The Development Bank in the Philippines (DBP) must explain their reasons and open their registers on its request for the extension of the regulatory placement, says a central bank’s official.

“They have to justify (request) … we have to see and judge, verify; is it reasonable?” Bangko Sentral ng Pilipina’s (BSP) Deputy Governor Chuchi Fonacier said in a media briefing in Baguio over the weekend.

DBP’s President and CEO Michael de Jesus wants the central bank to extend the regulatory exemption granted to the state bank after it poured P25 billion into the Maharlika Investment Fund. Land Bank of the Philippines (Landbank), which added P50 billion, was also granted an exception but has said that it would not seek an extension.

Fonacier said that approval of DBP’s request would be due to a thorough evaluation of important financial measurement values ​​and the broader consequences for the banking sector.

BSP will investigate DBP’s capital adequacy, loan portfolio quality, non -performance loans (NPL) conditions, overdue conditions and exposure to high risk sectors.

IMF report

The International Monetary Fund (IMF), in its 2024 country report released last month, warned of potential risks to the Philippine financial system if capital recovery plans were not quickly adopted for DBP and Landbank.

Fonacier acknowledged the IMF’s concern, but said that all regulatory relief was time -bound.

“The conditions they are in … (are) also linked in some measurement values. So we go back to those measurement values ​​to see if” yes, you are right “… it can’t be automatic,” she added.

BSP regulations require universal banks to maintain minimal capital from P3 billion to P20 billion, depending on their branch network size. The Landbank’s second largest bank in terms of assets have an authorized capital of P200 billion, while DBP-in 10th place from September 2024-Har P35 billion.

The finance department has said that it wants Congress to approve changes in the DBP and Landbank charters to increase their activation to P300 billion and P1 trillion respectively, to further strengthen their financial position.

Fonacier said that BSP was also aware of risks that could arise if the banks rely on continued regulatory relief instead of strengthening their financial position.

“There are also factors, (for example) what is the condition for a particular industry that (DBP) is exposed to. So there are things to keep in mind, but of course we guard against moral dangers,” Fonacier said.