Panel endorses bank-reform legislation

The House Commerce and Tourism Committee has recommended immediate passage of a legislation overhauling operations of banks and other financial institutions on the island, saying these reforms will safeguard the half-a-billion dollar sector.

It will also widen the scope or ownership of Commonwealth banks and simplify the administrative procedures associated with the licensing and operations, according to a committee report.

“It provides for a balanced, modern regulatory scheme, one that protects depositors, while encouraging competition in the industry,” it said.

Committee chair Rep. Oscar M. Babauta said the existing banking regulations have been comprehensively revised to deal with the explosive growth of the industry over the last few years.

Several amendments to the law are included in the 47-page proposed bill which is a result of almost one year of review by the panel. Lawmakers are hoping this will provide much-needed reforms in the current banking system here.

Aside from reforms in the local banking industry, such as enforcement of regulations and easing of government bureaucracy, the measure will safeguard depositors from those banks not insured under the federal insurance corporation.

Banking activities have continued to soar in the CNMI despite the current economic crisis, with bank assets posting healthy increase last year compared to figures recorded the previous year, according to latest statistics.

Most of the concerns of all major banks, including local and foreign owned, were considered in the drafting of the bill after the committee sought their recommendations.

The committee has proposed giving broad powers to the banking commissioner, under the Department of Commerce, including comprehensive auditing and inspections of banking institutions in the commonwealth.

During deliberation of the bill last year, officials had cautioned against placing too much control on the banking operations on the island, such as the audit requirement, saying the move would only impede its development

Bank executives have called on lawmakers to overhaul existing banking laws to bridge loopholes and update regulations governing their operations, including remittance services of foreign workers.