E.O

No. 81 dated December 3, 1986, as amended by R.A No. 8523 dated
February 14, 1998), the DBP as surviving entity, shall also exercise the powers


of LBP under R.A. No. 3844, as amended, such as providing timely and
adequate financial support in all phases involved in the execution of needed
agrarian reform

SECTION 3. Capital Structure. The existing capital structures of DBP
and LBP shall be combined; provided, however, that the combined existing
authorized capital stock of DBP and LBP which is in the amount of Sixty Billion
Pesos (P60,000,000,000.00) shall be increased to One Hundred Billion Pesos
(P100,000,000,000.00). Said increase of Forty Billion Pesos
(P40,000,000,000.00) shall consist of 400,000,000 common shares with par
value of P100.00 per share.

SECTION 4. Tax Exemption. The merger of DBP and LBP including all
aspects of the implementation thereof shall be exempt from the payment of all
national and local taxes, fees and charges, including, but not limited to, the
income tax, capital gains tax, creditable withholding tax, gross receipts tax,
value-added tax, local transfer tax, documentary stamp taxes and registration
fees. The shares of stock to be issued out of the increase of the authorized
capital stock of DBP shall be exempt from the payment of the documentary
‘stamp taxes.

SECTION 5. Implementation of the Merger by Concemed Goverment
Offices/Agencies. The Bangko Sentral ng Pilipinas, the Bureau of Intemal
Revenue and other government offices/agencies concerned are hereby
directed to promptly take such actions as may be necessary to fully implement
the provisions of this Act.

SECTION 6. Effects of the Merger on Existing Laws. The provisions of
the Corporation Code on Mergers shall have suppletory effect on this Act.

The provisions of R.A. No. 3844, as amended, the Code of Agrarian
Reforms of the Philippines, and E.O. No. 81, as amended by R.A. No. 8523,
the 1986 Revised Charter of DBP, are hereby amended accordingly.

SECTION 7. Repealing Clause. All laws, decrees, issuances, rules and
tegulations inconsistent with the provisions of this Act are hereby deemed
amended accordingly.

SECTION 8. Effectivity Clause. This Act shall take effect within fifteen
(15) days after its publication in at least two (2) newspapers of general
circulation.

Upon the effectivity of this Act, the Board of Directors of DBP as
surviving entity, shall as soon as practicable, immediately convene to take such
steps as it shall consider to be necessary to implement the provisions of this
Act and in the reorganization of the merged banks, applicable laws and rules
relevant thereto like the Civil Service Law and its implementing Rules shall be
observed.

Approved.