Gov. Lolo Matalasi Moliga is targeting June this year to open the government-owned charter bank, which will be controlled and operated under a new ASG holding entity called Territorial Bankcorp.

This week, the governor submitted to the Fono for approval legislation that would allow the government to set up the charter bank — named the Territorial Bank of American Samoa — and companion legislation which would establish an office responsible for regulating the financial institution and similar types of services in the territory.

The Territorial Bank of American Samoa, or TBAS, “will serve as the government’s bank, as well as accept deposits from and make loans to the community at large,” Lolo wrote in a letter to the Fono, whose members were also told about the measure during the governor’s State of the Territory address on Monday.

During his Fono address, the governor said the tentative schedule for opening of the bank, is June this year, but this schedule is dependent on the approval of legislation allowing the government to set up the Charter Bank.

In his letter to Fono leaders, that includes the proposed Charter Bank bill, the governor pointed out that for some time now the territory “has suffered from poor quality service” from the two local commercial banks.

He said one bank wants to exit the territory entirely (referring to Bank of Hawaii), and in the meantime has severely curtailed its banking services. The other bank (referring to ANZ Amerika Samoa Bank) while not signaling a desire to leave, has reduced its available lending products and is not otherwise able to deliver full banking services that should be expected in a U.S. territory.

Regarding the Community Bank of American Samoa, it has been over a year since applying for federal regulatory approval with the Federal Deposit Insurance Corporation (FDIC), and the governor said, it “does not appear to be progressing satisfactorily.”

Setting up the Charter Bank is “an ambitious effort but one we cannot afford to let pass us by if we want to build a more satisfactory, long term future of our people,” he said. “Without a bank willing to invest in the territory and provide the same level of banking services existing across other states and territories, it will be difficult for us to move forward.”

The governor said the local charter bank is modeled after the Bank of North Dakota, a very successful-state-owned bank originally chartered in 1919. He also said that ASG has been given support for the local charter bank from Utah-based Zions Bank which will provide co-respondent banking services. (Zions is already handling other ASG accounts, such as the payroll.)

Some of the provisions of the proposed Charter bank measure calls for the Territorial Bankcorp to be overseen by a seven-member board that includes the lieutenant governor, ASG Treasurer, Commerce Department director, the TBAS chief executive officer and members at large who are nominated by the governor subject to Fono confirmation.

According to the bill, the bank’s CEO will not receive any additional compensation for being a board member, except for his annual salary. The other board members are to receive $5,000 while the chairman gets $6,000 a year.

The bill makes clear that each board member — before taking office and at the end of each fiscal year — must file with the bank a personal financial statement, which among other things discloses any financial interests that the board member or his or her immediate family (spouses and children) have in any business entity that is a customer of the bank.

To provide confidence in the integrity of TBAS, the governor has sent to the Fono a second proposed bill, that would create the Office of Finance Services — to be administered by a Commissioner, who is appointed by the governor — within the Treasury Department.

Lolo said that for the government to go into the business of banking services, it is necessary to create a regulatory environment to ensure its business is conducted in a safe and sound manner, and in accordance with applicable territorial and federal laws.

The governor informed the Fono that only the two commercial banks in the territory are regulated by the federal government under the FDIC.

“I am sure you will agree that as we move toward a world where the financial services sector becomes more and more complex, that it is time to update our local bank regulatory environment, which hasn’t been significantly modified since 1975,” the governor said.

Provisions of the proposed bill state that the Office of Finance Services 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.

Both the Charter Bank and Office of Finance Services bills are expected to be introduced this week in both the Senate and House.