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House passes bill setting minimum requirements for banks with govt deposits
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Posted on Apr 20 2008
The House of Representatives has passed a measure setting minimum requirements for banks to meet before any public funds are deposited into them.
Under the bill, sponsored by Vice Speaker Joseph Deleon Guerrero, banks must meet certain criteria before they can receive government deposits.
Funds amounting to less than $100,000 must be deposited only with banks insured by a federal agency or a U.S. Treasury listed surety agency. All of the deposited funds in excess of the insurance coverage should be secured by bank assets valued at all time at 100 percent of the excess funds. Bank assets that serve as collateral for the public funds should be in the form of U.S. Treasury bonds and U.S. government agency securities.
The House-approved bill also included amendments to the original version.
A grandfathering provision was added for banks not in compliance when the bill is signed into law. The conditions are that the bank must furnish and pledge security in the form of U.S. Treasury bills valued at 100 percent of the deposits, come into compliance with the law within 10 years of the effective date, and issue disclosures of public deposits on a quarterly basis.
The House-passed bill also “mandates,” rather than merely empower, the Secretary of Commerce and the Secretary of Finance to issue regulations to enforce the Act.
Further, it expands the types of loans offered to Commonwealth residents to include educational student loans and loans for renewable energy and energy efficiency, as a basis for giving preference to particular banks among those that meet the requirements of the Act.
The measure addresses concerns raised by the Office of the Public Auditor in 2002 in relation to government deposits. The audit came after the collapse of Bank of Saipan placed approximately $16 million in government deposits at risk.
The bill now heads to Senate.
