By Nazario Rodriguez Jr.
Horizon news staff

The Senate committee on Ways and Means and Financial Matters proposed several major changes and policy decisions to the Financial Institution Act of 2001 (RPPL 6-3).
Senate Bill No. 7-25, SD1 is to clarify the scope of the powers of the Financial Institutions Commission relative to other offices and agencies of the national government.
It is also to modify the required qualifications of and procedure for appointing members of the FIC, facilitate efforts to detect, prevent and redress illicit financial transactions.
The bill, which was introduced by President Remengesau, is on second reading in the Senate.
Based on the committee report, the amendments to the bill also addressed the process for allowing the FIC to promulgate rules and regulations, the change in the minimum capital requirements for Palau banks, the qualification for the appeals process for adverse decisions of the Commission and the modernization of the receivership provisions.
The committee, which is chaired by Senate Floor Leader Alan Seid, said that it has solicited comments from many sources including the FIC and all banks licensed in Palau.
A comprehensive hearing was held Nov. 11 as a round table working group designed to negotiate solutions to the problem areas of the proposed amendments as identified by the banks and to address issues of concern of the FIC.
The committee report said that the two major points of disagreements between the banks and the FIC were regarding the process to appeal adverse decisions by the FIC and the minimum capital requirements for banks requested by the FIC.
Among other changes, general penalties for violations for the FIA include fine the entity or person up to $5,000 per day of violation, order the entity or person to cease and desist the offending activity and dissolve the legal entity if it is a Palau corporation.
The committee report said that the proposed bill has clarified that nothing in the FIA shall be construed to preempt or preclude other entities of the national government, including but not limited to, the Attorney General, the Registrar of Corporations, and the Bureau of Revenue, Customs and Taxation, from exercising authority over financial institutions pursuant to the laws such authority to such entities.
The committee said that it does not want an automatic consent of the financial institution to the release and exchange of information by the FIC and law enforcement authorities of foreign jurisdictions that the financial institution operates in or conducts business in, without giving notice to the affected financial institution.
A major change in the composition stated that while the President may pick five from the 10 names given by the Chamber of Commerce, under the new bill said that to fill one vacancy, the Palau Chamber of Commerce shall submit three candidates to the President to choose from.
To fill more than one vacancy, the Chamber will submit 10 but none may from the government.
With regards to licensing, the committee report said it does not agree that the FIC should have the authority to require additional evidence of the capital solvency of a financial institution.
The Committee said it is especially concerned with allowing the FIC to require evidence about the fitness and appropriateness of existing administrators and principal shareholders.
On minimum capital requirements, the Committee believed that the Palau banks that are 100 percent Palauan owned should be at $500,000 and the Palau banks that are between 20 percent and 99 percent Palauan owned is $100,000 and those that are less than 20 percent Palauan owned is $2,500,000.
It also said that foreign bank subsidiaries and their branches in Palau will remain at the minimum capital level in the current law.
These and other changes were made to the FIA such as publication and disclosure requirements for banks, on-site examinations of the FIC, promulgation of rules and regulations by the FIC regarding remedial measures, basis for initiation of receivership and powers and duties of the receiver.