Ads by Google Ads by Google

TBAS further explains why it is not FDIC insured … yet

fili@samoanews.com

Those in the financial industry know why Bank of Hawai’i decided to depart America Samoa, and it was not related to the “profitability of this market place” — American Samoa, according to Territorial Bank of American Samoa board member Steve Watson, in testimony before a Senate Budget and Appropriations Committee hearing.

Watson’s statement was made as part of his response to Sen. Fonoti Tafa’ifa Aufata’s question as to why the government owned TBAS is not insured by US government regulator FDIC.

While Samoa News has provided extensive coverage about TBAS not being FDIC insured, Watson’s response to Fonoti’s question, also provided some info to the inside workings of the banking industry and the difficulty faced by a new start-up bank to get FDIC approved.

Watson explained the reason TBAS is not FDIC insured is “because it has yet to establish a satisfactory track record that would enable it to retain insurance.” Additionally, FDIC “wants evidence of the economic viability of the bank.”

He also explained the difficulty in obtaining FDIC insurance and the reason TBAS was created.

When Bank Hawaii announced (in late 2012) that they were going to depart the territory, “a group of community-minded persons got together and made an effort to start the Community Bank of American Samoa” and “they came up with pledges of close to $10 million of capital.”

Community Bank sought FDIC insurance but “were unable to get accepted... because the FDIC felt that the market conditions here were not appropriate [for] a new start-up institution,” he explained.

“They (FDIC) didn’t have enough evidence of loan demand, they didn’t have evidence of deposit demand. Bank of Hawaii was leaving, which was evidence of a bad market and that’s not why Bank of Hawaii left,” Watson said.

“The FDIC, I don’t think knew that. Those of us in the financial industry knew why they were leaving but that was not related to the profitability of this market place,” said Watson who didn’t give details on what those in the banking industry knew of why BoH is leaving.

While the FDIC didn’t get to the point of approving insurance for the Community Bank, Watson said the governor realized that there is a need for alternate banking beyond ANZ Amerika Samoa Bank once BoH leaves.  He also informed senators that BoH is committed to departing the territory.

From these developments, BoH leaving and Community Bank unable to get FDIC, the governor moved to set up TBAS that would “open without [FDIC] insurance and as it built up its track record, over a period of two or three years [or] four years, would be able to obtain insurance and then our goal is to privatize the bank, into the private sector,” he said.

Watson also informed senators that TBAS has “over 2,000 customers at this point and close to $2 million in deposits from people who believe in us and want our services. And there are a lot more customers out there looking to join us once we can offer a fuller range of services.”

“As we’re able to grow the bank, we’re going to be able to show to FDIC that there’s demand here, on the deposit side, demand on the loan side and that we can manage a profitable institution which then gives them the comfort to be able to accept us into the FDIC and provide insurance,” he said.

Watson also told senators that he is the Governor’s Legal Counsel and not the board or the bank’s attorney. Therefore, his legal obligation is to the governor.

“When I sit on the board of this bank, I sit on the board based on my experience in the banking and financial industry,” he said. “I do not provide legal advice to the bank because that might conflict with my role of providing legal advice to the governor. So I am here as a banker.”

Watson made the clarification after one of the senators made reference to Watson being an attorney when a question was raised about a legal issue pertaining to the bank.