QuestionsQuestions (Act No. 556)
Act No. 556 amends Act No. 52 to provide for the closing (disallowing further banking operations) of banks in case of insolvency or when their continuance may involve probable loss to depositors, and for the liquidation of their assets under court supervision.
Act No. 556 amends Act No. 52 by changing Section 8 to Section 13 and by inserting additional sections after Section 7, specifically new Sections 8 to 12.
If the Treasurer’s examination (under Section 3) discloses that the bank is insolvent, or that its continuance in business in receiving deposits will involve probable loss to depositors.
If the Civil Governor finds the Treasurer’s statements to be true, he must forthwith forbid the bank to do banking business in the Islands and direct the Treasurer to take charge of the bank’s assets and proceed according to law.
Through the Attorney-General, the Treasurer files a petition in the Court of First Instance in the territorial jurisdiction where the bank is situated, seeking the court’s assistance and supervision for liquidation.
It must recite the proceedings taken and pray for the court’s assistance and supervision in the liquidation of the bank’s affairs.
Under the supervision of the court and with all convenient speed, reduce the bank’s assets to money (liquidate them).
First, all public taxes due; second, debts due to all other persons in the order of priority (if any) fixed by law.
The Treasurer must sell the mortgaged property and apply proceeds: (1) to taxes due, (2) to costs of sale (including reasonable commission to the Treasurer and insurance/other expenses), (3) to satisfy the mortgage debt of the owner of the mortgage, and (4) to pay other creditors in the order of priority (if any).
The Treasurer has the same remedies to effect sale of security, payment of the debt, and return of the balance as the bank would have had, and in those proceedings the Treasurer represents and exercises the rights of the bank and general creditors.
Yes, administration may be carried on by a deputy designated by the Treasurer. The costs, fees, and commissions earned are deposited as a special fund with the Insular Treasurer for paying necessary salaries and additional expenses; any balance after expenses is turned into the Insular Treasury.
Except as provided, liquidation and payment of creditors should be as nearly similar as possible to the liquidation of a national bank by a receiver under U.S. national banking laws.
All laws or parts of laws inconsistent with Act No. 556 are repealed to the extent of such inconsistency.
The Act takes effect on its passage.
It indicates the public good required speedy enactment; thus passage was expedited in accordance with the Commission’s prescribed order of procedure in law enactment.
Because the law authorizes closure not only when the bank is already insolvent, but also when continued operations may foreseeably harm depositors—allowing preventive liquidation to protect depositors.