A party-list legislator who represents the agriculture sector on Thursday assailed the Land Bank of the Philippines for granting a $85-million unsecured loan to the bankrupt Hanjin Heavy Industries and Construction Philippines.
In filing a resolution seeking an investigation in the government bank’s grant of a massive unsecured loan to the Korean company, Party-list Rep. Cecil Chavez of Butil said the grant of such loan was a betrayal of the LandBank’s mandate that was spelled out in Republic Act 10000, the law that aims to provide agriculture, fisheries and agrarian reform credit, insurance and financing system to improve the productivity of the agriculture and fisheries sectors, that was enacted in 2009.
“Nowhere in the original mandate of the Land Bank says that it should grant a jumbo, unsecured loan to a foreign shipbuilding entity,”—Chavez, vice chairman of the House committee on agriculture and food, said.
She said a congressional inquiry is needed because the loan that was granted to Hanjin “was done in the wake of the LandBank’s wanton and brazen failure to grant just even token loans to small farmers and agrarian reform beneficiaries.”
Under the law, all banks are required to set aside a portion of their loanable funds for so called “agri-agra loans” that are meant to provide financing to the food production sector. Failure to grant such loans will subject banks to stiff fines and practically all banks, including the LandBank, that was established to provide such loans to small farmers and fishermen, have been paying fines annually.
Earlier, Alvarez assailed the “overall mendacity” of the banking system and what she alleged as deliberate efforts of the banks “to brazenly violate RA 10000 — the law that requires banks to grant 25 percent of their yearly loan portfolio to agriculture and agrarian reform beneficiaries.”
The Regional Regional Trial Court in Olongapo City has already put Hanjin under receivership after the company defaulted on its debts obligations and filed for corporate rehabilitation on January 8.
It was the biggest corporate bankruptcy ever in the Philippines, with $412 million (P21.5 billion) in unsecured loans owed to five banks—Rizal Commercial Banking Corp., LandBank, Metropolitan Bank & Trust Co., Bank of the Philippine Islands and BDO Unibank Inc.
In a privileged speech, Chavez said “the Philippine banking system paid more than P6 billion in penalties because of the system’s deliberate decision to violate RA 10000 and pay fines just to avoid granting loans to small farmers and agrarian reform beneficiaries.”
Under RA 10000, the banks have several modes of “alternative compliance” which allow them to buy government papers and bonds and pass these off as “legal compliance” to the 25 percent mandate of RA 10000.
“Yet, after exhausting the modes of alternative compliance, the banks would then deliberately pay fines instead of lending to agriculture and small farmers,” Chavez said.