Marshall Islands Banking Commissioner Ann Marie Muller issued a letter Friday approving Bank of Marshall Islands’ application to the state of Hawaii for a banking license.
“There’s still additional work to be done for the bank to qualify on its own merits as a stand-alone bank with its own ABA (American Bankers Association) routing number,” Muller said Friday. “But it shows significant progress has been made for my office to issue an approval for application to the state of Hawaii.”
With stricter American banking laws going into effect post-9/11, the U.S. bank Citizens Security Bank terminated its relationship with Bank of Marshall Islands in 2006, ending the bank’s ability to negotiate checks in the U.S. where most of the country’s commerce is transacted.
The bank is the largest and one of only two in the country.
Although the Marshall Islands and the U.S. government have close ties — this western Pacific nation is a former U.S. territory, gets about 60 percent of its national budget from Washington and is one of the few countries globally that uses U.S. currency as its own — it is classified as a foreign nation.
“The single most important aspect for a U.S. branch is Ebeye Island has no access to negotiate checks off-island,” said Bank of Marshall Islands’ chief information officer James McLean.
“We’re they’re only bank. If this goes through, it will give Ebeye banking services they need.”
The bank is seeking to set up a “clearing branch” to act as a way to clear its checks in the U.S. Currently, individuals and businesses with accounts at the bank can only transfer money to U.S. companies by wire transfer — or by opening an account with a U.S. bank.
The branch, if approved, would not handle deposits or issue loans, McLean said.
The banking commissioner’s approval is the first step in Bank of Marshall Islands’ application process.
It must get approval from the Hawaii State Banking Commission, and then get the okay from both the U.S. Federal Reserve and the U.S. Federal Deposit Insurance Corporation.
Muller believes the country’s removal from the Organization for Economic Cooperation and Development’s tax haven blacklist two years ago will aid the application process.
“Being on the OECD’s blacklist was one of the setbacks to the application process,” she said.
The delisting by OECD “puts the Marshall Islands as a nation on good terms in international finance circles.”
Government officials said the Marshall Islands has a long-standing agreement with the U.S. Treasury for exchanging financial information and is negotiating a similar pact with Australia, which is expected to improve the country’s image.
Muller said establishing a U.S. branch for Bank of Marshall Islands is important for the economic development of the country, and she is hopeful that the U.S. government will “help the Marshall Islands achieve economic development and progress. Helping our financial sector is a major step toward that goal.”
