American Samoa Lawmakers Raise Questions About Territorial Bank

As a corporate entity, Government not liable for debts, obligations of TBAS

By Fili Sagapolutele

PAGO PAGO, American Samoa (The Samoa News, April 12, 2017) – Sen. Tuaolo Manaia Fruean has questioned why the American Samoa government is not liable for debts and obligations incurred by the Territorial Bank of American Samoa, which is governed by a seven-member board of the Territorial Bancorp Holding Company, an ASG entity, according to local law which established the government owned bank.

Tuaolo raised several questions on this particular issue during last Friday’s Senate Budget and Appropriations Committee hearing on an administration bill, which allows TBAS to provide trust services.

Gov. Lolo Matalasi Moliga submitted in late February the measure saying that trust services are another source of revenue for the bank and they are services, which are needed in the community.

The Senate endorsed its version of the trust services bill during Saturday’s Fono session and the measure is now in the House for consideration and approval. The House has its own version pending in committee.

The Saturday session — for both the House and Senate — was to make up a session day for a holiday in February, so that the current First Regular session ends at the close of business tomorrow (Thursday), as Friday is the government’s Good Friday holiday.

SENATE HEARING

During the committee hearing Tuaolo raised several questions targeting a provision of law, in which it states that “debts and obligations of the bank are not the debts or obligations of the government.” He asked — why is ASG not liable.

Although the government owns the bank, bank board member Steve Watson explained, “This is a corporate entity and in the form of a corporate entity, the shareholders are not liable for its debts. So as a shareholder, the government is not liable for the debts and obligations of the bank, which is a statutory corporation, established by law.”

Responding to more questions from Tuaolo, Watson explained further that the shareholder of the corporation is ASG and like any other corporation, the shareholders of the corporation are not liable for the debts of the corporation.

“If you look at any of the local businesses here, [for example] Bank of Hawaii shareholders are not liable for debts of Bank of Hawaii. StarKist shareholders are not liable for the debts of StarKist and so on. This is the way a corporate entity is structured,” Watson said.

Responding to other questions from Tuaolo pertaining to trust services, Watson explained that the trust side of the Bank of Hawaii family performs trust related services. For example, they manage retirement funds, future funds as well as administering to the pension plans for several other local businesses.

“They have the ability to serve as executor or administrator of an estate — a deceased person. They have the authority to perform fiduciary services on behalf of consumers or businesses,” he said.

Tuaolo says BoH is the trustee of the ASG Employees Retirement Fund and asked if TBAS can provide this service without being insured by the Federal Deposit Insurance Corporation (FDIC).

“Yes, it could be done without FDIC insurance, because it’s not a banking function, it’s a trust function,” Watson replied and explained that BoH is the bank for the Retirement Fund and for Retirement Fund investments “but that is not the kind of role” TBAS is looking at, which is a “much more complex endeavor than what we’re contemplating.”

TBAS chief executive officer, Philip Ware said, “What we are requesting here is a very simple part of the trust services that banks can do. Most banks on the mainland don’t do trust services anymore because its too complicated, takes too many people.”

“It is not our intent to do those complicated trust services but doing only the simple [trust services] such as property transfers, lease or a loan payment,” Ware explained. “It’s very simple to do. Our [computer] system is set us to do it, as well as current staff, with expertise.”

Before the hearing ended, Tuaolo along with other senators told TBAS officials “we strongly support the bank to help our community” and they encouraged the board to ensure that loans made, will be repaid by customers.

Ware told Samoa News early this year that Fiduciary or Trust Powers allow a bank to act in a fiduciary capacity.

“The fiduciary or bank then can hold assets for a third party when required as in the case when transferring privately held real property or when a third party is required to collect payments for rents, “ he explained.

The Samoa News
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