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  • Writer's pictureThe San Juan Daily Star

Bills would strengthen oversight of international banking sector

Standard International Bank LLC is put under receivership


Financial Institutions Commissioner Natalia Zequeira Díaz

By The Star Staff


Gov. Pedro Pierluisi Urrutia and Financial Institutions Commissioner Natalia Zequeira Díaz announced two bills Tuesday that would strengthen oversight of the island’s multi-billion dollar international banking sector to ensure it remains solvent and compliant.


Out of the 74 international banks operating in Puerto Rico, three have been placed under receivership so far. On Tuesday, Zequeira Díaz, who heads the Office of the Financial Institutions Commissioner (OCIF by its Spanish initials), announced that a fourth bank, Standard International Bank LLC, an international financial institution based in Asia, was put under receivership for lack of liquidity. It has more than 8,000 depositors and $56 million in deposits, she said.


The bills would amend Act 52-1989, known as the “International Banking Center Regulatory Law” and Law 273-2012, known as the “International Financial Center Regulatory Law,” respectively, to modernize and strengthen both to make the sector more solid, more efficient, more resilient and better prepared to cope with market changes, the governor said.


The government wants to ensure international banks and financial entities operate in a solvent, solid, competitive and responsible manner in such a way that they contribute to the economic growth of Puerto Rico.


“The image of Puerto Rico is important to its economic development. We don’t want to be seen as a refuge for money laundering,” Pierluisi said. “And we want OCIF to have more tools to investigate and ensure compliance. And we want to make sure they are financially solid. We don’t want entities that are failing their depositors.”


The governor said the amendments are needed to demand greater compliance with the laws to combat money laundering and empower the OCIF to deny a permit or license when the result of the pertinent investigation allows the commissioner to conclude that the financial responsibility, experience, character and general aptitude of the proponent do not provide or allow him or her to determine that the proponent will operate the international financial entity in an honest, fair and efficient manner.


Zequeira Díaz consulted the FBI and the Federal Reserve to ascertain how the changes can be applied retroactively to banks already operating.


“If we don’t apply this law retroactively, then we won’t have a uniform sector,” she said.


She said the amendments will raise the capitalization level to $10 million from $250,000, will allow OCIF to investigate the economic capacity of owners or investors, and will require each bank’s board of directors to have one member that is independent from the rest. The amendments will also allow Zequeira Díaz to deny a license to an entity that is deemed insolvent.


The new requirements will also increase the number of employees at each bank from four to eight. Two of the workers must work in the bank’s compliance and anti-money laundering division.


The proposed amendments will also increase licensing renewal fees to avoid so-called shell banks, which are those that are not operating. The license renewal will go to $100,000 from the current $5,000. Zequeira Díaz said of the 74 international banks, about 14 are shell banks.


Meanwhile, the bail required to operate was increased to $2.5 million from $300,000. The money will be used to pay fines or pay the cost of putting it under a trust.

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