The Supreme Court has dismissed an attempt by the Pacific International Commercial Bank to overturn the revocation of its banking license.
The Court also ordered the PICB to stop calling itself a bank.
The National Reserve Bank revoked Pacific International’s license in July 2016 under the Financial Institutions Act 2004.
The PICB argued that the Reserve Bank failed to give 10 working days’ notice to PICB to submit reasons why the licence should not be revoked.
The Reserve Bank argued that the licence was revoked under Section 37 of the Act and that it was not required to give any notice to PICB of its intention to do so.
Lord Chief Justice Paulsen, who presided over the case, said because of the public interest in the case he wanted to provide a full summary of the facts.
“I consider it will provide assurance to the public that banking operations are conducted in the Kingdom on a sound financial basis and subject to the proper supervision of the NRBT,” he said.
PICB was issued with its banking licence on the basis that it had the resources and ability to carry out its duties. The license was also dependent on bank having effective accounting, internal controls, audit and risk management systems.
Mr Justice Paulsen said it was an offence to provide false or misleading information in connection with such an application. A license could be revoked if the information supplied was false or misleading.
The PICB’s business plan said it would not rely on local depositors to fund its banking activities; would be funded from its shareholders and foreign investors and would receive very substantial deposits in the first three years of operation.
The bank made healthy financial forecasts including substantial profits in the first three years of operation.
The judge said the business plan played a significant part in the NRBT’s consideration and ultimate approval of PICB’s application for its licence.
He noted that PICB did not commence its operations as a bank until late May 2014. The date set for compliance with pre-operation conditions was January 1, 2014 but they were not met.
“Following the granting of the licence and through to its revocation on July 26, 2016, the NRBT became increasingly concerned about PICB’s failure to comply with the requirements imposed upon PICB under the Act and in the NRBT’s prudential statements and requirements for the proper management of operation of licensed financial institutions,” the judge said.
The Reserve Bank became increasingly concerned with the PIBC as its debts grew to TP$4.5 million, it failed to follow directives and its failure to institute any effective management plan.
A draft audit by KPMG heightened the Reserve Bank’s concerns that PICB was conducting unsafe and unsound banking operations that were likely to jeopardise its obligations to its depositors or other creditors or to adversely affect the operation or stability of the financial system.
Lord Chief Justice Paulsen said Section 36 of the Act recognised that the Reserve Bank may face circumstances where it had to act swiftly to protect the interests of clients, investors and depositors.
It would therefore defeat the purpose of Section 36 to imply into it a notice requirement.
Pacific International’s license was revoked because it failed to honour its business plan; failed to have its accounts audited; failed to provide accurate and reliable reports to the NRBT and continued to incur losses.
“There is absolutely no prospect that PICB would have been able to comply with its obligations and thereby avoided revocation of its licence had it been given 10 days’ notice,” the judge said.
He ordered PICB to change its name to remove the word Bank.
