CAPITOL HILL Saipan — A House lawmaker has vowed to push for passage of his legislation that would overhaul the Northern Mariana Island’s 20-year-old banking code to require all lending institutions to be insured by the Federal Deposit Insurance Corp.
House Bill 15-2 introduced by Rep. Ray N. Yumul would also permit offshore banks to operate in the NMI but under strict regulations to ensure that they do not get involved in money laundering activities.
“We want the community to be confident in our banking system. We want to be able to monitor non-FDIC banks so we won’t have another Bank of Saipan fiasco ” he told the Journal.
BOS closed on April 30 2002 and thereafter went under receivership. A rehabilitation plan was approved in February 2003 after which BOS underwent a reorganization process and received a $2-million infusion from its shareholders on top of the current assets it had. On May 27 2003 BOS re-opened.
Yumul who is vice chairman of the House Committee on Commerce and Tourism said his bill which the committee is reviewing would require banks not insured by FDIC to begin the application process.
The bill’s provision would give non-FDIC banks 10 years to get FDIC coverage.
“We understand that it (applying for FDIC coverage) is a long process. We want to put regulations in place. If after 10 years they still were not able to get FDIC insurance we’ll have them dissolved ” he said.
According to Yumul there are at least three non-FDIC member banks in the NMI: BOS City Trust Bank and the CNMI Credit Union.
Yumul said the committee would summon the banks’ officials as well as those of FDIC-member banks to “answer their concerns and once and for all pass the bill.”
Jon Bargfrede president and chief executive officer of the Bank of Saipan and Marcie Tomokane vice president of Bank of Guam said they were still reviewing the 48-page bill and declined to comment at this time.
Another salient point of the bill is a provision that would allow offshore banks to operate in the NMI. Yumul said “There are concerns about money laundering. But we have the Federal Bureau of Investigation just across the street. It would be difficult for offshore banks to engage in money laundering here.” He said his bill has enough provisions that would strictly regulate operations of offshore banks.
A similar bill was introduced by Rep. Oscar M. Babauta majority leader of the 13th House of Representatives. Yumul introduced the same bill in the 14th House but he said the Senate “made some very interesting changes that the House did not want.”
This time around Yumul said the bill has better chances of being finally enacted into law considering that the administration and the leadership of both the Senate and the House of Representatives belong to the same political party.
“I am confident this will pass this time. We’re not going to make this legislation go into public law without getting full input from the banks and the Department of Commerce. We want a sound code that can carry us into the next 20 years ” Yumul said.
H.B. 15-2 would create a Division of Banking within the Department of Commerce to be headed by a director who will have broad powers to ensure the protection of depositors and financial institutions.
• Receive and examine annual audited financial statements;
• Restrict withdrawal of deposits;
• Have access to a bank’s documents and summon its officials in an investigation;
• Deny an application for a license; limit restrict revoke or suspend a license;
• Issue license to an offshore bank following extensive review of the application.
The director who will be appointed by the commerce secretary would be required to report to Gov. Benigno R. Fitial and the legislature before June 30th of each calendar year and update them on the banking situation and on how each of the NMI’s banks is doing.
The following are required from offshore banks before they could be issued license:
• Incorporation under NMI laws;
• Proof of paid-in capital stock ownership and management;
• Physical office in the NMI;
• A license fee of $25 000 for the first year of operation and another $25 000 for each year thereafter;
• Must at all times have a paid-in cash of not less than $500 000; and a paid-in surplus of not less than $200 000;
• Regular reports submitted to the director of banking.
While in the 14th House of Representatives Yumul left for a tour of duty in Iraq on Aug. 16 2004. He ran for another term in absentia during last year’s general election and won. MBJ