As DBP moves to reassure the public over its ₱36.21-billion non-performing loan exposure, we show why confidence alone is no longer sufficient. A forensic reading of the bank’s balance sheet reveals how rising impaired assets, concentration risk, and mandate drift are quietly constraining development finance and shifting risk toward the public purse.

Against this backdrop, long-delayed proposals to merge DBP with LandBank emerge not as a rescue plan, but as a necessary modernization — one aimed at restoring governance discipline, strengthening risk management, and preserving the state’s capacity to finance growth before options narrow further.

When institutions face uncomfortable scrutiny, their instinct is rarely to issue a denial. It is mostly to provide reassurance. Stability is emphasized, context is invoked, risks are normalized, critics are thanked, and accountability is deferred.

This pattern was evident in the February 18, 2026, letter of the Development Bank of the Philippines (DBP) to Rappler Executive Editor Glenda Gloria regarding a Vantage Point exposé which probed the implications of DBP’s ₱36.21-billion non-performing loan (NPL) exposure. The letter was professional, courteous, and calm. It was also carefully constructed to reassure — without substantively addressing the structural issues at hand. (See related article below:

That distinction matters.

What the DBP says

DBP argues that elevated NPLs are an inherent risk of development banking, and that recent economic headwinds explain borrower distress. This is accurate, but incomplete. All banks face credit risk. What distinguishes resilient institutions from constrained ones is not whether NPLs exist, but whether their scale, composition, and concentration remain consistent with earnings capacity and capital strength.

At more than ₱36 billion, DBP’s impaired loans are no longer peripheral. They are large enough to materially influence profitability, provisioning, and future lending capacity. This is not a matter of opinion; it is math at its best. When annual earnings are modest relative to potential provisioning requirements, asset quality becomes a strategic constraint, not a cyclical fluctuation.

Invoking “economic headwinds” explains why loans deteriorated. It does not explain why exposure accumulated at scale.

The bank has also taken issue with the publication of borrower names appearing in its NPL portfolio, saying the list should not have been disclosed. But loans extended by a government-owned bank are not purely private transactions. DBP operates with public capital and carries public risk. 

When large exposures turn non-performing and begin to affect profitability, capital buffers, and lending capacity, the consequences extend beyond borrower and bank to taxpayers and the broader economy. The publication did not disclose sensitive personal identifiers. It reported names and loan amounts strictly in relation to their impact on a state institution’s financial condition. A non-performing classification is not an accusation of wrongdoing. It is a financial status. Reporting it is oversight and is never meant to be intrusion. 

Privacy protections exist to prevent misuse and harassment, not to shield matters of legitimate public concern. When billions of pesos in unpaid loans weigh on a state-owned bank’s balance sheet, transparency becomes an obligation, not a choice. 

The public has a right to understand how such risks affect development finance and fiscal exposure. Reassurance without visibility is not accountability. If DBP is as strong and resilient as it maintains, informed scrutiny should not be feared. Trust in public institutions is sustained not by withholding information, but by confronting financial realities openly before they become public liabilities.

The bank further asserts that it has been “proactive and prudent” in managing NPLs. Prudence, however, is measured by outcomes, not intent. A prudent system limits concentration, enforces underwriting discipline, and prevents impaired assets from dominating management attention. When large exposures migrate to non-performing status and remain unresolved, prudence becomes more of a claim than a conclusion.

More revealing is DBP’s rejection of the observation that a growing portion of its loan book is exposed to individual borrowers, arguing that these accounts belong to Micro, Small, and Medium Enterprise (MSME) proprietors and development-oriented operators. Legally, this may be correct. Financially, it is incomplete.

From a risk perspective, loans booked under individual names — even when tied to enterprises — behave differently from corporate or project-based credits. They lack audited financials, offer limited restructuring options, and depend heavily on collateral enforcement. Recovery is slower. Resolution is costlier. Capital remains trapped longer. Calling such borrowers “MSME proprietors” does not change the structural risk profile of the exposure.

Scale, not legality

In my humble opinion, what is at issue here was never about legality, but scale. 

When billion-peso exposures appear under individual accounts, regardless of enterprise affiliation, the risk architecture of a development bank changes. It becomes more vulnerable to fragmentation, slower recoveries, and governance strain. That is an institutional fact, not an allegation.

In its letter to Rappler, DBP also emphasizes its continued commitment to priority sectors. Few would dispute this. But mandates are not measured by mission statements. They are reflected in balance sheets.

When impaired loans absorb earnings and constrain capital, even well-intentioned mandates lose operational force. What is key is not intent; it is impact. Development finance depends on balance-sheet capacity. Without it, priorities remain aspirational.

Perhaps the most telling passage in DBP’s response is the repeated assurance that the bank remains “strong, profitable, and resilient.” This is true — for now. But stability today does not immunize institutions from structural risk tomorrow. Many weakened banks have looked stable shortly before their options narrowed.

Resilience is not static. It is forward-looking.

A bank is resilient when it can absorb shocks without sacrificing its core mission. When it must increasingly divert resources to managing legacy risk, resilience quietly erodes — even as headline ratios remain compliant.

Nowhere in the letter is there a detailed discussion of concentration limits, exception approvals, portfolio migration, or recovery timelines — the mechanics that determine whether NPLs metastasize or remain manageable. Their absence is notable.

Reassurance is not a substitute for adjustment.

DBP-LandBank merger

This is where the long-delayed conversation on consolidation must finally move from theory to policy.

For decades, proposals to merge DBP with the Land Bank of the Philippines (LandBank) have been deferred. After the Asian Financial Crisis, during public sector rationalization efforts, and under successive administrations, the idea resurfaced — only to be shelved. Political resistance, labor concerns, and the absence of immediate crisis made postponement easy.

That environment no longer exists.

What makes the current moment different is that the case for consolidation is no longer abstract. It is anchored in measurable balance-sheet strain. A ₱36-billion impaired loan portfolio is not a temporary inconvenience. It is a structural constraint on DBP’s ability to expand development lending without additional capital — capital that would ultimately come from the state.

In effect, credit risk is beginning to migrate from the bank to the public balance sheet.

LandBank’s relevance in this context is operational and not ideological. It operates with a broader deposit base, stronger rural penetration, more advanced retail and MSME risk systems, and more diversified income streams. For decades, it has invested in portfolio monitoring, credit scoring, and recovery infrastructure — precisely the capabilities needed to manage fragmented exposures.

DBP, by design, is strongest in project and sectoral finance. Its growing exposure to retail-style risk reflects mandate drift, not comparative advantage.

A merger would realign these mismatches.

It would contain asset-quality risk by absorbing DBP’s impaired exposures within a larger, more diversified portfolio. It would strengthen governance by extending LandBank’s risk systems across DBP’s vulnerable segments. It would improve capital efficiency by eliminating duplication. And it would restore mandate clarity by segmenting development functions within a unified structure.

This would not eliminate losses. It would prevent them from distorting a smaller institution’s future.

Pros and cons

Critics warn that consolidation creates a “mega-bank” that is difficult to manage. The concern is legitimate. But governance failures are not a function of size alone. They are a function of oversight and accountability. Fragmentation does not guarantee prudence. It often delays recognition of weakness.

Others point to labor and political costs. They are real. But so is slow deterioration. The difference is timing: one is immediately painful; the other, eventually — and usually more expensively.

What DBP’s NPL position now demonstrates is that the cost of inaction is rising.

Each year that impaired assets constrain earnings is a year of underperforming development finance. Each year that reform is deferred increases the likelihood that future stabilization will require public funds rather than institutional redesign.

This is not about assigning blame. Financial institutions weaken through systems, incentives, and policy pressures — not personalities. The good news is: systems can be corrected.

A DBP–LandBank merger should not be framed as a rescue. It should be understood as modernization — a recognition that development finance has outgrown a fragmented architecture built for another era, and that rising credit risk has now made reform economically rational, not merely administratively convenient.

DBP’s response reflects confidence. Confidence is valuable. But in finance, it is never sufficient. What sustains institutions is not reassurance, but correction. And DBP’s balance sheet is now speaking with unusual clarity: adjustment is no longer optional. – Rappler.com

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