Advocates: Only a solid US bank can fully serve AS
The National Community Reinvestment Coalition is of the opinion that only a solid-U.S. based chartered financial institution, like the Bank of Hawai’i, can fully address the banking needs of local residents compared to a credit union or even a new, locally-chartered bank.
NCRC’s president and CEO, John Taylor, made the statement during his verbal testimony by phone during Tuesday’s public meeting sponsored by the U.S. Federal Reserve Bank of San Francisco over BoH’s move to shut down local operations.
The Washington D.C. based national advocacy group is an association of more than 600 community-based organizations that promote access to basic banking services, including credit and savings; to create and sustain affordable housing, job development and vibrant communities for America’s working families, according to its website.
On Mar. 6, the coalition signed a nine-page letter to the Federal Reserve Bank calling for the public meeting on the BoH closure and to ultimately block BoH from closing their branches in American Samoa, at least until a satisfactory transition plan is put in place that will ensure access to capital, credit and banking services.
“Bank of Hawaii holds $97 million in deposits in American Samoa. Their exit would badly curtail the availability of basic banking services and access to credit, and have a serious negative impact on the community,” Taylor said in a brief statement, after the letter was sent to the Federal Reserve Bank.
During his testimony on Tuesday, Taylor said that by closing its local branches BoH “is abandoning a community with no good explanation”, adding that the bank is “simply walking out in the middle of the night with no regard to the damage they may do or whatever it leaves behind.”
“This is a violation of the Bank of Hawaii’s duties and obligation under the [federal] Community Reinvestment Act,” he said, adding territorial residents deserve “real, affordable and comprehensive banking services.”
He then pointed out the dangerous impact the territory will face with only one bank, which in this case is ANZ Amerika Samoa Bank. For example, he said there will be a monopoly in banking services, and ANZ’s ATM fees have already gone up by $6 per transaction. He said a recent study by NCRC shows that when “main stream banks” leave a community, then fees will go up for banking services.
“It is reasonable to assume that the price of banking in American Samoa will go up, making it harder for citizens to build and grow well,” he said and noted that no other financial institution is close to being ready and able to step into the very large shoes BoH leaves to fill.
Taylor noted that there were testimonies earlier about a credit union and other types of banking services pending for the territory. He said he is a believer in supporting those institutions; however, “the problem is, it lacks the capacity that a main stream financial institution, like the Bank of Hawaii has of being able to draw upon the kind of resources that the Bank of Hawaii has...”
And “most important of all, credit unions are not covered by the [federal] Community Reinvestment Act. They have no affirmative obligation to loan to low income people,” he said, adding that he appreciates the local leaders and business people in the territory stepping up to try and fill the void that will be left by BoH in financial services.
“While I commend their efforts, especially those aimed to create products that ANZ does not have, I am still very concerned that a locally chartered financial institution would not substantially fulfill community [banking] needs,” he said.
Taylor cited media reports that Community Bank of Amerika Samoa (IO) is at least a year away before it can accept deposits and provide basic banking service. Additionally, Community Bank has yet to submit an application for federal regulatory approval.
“Community Bank has a long road ahead,” he said. “Bank of Hawaii and the Federal Reserve cannot depend on an as yet, unknown, untested financial institution... to take the place of an established American bank that has served the territory for four decades, especially not in the course of a single year.”
In closing, he said BoH cannot just leave the territory without any alternative banking services for local residents.
COMMUNITY BANK (IO)
Avamua Dave Haleck, the interim board chairman of Community Bank was the first witness to testify during the meeting, recommending that BoH delay its full departure until Community Bank receives federal approval to opens its doors. (BoH has since extended its stay for 12 more months at their Utulei Branch.)
Avamua also revealed a new piece of information — the Community bank “expects to open its doors as a full service, FDIC-insured banking institution in early 2014. Once we are open, American Samoa will have adequate banking competition and banking services that meet the community’s needs.”
He said the bank anticipates to formally submit its FDIC application in three weeks time and the application will call for the bank to have paid-in-capital of $10 million prior to opening its doors.
“We expect the application will include non-binding Letters of Intent showing serious expressions of potential investor support of at least $7 million,” he said and pointed out that Community Bank has already received the support of the Lolo Administration, Congressman Faleomavaega Eni, the community and a Fono resolution in progress of endorsement.
He said Community Bank’s business and technology plan calls for providing the entire range of services presently offered by BoH and “we expect to be able to provide better services than either local bank presently provides, primarily due to our ability to adopt the latest technology with no legacy systems to integrate and our commitment to making use of a robust suit of correspondent banking products.”
“As a locally owned and governed bank, we intend to offer banking products and services that cater to local needs and reflect American Samoa’s unique circumstances,” he said.
As for a credit union, Avamua said Community Bank welcomes a local one as “they are better equipped than banks to serve small island needs, and the activities that are their bread and butter tend to be less attractive to the banking sector.”
“But a credit union,” he said, “could not serve the community’s needs as well as a bank, because they are severely restricted as to the lending they can provide to the commercial community, due to regulations and the likely small capital base provided by depositors.”
Testifying by phone from California was Michael McDonald, who is the vice president of American Samoa operations for the Riverside, Calif., based nonprofit group, Community Investment Corporation (CIC), which is seeking to set up a community development credit union (CDCU) in the territory.
McDonald said the group was initially set up to serve the banking needs of the Manu’a Island group, where there are currently no banks available. When BoH announced its departure, “we moved to accelerate our efforts” to include all of American Samoa.
He said CIC requested assistance from National Federation of Community Development Credit Unions for seeking a charter with the National Credit Union Administration — the federal regulator for credits unions. He said an NCUA charter can be obtain in as little as 90 days.
Currently CIC has acquired a location in Pago Pago and a site in Fitiuta, Ta’u island in Manu’a. McDonald’s said the Pago Pago facility is about 90% complete and is equipped with the necessary furniture and computers with the supporting server infrastructure based in California. CIC has also completed 250 pre-enrollment surveys, showing the interest and support in the community, he said.
He then explained why a CDCU will best serve the community. “First and most importantly, a credit union is member-owned. Everyone who has an account at the credit union, no matter how small his or her holdings are, has a voting share in the credit union's affairs,” he explained. “This ensures the organization’s policy matches up with what the members want.”
Second, the credit unions are non-profit organizations providing services tailored to their members, rather than driven by profits for the institution — like a bank.
Third, credit unions typically offer higher interest rates on savings accounts, lower fees and lower interest rates on loans, because the credit union serves its members.
“By comparison, the bank’s role is to drive profitability so that the shareholders see an acceptable return on their investment,” he pointed out.
Additionally, a credit union has the unique opportunity to be part of the co-op shared network, which is a network created by credit unions to expand the reach of its services, providing the kind of financial convenience usually available to large banks.
This includes nearly 30,000 ATM service-free nationwide, 5,000 credit union branches, and 2,000 self service locations. “This allows for credit union members, to, for example, make a deposit at a credit union in... North Carolina and withdraw the funds in American Samoa. And this service is free to members,” he said.
Lastly, the capital requirements for credit unions are much different than those of the banks, allowing for a much easier start up for a credit union. In summary, a CDCU “offers all the convenience that a bank would offer and at more affordable rates,” he pointed out.
McDonald’s acknowledged that are “many hurdles” and “many more challenges” that remain for them, saying "we need the support” of the community, the Lolo Administration and Congressman Faleomavaega Eni.
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