TBAS chair responds to many of the community’s concerns

FDIC insurance, correspondent bank, directors’ personal financial status, gov’t owned…

The Territorial Bank of American Samoa has already adopted a policy that forbids lending to directors or senior management of the government owned financial institution, at all, says Chairman of the Board Utu Abe Malae, adding that’s one step further than required by TBAS statute. Utu addressed public concerns about the bank as it is set to open operations early next month. Among the concerns is that TBAS is still working to secure “routing numbers” or a (US) correspondent bank — after the original one, Zions Bank, faced with their own issues could not help TBAS.

TBAS is set to open its operations on the ground floor of the Centennial Building in Utulei. It is governed by the Territorial Bancorp Holding Company’s seven-member board, chaired by Utu Abe Malae and board members are: Papali’i Lauli’i Alofa, Salaia Gabbard, the governor’s chief legal counsel Steven Watson, Alo Dr. Paul Stevenson, Development Bank President Ruth Matagi Fa’atili and Commerce Director Keniseli Lafaele.

Samoa News asked if the bank is still set to open on Oct. 3rd, and Utu said “yes” and “we are trying to coordinate the opening date with the schedule of the key individuals who helped to make this happen.”

PUBLIC CONCERNS

As the bank is prepared to open more public concerns have surfaced and among them are board members getting loans and other benefits because they are directors on the board, while customers wait for a long time, or do not get loans.

Asked if the board has drawn up by-laws dealing with board members getting loans and if so, are there any restrictions applied to board members, Utu explained that “board members are essentially disallowed from taking out loans from the bank. They should look for another bank to borrow from.”

He said the restriction and legal reference are in the by-laws as well as the bank policies adopted as resolutions.

“The board at one of its first meetings adopted a Loan Policy that forbids lending to directors or senior management of the bank. This extends to their immediate families,” he said, adding that if there was any lending, it would be subject to Regulation O, which requires loans to insiders be on terms no more favorable than what is offered to the public.

“This is in the TBAS statute, but the board went further by deciding no loans whatsoever,” he said.

Provision of the statue, titled “Loans to insiders”, states that the “bank shall make no extension of credit to insiders”, as defined in federal law, also known as “Regulation O”, except in compliance with all provisions, including reporting provisions of Regulation O, as they may be amended from time to time.

(More details on federal law: https://www.law.cornell.edu/cfr/text/12/part-215)

The TBAS statute also states that before taking office, and annually at the end of each fiscal year, each board member is “to certify to” and file a personal financial statement with the bank. This statement shall include disclosure of any personal financial interests that the board member, or his or her immediate family — spouses and children — has in any business entity that is a customer of the bank.

Another provision of the statute, title “Malfeasance of director” states that any director that violates any federal or local law or knowingly negligently permits any officer, agent or employee of the bank to violate any federal or local law or any provision of the bank’s charter of bylaws is subject to removal from the board.

Additionally, any “American Samoan” who has reasonable grounds to believe that a director is subject to removal under this section may petition the High Court of American Samoa for removal of the director.

And if the court finds that the respondent director is subject to removal under this section, the court shall order his removal and provide for such other relief, as the court deems just and appropriate.

GOV’T OWNED COMMERCIAL BANK CONCERNS

Asked to comment about continued public complaints and concerns over a government owned commercial bank, Utu said American Samoa is modeling TBAS on the State-charted Bank of North Dakota which has been operating successfully for almost a century.

“TBAS is not being modeled after credit unions, Development Bank of American Samoa, Pay Day Financiers or the old Bank of American Samoa,” he said.

Asked to comment to ongoing public mistrust about the government owning a bank after past failures, Utu points out that “DBAS hasn’t failed, but TBAS is much more tightly regulated than the former” Bank of American Samoa.

He said the Fono and Executive Branch worked together to pass legislation that “is fairly restrictive and protective of the interests of customers”. Additionally, the establishment of the Office of Financial Institution (OFI) is an example of oversight.

“The policies (e.g., Anti-Money Laundering) that were passed impose strict rules and provide serious consequences for infractions,” Utu said. “The board, which includes seasoned management and banking professionals, recognizes it owes its fiduciary duty to the government and people of American Samoa, not to the politicians who may be in office today or tomorrow.”

CORRESPONDENT BANK ISSUE

Another concern from the community is that TBAS is having problems securing routing numbers or a correspondent bank in the US.

Asked for reaction, Utu explained that, “we are about to secure routing numbers and we are working on the correspondent banking situation.”

He said, “A correspondent bank relationship is not critical to our opening with limited services as we grow over the next several months into a full-service institution.”

Samoa News pointed out that Utah-based Zions Bank was supposed to be the correspondent bank, and asked if Zions has changed its mind and if so why.

Utu explained, “Zions bank was unable to help us. It was not because of TBAS; Zions bank had its own issues.”

(A bank routing number is a nine-digit number used to identify a financial institution in a transaction. Most common types of transaction being wire transfers.)

FDIC INSURANCE ISSUE

Perhaps the biggest and most vocal public concern is the fact that TBAS is not insured by the Federal Deposit Insurance Corporation (FDIC) and the concern goes back to last year when the government started working on setting up the bank.

Utu had told Samoa News two months ago that the bank does plan to get FDIC insured down the line probably in two to three years time and a “good track” record of an operating bank is very favorable to FDIC.

When asked again about TBAS getting FDIC insured, as well as the bank’s guarantee that customer’s deposit will be protected, without FDIC insurance, Utu revealed that “we are obtaining a suite of insurances that would protect the bank and reduce risk. There is no replacement for FDIC insurance.”

“We can insure against fraud, theft, fire, cyclone, all forms of risk of loss including liability cover protecting the bank from risks related to lender liability, etc.,” he said. “Our key protections relate to OFI and the fact that we have adopted policies and procedures consistent with industry standards.”

“The concerns are understandable but let’s give the bank a chance to succeed. We are aiming for FDIC insurance in two to three years,” echoing his remarks two months ago.

The Department of Commerce has also released a position statement on TBAS, saying to “please join us in supporting the creation of the Territorial Bank as we simply cannot let fear of failure paralyze our economy. If we do not affirm that we believe in ourselves now, who will believe in us ever again?”

TBAS said more than a week ago that it will continue to inform the public through it’s “Coming Soon” ad campaign, which will also include a schedule of its products and services — when they will become available.

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