MANILA, Philippines - Two local banks controlled by businessman Lucio Tan can finally proceed to merge after the anti-graft court junked an appeal by a government agency tasked to recover ill-gotten wealth during the Marcos years.

Renato Fernandez, corporate secretary of the Philippine National Bank (PNB), told the local bourse on Tuesday that they have received a copy of the Sandiganbayan's resolution denying the government's motion for reconsideration of its earlier ruling.

In December 2009, the anti-graft court denied the government's application for a temporary restraining order or preliminary injunction on the merger of PNB and Allied Banking Corp. It ruled that the merger of Allied Bank and PNB would benefit the Philippine economy.

"To assure the strength of the banking system, the Bangko Sentral (central bank) even has provided incentives for banks to merge and consolidate. The bigger banks were the result of mergers and consolidations," it said.

The Presidential Commission on Good Government (PCGG) has claimed that Tan's shares in Allied Bank are part of the ill-gotten wealth acquired during the Marcos regime. Tan controls approximately 67% of PNB and 75% of Allied Bank.

Should the merger push through, PNB will buy out Allied Bank through a share swap involving 457 million shares worth P55 apiece. PNB will be the surviving entity, and would become the country's fourth largest bank, following Banco de Oro, Metrobank, and Bank of the Philippine Islands.

Tan would also own over 80% of PNB after the merger.