Fresh capital is expected to flow into the economy following the entry to the local financial sector of the Bank of the Federated States of Micronesia, which gears at providing both commercial and personal loans to CNMI businesses and consumers.
While the bank is initially opening its doors strictly to engage in lending activities, BFSM president Thomas Riefe disclosed future plans include providing full service banking on Saipan depending on the turnout of the Loan Production Office’s operation in the next one to two years.
Mr. Riefe pointed out BFSM is the only non-United States banking institution in the world insured by the Federal Deposit Insurance Corporation, which makes it highly qualified to secure a full service bank license in the Commonwealth.
Under existing CNMI banking regulations, foreign banks that are not insured by the FDIC can only get a good chance of penetrating the strong banking sector in the Northern Marianas if their assets exceed $100 billion.
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.
According to Mr. Riefe, BFSM officials and Board of Directors decided to establish an office on the island in response to numerous requests from the Micronesian community here and on Guam for the bank to provide services in the Marianas.
He pointed out that the decision to come to Saipan first was made primarily because present estimates put the number of Micronesian citizens currently residing on the island to be between 3,000 and 4,000.
“We established our presence here because we feel that there is a market demand that we can meet here. We also feel that it is the good time to come to Saipan despite the economic problems in the past which we think are already on their way out,” he added.
“We have confidence on Saipan and its economy. We feel that tourism will pick up and that the issue on federal takeover of local immigration will be resolved sooner,” he told reporters after the formal opening of the bank’s branch in Susupe.
He also stressed that the Susupe branch would initially be open to accept and approve loan applications from both individuals and businesses.
Commercial loans are focused at providing financial assistance to small- and medium-scale businesses needing additional capital to fund expansion or existing operations, said Mr. Riefe.
BFSM was established in 1985 and holds a branch each in four FSM states — Kosrae, Pohnpei, Chuuk and Yap. The Saipan branch, which starts accepting loan applications today, is its first international physical facility.
Total assets of the bank reached $51.8 million in 1999. Its loan losses continued to be moderate while delinquencies were below peer group levels, reads the company’s 1999 Annual Report, which adds that the bank’s loan portfolio grew 25 percent last year.
BFSM is also a proud holder of about 51 percent of the overall market share for loans in the country, while cornering about 33 percent of all deposits in 1999.
The bank returned an estimated $450,000 of equity to shareholders in the form of common stock dividends last year, when two dividend distributions were made resulting in payments equal to 50 cent per share.