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National Bank of Palau Deposits, RPPL 9-41 2014

RPPL No. 9-41

NINTH OLBIIL ERA KELULAU

Fifth Regular Session, January 2014

RPPL No. 9-41
Passed as House Bill No. 9-84-5, HD1, SD1

AN ACT

To amend Title 26 of the Palau National Code to facilitate the National Development Bank of Palau to accept deposits, and for other related purposes.

THE PEOPLE OF PALAU REPRESENTED IN THE OLBIIL ERA KELULAU DO ENACT AS FOLLOWS:

Section 1. Legislative findings. The Olbiil Era Kelulau finds that the National Development Bank of Palau (NDBP) has successfully secured loans for individuals to access financing, opening the door to increased home ownership, agriculture, and economic opportunity. Additional sources of funds are needed to finance the housing and business needs of the Republic. These needs include depository services for businesses that are not currently offered by banks that are required to comply with additional home country regulations. NDBP's role to this point has been primarily a lender. This Act will enable the NDBP to transition to accept deposits and open savings accounts – initially on a limited basis for commercial and individual investors. This will provide needed capital to NDBP to assist more borrowers at competitive rates. Furthermore, this Act will address difficulties resulting from recent changes to United States of America regulations affecting Palauan businesses, finance companies, investors and Palau chartered banks to transact business in the Republic. This Act will provide companies the opportunity to receive needed financial services through the NDBP to invest and grow their business in Palau.

Section 2. Amendment. Amend Chapter 1 of Title 26 of the Palau National Code as follows:

"Chapter 1

National Development Bank

Subchapter I

General Provisions

§ 101. Short title.

This Chapter may be cited as the "National Development Bank Act."

§ 102. Legislative findings and purposes.

The Olbiil Era Kelulau hereby finds and declares the policy of the Republic to be as follows:

(a) It is the responsibility of the national government to provide for the general health, welfare, safety and prosperity of the people of Palau, and to actively promote the economic development of the nation.

(b) It is in the national interest that a national development bank be the central financial institution responsible for initiating and promoting economic development within the Republic.

(c) It is in the national interest that a national development bank make use of existing administrative and funding sources, such as the World Bank, the Asian Development Bank and other like private and public organizations, to provide low cost capital to the private economic sector of the Republic.

(d) It is in the national interest that a national development bank lend to projects with development potential rather than a purely commercial investment potential.

(e) It is in the national interest that a national development bank accept deposits and establish savings and demand deposit accounts for both commercial entities and individuals to ensure the retention of capital and liquidity within the Republic.

§ 103. Definitions.

. . .

§ 104. Laws inapplicable to this Chapter.

Chapter 3 of Title 11 of this Code (relating to usury) is specifically inapplicable to this Chapter and any entities established hereunder.

§ 105. Conflict of laws.

. . .

Subchapter II

Corporate Purposes, Powers and Duties

§ 121. Corporation created.

(a) There is hereby created a corporation wholly owned by the government of the Republic to be called the "National Development Bank of Palau."

(b) The Bank shall be subject to the provisions of this Chapter, the Financial Institutions Act codified at Chapter 10 of this title and all regulations promulgated thereunder, the anti-money laundering laws contained in title 17, and to the corporation laws of the Republic. The Bank shall be free from state laws, rules and regulations as to its operations.

§ 122. Purposes, powers and duties in general.

(a) . . .

(b) The Bank shall operate as a development bank and may receive funds in the form of direct appropriations from any legitimate source both domestic and foreign, including demand or other time deposits as the Bank determines so long as the person depositing funds in the Bank resides or does business in the Republic.

(c) . . .

. . .

(q) The Bank may accept demand deposits and other types of deposits from commercial or individual customers allowed by the laws and regulations of the Republic.

§ 123. Additional and specific authority.

In order to achieve the objectives and carry out the purposes and provisions of this Chapter, the Bank shall have the following additional authority:

(a) . . .

. . .

(d) to acquire by purchase, exchange, or in any lawful manner, real, personal or mixed property, either tangible or intangible, freehold or leasehold; to hold, maintain, use and operate such property; and to sell, lease, mortgage, charge, or otherwise dispose of such property;

(e) subject to Section 1053 of this Title, to acquire in any mode and take over the whole or any part of the business, property, goodwill, assets and liabilities of any person who has received a loan or loan guarantee from the Bank and who is in default of such loan or guarantee;

(f) [Repealed];

(g) . . .

. . .

(m) Except as otherwise prohibited in this Chapter, to lend and advance money to, or negotiate loans and discount promissory notes or other negotiable instruments for or on behalf of, or otherwise financially assist, any person concerned in any way whatsoever in the sale or purchase of property, real or personal, for cash or on credit or on hire purchase, hire agreements, time payment, installment system, or otherwise, and generally to transact or engage in any class of business commonly undertaken by banks;

(n) . . .

. . .

Subchapter III

Board of Directors

. . .

§ 143. Members.

(a) . . .

. . .

(e) The composition of the Board must comply with Chapter 10 of this Title and regulations promulgated by the Financial Institutions Commission.

(f) No member shall serve as director who:

(1) is or during his or her term becomes a member of the Olbiil Era Kelulau;

(2) is or during his or her term becomes a board member or officer of the Financial Institutions Commission;

(3) is or during his or her term becomes a director, officer, or employee of a company in possession of a valid license granted under the provisions of the other laws pertaining to banks and finance companies operating in the Republic of Palau;

(4) has been or during his or her term is convicted of a crime;

(5) has been determined by a court of competent jurisdiction in any venue to be insolvent, or has been a debtor, whether voluntarily or involuntarily, in a bankruptcy proceeding;

(6) has been or during his or her term is determined to have been party to a transaction that violates the Banking Laws of the country or a regulation issued under those laws; or

(7) during his or her term is subject to an insolvency proceeding as a debtor.

(g) The President of the Republic shall have the power to remove a Board member for cause.

§ 149. Subcommittees.

(a) The Board shall establish the following committees in accordance with Section 1059 of this Title, the members of which shall be employees, directors or officers of the Bank appointed by the Board:

(1) Audit Committee;

(2) Risk Management Committee;

(3) Credit and Asset and Liability Committee.

The President of the Bank shall be a member of the above-listed committees. The activities of the committee shall be governed by this Title and the regulations and rules established by the Board.

(b) The Board may establish such other committees and subcommittees as prudent.

§ 150. Delegation of Authority.

. . .

. . .

Subchapter IV

Institute for Administration of Trust Territory Economic Development Loan Fund

§ 161. [Repealed.]

§ 162. [Repealed.]

§ 163. [Repealed.]

§ 164. [Repealed.]

Subchapter V

Administration and Enforcement

. . .

§ 185. Records; audit.

(a) The Bank shall keep a detailed account and record of all of its transactions and activities.

(b) Subject to Chapter 2 of this Title, all books and records of the Bank shall be available to the public, provided that business secrets or other private information of a loan applicant, investor, depositor, or client are not revealed.

(c) ...

(d) ..."

§ 186. Annual Report.

. . .

. . .

§ 193. Powers of expenditure.

The Board shall establish policies for the expenditure of funds and resources based on prudential banking practice to effectuate the purposes of this Chapter."

Section 3. Amendment. Amend Title 26 of the Palau National Code to include a new Chapter 2 as follows:

"CHAPTER 2

Financial Privacy

§201. Definitions.

For the purpose of this Chapter, the term:

(a) "Customer" means any person or authorized representative of that person who utilizes any service of a financial institution, or for whom a financial institution is acting or has acted as a fiduciary, in relation to an account maintained in the person's name.

(b) "Financial institution" means any institution regulated by the Financial Institutions Commission.

(c) "Financial information" means any record held by a financial institution pertaining to a customer's relationship with the financial institution and includes personally identifiable information.

(d) "Government authority" means any agency or department of the Republic of Palau, or any officer, employee, or agent thereof.

(e) "Nonaffiliated third party" means any person not acting as an agent of the customer whose financial information it concerns, or the financial institution which holds such customer's financial information.

§ 202. Confidentiality of financial information.

(a) No financial institution may provide to any nonaffiliated third party the information contained in the financial records of any customer, except:

(1) such customer has authorized such disclosure in accordance with Section 203 of this Chapter;

(2) such financial records are disclosed in response to a subpoena;

(3) such financial records are disclosed in response to a search warrant;

(4) such financial records are disclosed to comply with laws or regulations; or

(5) such financial institution –

(A) informs the customer that such information may be disclosed to such third party;

(B) the customer is given the opportunity to direct that such information not be disclosed to such third party; and

(C) the customer does not exercise that nondisclosure option.

(b) Nothing in this Chapter shall preclude any financial institution, or any officer, employee, or agent of a financial institution, from notifying a government authority that such institution, officer, employee, or agent has information which may be relevant to a possible violation of any statute or regulation.

(c) (1) Nothing in this Chapter shall preclude a financial institution from providing copies of any financial record to any court or nonaffiliated third party for the purpose of perfecting a security interest, proving a claim in bankruptcy, or otherwise collecting on a debt owing either to the financial institution itself or in its role as a fiduciary.

(2) Nothing in this Chapter shall preclude a financial institution from initiating contact with a nonaffiliated third party for the purpose of providing any financial record necessary to permit such nonaffiliated third party to carry out its responsibilities under a loan.

§ 203. Customer authorizations

(a) A customer may authorize disclosure if he or she furnishes to the financial institution and to the nonaffiliated third party seeking to obtain such disclosure a signed and dated statement which:

(1) authorizes such disclosure for a period not in excess of three months;

(2) states that the customer may revoke such authorization at any time before the financial records are disclosed;

(3) identifies the financial records which are authorized to be disclosed;

(4) specifies the purposes for which, and the nonaffiliated third party to which, such records may be disclosed; and

(5) states the customer's rights under this Chapter.

(b) No such authorization shall be required as a condition of doing business with any financial institution.

(c) The customer has the right, unless the nonaffiliated third party obtains a court order, to obtain a copy of the record which the financial institution shall keep of all instances in which the customer's record is disclosed to a nonaffiliated third party pursuant to this Chapter, including the identity of the nonaffiliated third party to which such disclosure is made.

§204. Disclosure of institution privacy policy

(a) A financial institution shall provide a clear disclosure to the customer, in writing or in electronic form, with respect to its privacy policy regarding disclosure of financial information.

(b) The disclosure required by subsection (a) of this Section shall include:

(1) the categories of persons to whom the information may be disclosed; and

(2) the categories of information that is collected by the financial institution; and

(3) the policies that the institution maintains to protect the confidentiality and security of financial information in accordance with this Chapter.

§ 205. Administrative enforcement

This Chapter shall be enforced by the Financial Institutions Commission.

§ 206. Penalties.

(a) Any person who willfully violates any requirement imposed under this Chapter with respect to any customer is liable to that customer in an amount equal to the sum of:

(1) any actual damages sustained by the consumer as a result of the failure, or damages of not less than $500; or

(2) such amount of punitive damages as the court may allow; and

(3) the costs of the action together with reasonable attorney's fees as determined by the court.

(b) Any person who is negligent in failing to comply with any requirement imposed under this Title with respect to any customer is liable to that customer in an amount equal to the sum of:

(1) any actual damages sustained by the costumer as a result of the failure; and

(2) the costs of the action together with reasonable attorney's fees as determined by the court."

Section 4. Amendment. Amend Chapter 10 of Title 26 of the Palau National Code as follows:

"§ 1001. Scope of operation of this Chapter.

(a) This Chapter shall apply to banks, including the National Development Bank of Palau, securities brokers, and securities dealers (hereinafter referred to as "financial institutions"), their shareholders, administrators, employees, agents and affiliated entities, and applicants for bank credit.

(b) The National Development Bank of Palau shall be licensed and regulated by the Financial Institutions Commission, and be subject to the law as set forth in this Chapter, as well as the rules and regulations set forth by the Financial Institutions Commission.

(c) Persons other than financial institutions who are in violation of provisions of Section 1003 shall be subject to the penal provisions of subchapter VII."

...

§ 1021. Composition of the Governing Board.

(a) The Governing Board of the Commission shall be composed of six (6) members.

(b) The members of the Governing Board of the Commission shall be appointed by the President of the Republic of Palau. All appointments made by the President of the Republic shall be subject to the advice and consent of the Senate. All nominees for the Commission must hold a B.A./B.S. degree and have at least two (2) years of business management experience and have recognized civic leadership qualities. The President of the Republic of Palau shall not appoint a person that is related within the second degree of consanguinity to the President. These members may not be an executive officer or principal shareholder in a financial institution and may not be related within the second degree of consanguinity to a person who is an executive officer or principal shareholder in a financial institution. The Governing Board shall elect a Chairman and a Vice Chairman from amongst its members.

(c) ...

...

§ 1060. Secrecy.

(a) Present and past administrators, employees, and agents of a financial institution shall keep secret, and not to use for personal gain or gain by other than the financial institution that they serve or have served, or permit to be examined by others, any non-public information that they obtained in the course of their services to the financial institution.

(b) The information described in subsection (a) may be disclosed where required by law to the Commission, including the auditors appointed by it, and when the protection of the financial institution's own interest in legal proceedings requires disclosure subject to, and in the manner set forth, in Chapter 2 of this Title ."

Section 5.Transition.

(a) Upon the effective date of this Act, the National Development Bank of Palau must take measures to ensure compliance with

(1) the supervision of the Financial Institutions Commission;

(2) the application of Chapter 10 of Title 26 of the Palau National Code to the operations of the National Development Bank of Palau; and

(3) take measures to ensure that the membership of the Board of Directors complies with the laws and regulations relating to the board membership of Financial Institutions under Chapter 10 of Title 26 of the Palau National Code and regulations promulgated by the Financial Institutions Commission.

(b) The National Development Bank of Palau should establish compliance as directed in subsection (a) not later than one year after the effective date of this Act. All Board members who are not qualified to serve on the Board of Directors must resign. Failure by unqualified Board members to resign prior to one year after the effective date of this Act constitutes cause for removal.

(c) Upon the effective date of this Act, the National Development Bank of Palau should take measures

(1) to plan for and begin taking deposits for savings accounts not later than two years after the effective date of this Act;

(2) to issue bonds not later than two years of the effective date of this Act; and

(3) to plan for and begin taking demand deposits not later than three years after the effective date of this Act.

(d) The National Development Bank of Palau must promulgate regulations to carry out the purposes of this Act.

(e) On October 1 of the years 2015, 2016, and 2017, the National Development Bank of Palau must submit a report on the measures taken to carry out the directives of this Section and the purposes of this Act. This report must include an anticipated timeline for taking savings and demand deposits and issuing bonds. The report must be sent to the President of the Republic, the Chairmen of the Ways and Means Committees of the Senate and House of Delegates of the Olbiil Era Kelulau, and the Financial Institutions Commission.

Section 6. Effective date.

This Act shall take effect upon its approval by the President of the Republic of Palau, or upon its becoming law without such approval.

PASSED: November 5, 2014

Approved this __5th____ day of __December__, 2014

_________________/s/_________________
Tommy E. Remengesau, Jr.
President of the Republic of Palau