The taxpayers would bear the risk of the Development Bank of the Philippines’ (DBP) investment in the proposed Maharlika Investment Corporation, National Treasurer Rosalia de Leon said Wednesday.
At a Senate hearing on the bills creating the Maharlika Investment Fund, Senator Sherwin Gatchalian asked the DBP who will carry the risk of the investments as he mentioned the latter’s position paper which suggested that the funds invested by the government financial institutions (GFI) “shall carry a zero-risk weight.”
The DBP’s position paper also indicated that the funds they invested “shall not be deducted from GFIs regulatory capital in the computation of the applicable risk adequacy ratio based on Bangko Sentral ng Pilipinas’ manual regulation for banks.”
“So who bears the risk in other words? The taxpayers?” Gatchalian asked to which De Leon responded: “Ultimately.”
Under the proposed MIF bills, P50 billion of the capitalization of the sovereign wealth fund will come from LandBank of the Philippines and P25 billion from the DBP.
DBP vice president Rodrigo Jesus Mantaring explained that exempting the GFIs’ investments from risks would ensure that the investment will not affect their ability to carry out their mandate to lend money.
However, Gatchalian pointed out that it is unfair because the MIF itself is not risk-free.
“But it’s not fair because all investments has risks and we cannot just isolate you from risk because this is an investment vehicle so there’s upside and downside,” the senator said.
“Number two, assuming this is carried, then it will affect the stability of the bank because you, again, are not reflecting the true risk of the investment. You are not reflecting the true quality of the investment,” he added.
The lawmaker said it would be a “bad practice” if the GFIs will not treat the MIF “risk-free” because there is a certain amount of risk that is involved.
“We have to be reflective of what we want to do and this type of funds– and I saw the portfolio… it is not completely risk-free,” Gatchalian said.
“That’s another point that we have to look at. Who bears the risk at the end of the day,” he added.
In closing the discussion, De Leon said the proposed measures will also establish a risk management unit and the board of directors will craft an investment strategy to “ensure that there’s a good performance of the investments of the funds.”
“There are also penal sanctions against fraud and underperformance of those who are running the fund. So there are a lot of safeguards to ensure that the fund will be viable,” she added.
At the latter part of the hearing, Hontiveros flagged the “ridiculously” low penalties against those who will violate the policies of the MIF.
“‘Yung penal provision, ridiculously napakababa considering na ‘yung Maharlika Investment Fund magha-handle ng billions of pesos,” she said.
“Ni walang forfeiture of ill-gotten wealth in favor of the government, walang perpetual disqualification from public office for offenses committed by government officials na bahagi ng [Maharlika Investment Corporation] board. Likewise, walang provision sa event na ‘yung funds invested ay gamitin sa money laundering,” she added.
(The penal provision was ridiculously low considering that Maharlika Investment Fund will handle billions of pesos. There is no forfeiture of ill-gotten wealth in favor of the government, no perpetual disqualification from public office for offenses committed by government officials who are part of the Maharlika Investment Corporation board. Likewise, there is no provision in the event the funds invested is used in money laundering.)
She cited the provision of the MIF bill for corporations used for fraud or for committing or concealing graft and corrupt practices which only provides a fine ranging from P100,000 to P5 million while directors or officers who tolerate graft and corrupt practices committed by the board’s directors will only be punished with a fine ranging from P500,000 to P1 million.
“Kabaliktad niyan, sa Plunder Act enacted in 1991 amended in 1993, ito po tungkol sa pag-amass ng ill-gotten wealth sa aggregate amount ng P50 million, punishable ng reclusion perpetua, forfeiture of ill-gotten wealth in favor of government, and perpetual disqualification from public office,” she said.
(In the Plunder Act enacted in 1991 and amended in 1993, this is about amassing ill-gotten wealth in the aggregate amount of P50 million, punishable of reclusion perpetua, forfeiture of ill-gotten wealth in favor of government, and perpetual disqualification from public office.)
“Bakit po napakababa ng proposed penalties dito sa napakalaking ipinapangarap ng Maharlika Fund (Why are the proposed penalties so low)?” she asked.
Finance Secretary Benjamin Diokno, in response, said it is up to the Congress to amend the provisions.
“That’s why we have to go through this process. If you want to propose amendments to the House version, it’s going to be up to you and legislators to impose a higher penalty if you feel a higher penalty is called for,” he said.—AOL, GMA Integrated News