Regs for govt bank deposits proposed

The Department of Finance has proposed regulations setting minimum standards to be met by banks seeking to receive and hold government deposits.

Published in the latest Commonwealth Register, the draft rules “are intended to provide safeguards for all Commonwealth government bank deposits, and to establish regulations for the deposit of government funds.”

The regulations also define “public funds” subject to the Government Deposit Safety Act.

Based on the proposed regulations, public funds include “any funds, revenues, deposits, or monetary assets of any Commonwealth government agency, government official in his or her official capacity, executive department, legislative agency, judicial office or agency, public autonomous or semi-autonomous entity, public corporation, nonprofit corporation receiving federal or Commonwealth funding, or any trust held for the benefit of the public or indigenous residents.”

Further, the regulations state that any institution that deposits public funds should give priority to a bank that is located in the CNMI, insured by the Federal Insurance Deposit Corp., in good standing with the Department of Commerce, and not in violation of applicable CNMI laws, rules or regulations.

Following in the order of preferences provided in the regulations is a bank capable of, among other things, obtaining and providing the necessary collateral to assure deposit security, insure and protect the deposit against loss.

The regulations also cite the bank’s interest rate for funds deposited, as well as on loans for residential housing, small business loans, and agricultural and fishing development loans.

The rules grant the Finance secretary or his designee, including the Commerce secretary in his role as banking commissioner, full access to review and obtain records of all deposits of public funds with any bank.

Meanwhile, the Office of the Public Auditor is given the authority to inspect, review, and obtain deposit records and to conduct its own independent examination or audit of the bank with regard to public funds and deposits.

Further, the Finance secretary is granted the power to suspend any bank that violates applicable laws from receiving deposits of public funds.

First-time offenders may be suspended for a maximum of 5 years. Banks that commit two violations may be suspended for up to 10 years, while those that commit three offenses may be suspended for an indefinite time.