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TBAS Chair corrects the math for naysayers of the bank

Chairman of the Territorial Bank of American Samoa (TBAS), Utu Abe Malae offered special remarks during the official opening of the new bank on Monday. In his remarks, he corrected figures touted by one of the gubernatorial teams, in the newspaper and on the radio, as one of the reasons TBAS is not a good investment of the people’s money.  [Photo: JL]
“Help us to make TBAS succeed,” Utu says
joyetter@samoanews.com

Chairman of the Territorial Bank of American Samoa (TBAS), Utu Abe Malae in his special remarks, during the opening of the new bank on Monday, used the opportunity to correct “the math” about the bank advertised in the paper and discussed on the radio by one of the gubernatorial teams. Utu did not name the team, but explained, “You do not use the capital to make loans; instead, the capital is leveraged 5- 7 times; so that, $1,000 in capital can be leveraged into $5,000 to $7,000 in order to make loans.”

Samoa News should point out that the Faoa & Sanitoa gubernatorial team ran advertisements in the paper, in Samoan and English, specific to TBAS, called  — Hope for Sustainable Banking in the Territorial” — for three days in September.

In the advertisement, the team says that the interest rate the bank will have to pay on the bonds it’s used for start-up is “approximately 14%. That means the only way TBAS will make money is to ‘charge more than 14% to its customers’… Further ASG passed laws to exempt TBAS from needing FDIC protections and requiring ASG to deposit ALL of its money in the new bank. Should TBAS fail, ‘ASG’S MONEY IS NOT PROTECTED BY INSURANCE AND ORE MORE IMPORTANTLY YOUR MONEY IS NOT PROTECTED BY ANY INSURANCE’.”

The advertisement continued, “…Nowhere in the law are there protections against political influence and conflicts of interest..,”

According to Utu, “There are three bond issues (A, B and C) and the one that set up the bank is one of them. That issue has a high interest rate of 13%; the other two have lower ones; the blended rate is under 8%.”

Addressing the insurance issue, Utu pointed out a bank can start without FDIC insurance and Amerika Samoa Bank started out that way, and then obtained insurance later. When ANZ purchased ASB it was already FDIC insured. “The written plan and all the policies and rules for TBAS assume it is FDIC insured. We have a suite of insurances already in place that mitigate risks of liabilities, including theft.”

In Samoan, the Chair of the TBAS said, “Faamolemole le atunuu ole FDIC insurance e le o se life insurance; afai e $1,000 o loo teu i lau tusi tupe, ae faaletonu ma tapunia le fale tupe, e le sili atu i le $1,000 le tupe e te mauaina; e le faamanuia ina oe i se $250,000!  E leai.” (FDIC is not life insurance if you have $1,000 in your account and if the bank closes you will get back your $1,000, you will not receive $250,000... no, that will not happen!)

Utu also addressed the purpose of TBAS, in doing so the fears that TBAS is not protected ‘against political influence and conflicts of interest’, saying the bank “is not to fund government; it is to provide services to the public, the kind of service that you are unable to receive at present.”

“TBAS enabling laws protect it from the undue influence of, excuse me, politicians or bad behaviors by governance and management. The Office of Financial Institution is the local regulator. The charter demands that the bank follow Regulation O, which attempts to prevent insiders from helping themselves to loans.

“The loan policies of the bank go further and disallow loans to board directors & officers and their immediate families,” he said.

Utu quoted a paper by the Wharton Financial Institutions Center on Foreign Banks in the Pacific: Some History and Policy Issues, Adrian E. Tschoegl, concluded:  “…the device of creating government-owned banks has been less successful …as most have succumbed to scandals of mismanagement, looting, and cronyism.”

He said, they (TBAS) took to heart the last sentence of the Conclusion: “Developing efficient, safe, and locally responsive banking systems in the Pacific islands will require innovations in banking practices and institutions. To the Federal Reserve, regulatory watchdogs and other financial institutions around the world — we ask you to give TBAS a chance because, we are indeed making “innovations in banking practices and institutions.”

The TBAS chair in his special remarks that they are starting small, and are looking at growing ‘a little at a time’ — and asked the public to give them a chance to make it work.

“We can wait around for perfect conditions to occur, but that will not happen and we must take control of our situation now. Right now, banking conditions are not good for the community of American Samoa. We must play the hand that is dealt with us and there is no reward without risk.

“Help us to make TBAS succeed,” Utu said.