Only FDIC-member banks can come in to CNMI

Foreign banks that are not a member of the Federal Deposit Insurance Corporation have thin-thread chances of penetrating the strong banking sector in the Northern Marianas unless their assets exceed $100 billion, commerce officials said.

The commerce department is also bent in encouraging all banking institutions in the Northern Marianas, even local banks that were grandfather by the existing banking laws, to secure membership with the FDIC.

At present, Hong Kong and Shanghai Banking Corporation is the only non-American financial company without FDIC insurance that was able to come into the CNMI.

Commerce officials said Hong Kong Bank’s assets have exceeded the $100 billion requirement. Under the law, banks may not secure membership with FDIC if their assets exceed $100 billion.

Of all the licensed U.S. banking institutions in the Northern Marianas, only two — Bank of Saipan and City Trust — are without FDIC insurance.

The Department of Commerce said Bank of Saipan and City Trust were actually not covered by the FDIC insurance requirement because they were already in operation before the law was implemented.

However, Bank of Saipan president and chief executive officer Tom Aldan said the company is close to securing membership with the FDIC.
City Trust is still yet to publicly express intention to get FDIC insurance.

FDIC membership offers up to $100,000 insurance for each account in the event of bank failure or bankruptcy. This means FDIC insurance provides depositors with security for their money.

Although they have always manifested strength and resiliency against outside factors, the heating competition in the local financial sector is forcing banks to draw up plans that would help keep them sound and clients’ confidence that their deposits are safe could make a difference.

Finance experts have seen the need to pacify worries by private depositors, thus, the move to aggressively encourage banking institutions operating here to get some form of security, in this case, FDIC membership since this provides a more concrete assurance that the depositors’ money is safe.

Mr. Aldan said the Bank of Saipan is expecting full accreditation with FDIC sooner, adding that works are now underway for the company’s eventual membership with the largest insurance institution in the mainland U.S.

The move is expected to boost Bank of Saipan’s competitiveness and resilience, since affiliation with FDIC has been a major consideration among depositors and bank clients when choosing an institution because there is something to fall back on in case a bank goes bankrupt.

While existing law requires that government deposits be fully protected by 110 percent of the bank’s assets, it does not cover private depositors. Mr. Aldan said FDIC insurance will be a welcome news for the bank’s private clientele.

Mr. Aldan said the bank’s decision to secure insurance from the FDIC would also bring the company at a level playing field with off-island banks which are insured by the largest American financial institution.

At the same time, the commerce department is adopting model rules and guidelines to ensure financial soundness of companies, as well as other innovations that will help promote the development of the insurance sector.