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TBAS board is proposing legislation for ASG to guarantee deposits

Sen. Togiola Tulafono
fili@samoanews.com

Pago Pago, AMERICAN SAMOA — The Territorial Bank of American Samoa (TBAS) board of directors is working on draft legislation, which will seek to have the government guarantee all bank deposits. And this action is similar to the regulatory role of the Federal Deposit Insurance Corporation (FDIC), which insures financial institutions in states and territories.

Sen. Togiola Tulafono made the verbal revelation — as a witnesses, which means as a TBAS board member, and not in his position as senator — when he was responding to queries raised by Sen. Soliai Tuipine Fuimaono, at last week’s Senate session.

It was also revealed during the Senate session that the ASG Employees Retirement Fund (ASGERF) board of trustees had proposed to TBAS to buy majority shares of the ASG-owned bank, but that didn’t work out.

Soliai shared with his colleagues public concerns that TBAS is still not FDIC insured and pointed to media reports about the TBAS chief executive officer’s testimony to a House committee on the same FDIC issue two weeks ago.

He noted that the community is concerned with making deposits with TBAS, which is not FDIC insured and queried as to whether the government plans to remove its control from the financial institution. And he questioned the security and safety of people’s deposits at TBAS.

Soliai noted that Togiola is a TBAS board member and directed the queries to Togiola, who noted that he was responding as a witness, not as a Senator.

Togiola explained that the board recently held discussions with FDIC, which made clear that federal law prohibits FDIC from insuring a bank that is controlled by a government — either local, state or territorial jurisdiction.

On the security and safety of deposits at TBAS, he explained that the board is looking at a way to amend current law, which provides “no guarantee” for customer deposits. But if the governments can “secure all deposits” then there is no longer an issue or concern over TBAS not being insured by the FDIC.

He further explained that FDIC insures only a certain amount of deposits and that FDIC insurance is capped at a certain amount for both large and small deposits. (See more details on www.fdic.gov.)

Togiola also revealed that the TBAS board had discussed identifying a private insurance firm to insure bank deposits — similar to the FDIC’s regulation.

Because TBAS is a government owned and controlled financial institution, he said, many in the community have voiced their opinions that ASG should sell the bank and these are the same issues and concerns that have been raised before.

Togiola recalled his time while governor when his administration worked on establishing a credit union here, which was a simpler type of financial institution owned by members, who are all local residents, who contribute to it.

(Samoa News notes that the National Credit Union Administration (NCUA) is a government-backed insurer of credit unions in the U.S and its regulatory function is identical to FDIC.)

Togiola said that ASG owning the bank prevents it from being sold — as in the case of the former-Amerika Samoa Bank, owned by local share holders but acquired in 2001 by ANZ Bank Group. The ASG owned bank ensures the financial institution continues to remain and serve the community if others leave.

Samoa News notes that the previous Lolo Administration had said that TBAS is a charter bank modeled after the same charter bank established many years ago in the state of North Dakota, which is owned and controlled by the state government and therefore was is not a member of FDIC.

During the Senate session, Togiola informed his colleagues that the North Dakota charter bank has a law allowing the state-government to guarantee and insure all deposits. And that is what the TBAS board is looking to propose in amending local law to allow the government to guarantee and secure all deposits.

Senate President Tuaolo Manaia Fruean, a member of the ASERF Board of Trustees, revealed that the Fund had submitted an investment proposal to TBAS to become a major shareholder of the bank.

According to Tuaolo, the current CEO of TBAS had responded saying that while the Fund can invest, it has no voice to vote on decisions by the board. Tuaolo said he was surprised by such reply that a major shareholder has no voice on decisions through its vote.

Togiola responded that investment was also discussed recently with FDIC, which says that if a government “owns or influences” operations of a bank, it still cannot be FDIC insured.

That mean’s even if 50% is owned by the government and the other 50% by the public, the government still has a say on the board and therefore, TBAS cannot be FDIC insured, he said.

Togiola reiterated that there’s no problem with the bank’s continued ongoing operations and the most important factor is that TBAS has in place a “routing number” allowing it to operate like any other bank with all transactions.

And the only question to address now is the safety and security of deposits, and the board is focusing on that now with proposed draft legislation for ASG to provide “full faith and credit” for all deposits and that will provide guaranteed security of deposits.

Soliai’s questions during the session followed reports at the time that ANZ Banking Group was pulling out of the American Samoa market and he voiced concerns that the only FDIC bank on island may be leaving.

Late last week, ANZ made the official announcement of closing down its operations at the end of September this year. (See Samoa News edition Apr. 1 for details.)

BACKGROUND

As reported by Samoa News in February 2018, TBAS was issued a “transiting routing number” on Dec. 26, 2017 by the American Bankers Association, which assigns the number. Thereafter, TBAS worked on setting up its “master account” with the Federal Reserve Bank and achieved that goal.

TBAS president at the time, Philip Ware told Samoa News that these are the important steps needed for the government owned bank to move forward with rolling out its services and products.

Being the first non-FDIC insured and government-owned bank in the U.S to get a routing number and then a “master account with the Federal Reserve Bank, became national news, with trade-publications writing about this TBAS achievement at the time.

Ware told Samoa News at the time that TBAS’ achievements prompted many inquiries from other local governments throughout the U.S seeking information how to secure such efforts.