FSM Banking Board Update
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The deposit base in the FSM banking system ($452.1 million as of March 31,
2021) has grown significantly reflecting a sound financial system. However,
lending performance to the commercial private sector has been weak and
represents only 18 percent of the deposit base.
surplus liquidity, now over $367.0 million, is invested offshore in
The low rate of domestic lending reflects the
perceived high risk of lending in the FSM and "lack of bankable projects".
Overall, the inability of businesses to prepare credible business plans and
financial statements, lack of collateral, the limited ability to use the
land as security, and inadequate provisions to secure transaction have
inhibited development of the financial sector. With limited opportunities,
commercial banks have preferred to invest their assets offshore in less
risky and more secure markets.
In addition to
safety, soundness, health, among others, the fitness and propriety of
applicant, persons associated with applicant, regulated bank, and person who
occupies a position of influence is important and a prerequisite. Influence
person include, for example, shareholders who exercise a certain level of
voting power, chief executives, managing directors, directors, managers,
The FSM Banking Board has to be satisfied that the applicant
is fit and proper before the applicant is allowed to carry on banking
business in the FSM. Particularly for banking business, the fit and proper,
sound, safe and stability standards are a high one for protecting public
interest. Therefore, if the FSM Banking Board or Commission is left with a
substantial doubt as to the fitness and propriety, soundness, safety,
healthy and stability, the correct course would be for the applicant not to
Our Track Record
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