Before passing in third and final reading last Friday an administration bill that would establish a local regulatory arm to oversee banking and money transfer services in the territory, the Senate made one amendment to the legislation, dealing with the post of Commissioner to oversee the office.

The bill, which seeks to establish the Office of Financial Institutions (OFI) within the Treasury Department now goes to the House for their consideration. The House has its own version of the bill, pending in committee.

Provisions of the bill state that the OFI shall have the authority to regulate all financial institutions that operate or conduct business in the territory, including but not limited to commercial banks, holding companies, credit unions, trust companies and retirement funds, consumer money lenders, money brokers, mortgage loan originators, collection agencies, money transfer services, debt settlement service providers and any ASG-owned financial and depository institution.

The governor referred to consumer money lenders as the small consumer loan lenders doing business around the territory.

Senate Budget and Appropriations Committee chairman Sen. Laolagi F.S. Vaeao summoned members of the American Samoa Economic Development Authority board to testify on the measure, which states in part that OFI is to have a Commissioner who is appointed by the governor for a four-year term.

However, some senators believe the Commissioner post, which they say is a powerful position when it comes to OFI and its proposed regulatory duties, should be subject to Fono confirmation once the individual is appointed by the governor.

Sen. Galeai M. Tuufuli says he believes that there are current provisions of other laws, which require all appointees of the governor to be confirmed by the Senate or both Chambers of the Legislature.

He believes that this appointee, the Commissioner, should be subject to either Senate, or both Senate and House confirmation.

Attorney General Talauega Eleasalo Ale, who is member of the ASEDA board, explained that the governor wants to keep this post free of any political influence or free from the influence of politics.

Laolagi said that the Senate will consult with the Fono’s legal team on whether a Commissioner should be subject to Fono confirmation before passing the bill.

In the end, the Senate amended the bill to say that the Commissioner will be appointed by the governor, subject to Fono confirmation.

During the committee hearing, Talauega explained the qualifications for Commissioner, as cited in the bill. For example, the Commissioner must possess knowledge of the financial services industry with a preferred experience as a federal, state, or territorial regulator, or to be experienced as a result of holding a senior management position with a federal, state, or territorial regulated institution.

ASG Treasurer Uelinitone Tonumaipe’a explained that there is a need to have an OFI for American Samoa, which is the only U.S. jurisdiction without a regulatory arm, and an OFI was also recommended by Utah-based Zions Bank, who will not support the setting up of the proposed government owned Charter Bank without an OFI.

Tonumaipe’a also says that the charter bank will not be regulated or insured by the Federal Depository Insurance Corporation (FDIC) and therefore the territory needs a “regulatory arm” to protect customers and to ensure that the Charter Bank complies with federal and local laws dealing with the banking industry.

Further, the OFI will deal with the regulation of money transfer businesses as well as the many small loan businesses in the territory that the Commerce Department director Keniseli Lafaele described as “loan sharks”. Additionally, it will oversee regulatory duties for insurance companies and investment firms in American Samoa.

Sen. Magalei Logovi’i asked as to how OFI will be funded and Tonumaipea said it will be included as part of the Treasury Department budget, adding that “lae e kele kupe” — meaning there is a lot of money. The response prompted laughter from Magalei, a former ASG Treasurer, who sought additional information.

Tonumaipea said OFI will receive fees to be paid by local institutions for being licensed here and that having these type of businesses licenses ensures that the government knows who is operating in the territory.

Magalei still had more questions about the Charter Bank legislation, which remains pending in the Senate committee, although the House passed last Friday its version of the measure, which is expected to be introduced today in the Senate.

(See Samoa News edition this week for other concerns about the Charter Bank from the Senate.)

The OFI bill is the companion bill to the Charter Bank legislation.