ATTORNEY Randall T. Fennell, the court-appointed receiver for Bank of Saipan, said its closure has disrupted the operations of local banks and Palau Savings Bank.
Fennell, in a May 8 report submitted to the Superior Court, explained that by mutual written agreement, Bank of Saipan cleared items with local banks by netting out due-to-bank and due-from-bank items at the end of each business day. Any difference was settled by the issuance of a cashier’s check or wire transfer for any bank shortfall.
In the case of Bank of Saipan, Fennell said these differences were often settled through the issuance of check drawn on the bank’s due from account at First Hawaiian Bank.
Upon Bank of Saipan’s closure, First Hawaiian froze its account and returned all checks presented to them for payment out of that account.
First Hawaiian, Fennell said, also stopped accepting clearing checks for deposit into Bank of Saipan’s account as it had been advised that the issuing banks had stopped payment on the checks.
“Other local banks have also begun to charge back their customers for any checks drawn on the bank, returning them ‘refer to maker.’ They have further recommended to their clients that they should no longer accept Bank of Saipan checks,” he said, adding that this had greatly disrupted all vendors and banking customers on the island.
In Palau, Bank of Saipan was Palau Savings Bank’s correspondent bank, Fennell said.
The closure and the suspension of services caused Palau Savings Bank drafts to be returned to the depositor, he said.
