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Banking Board report shows banks have excess lending capacity

POHNPEI, Palikir (FSM Information Service): June 2000 - The balance sheet of the FSM commercial banking system increased $1.6 million, or 1.1 percent, in the first quarter of calendar year 2000, due to an increase in foreign assets holdings funded by an increase in deposits, according to the FSM Banking Board.

In a report sent to FSM President Leo A. Falcam, the Banking Board reported that the system grew by $10.7 million, an annual expansion of 8.1 percent.

Total assets of the system as of March 31, 2000, were $142.9 million versus $141.3 million at December 31, 1999.

Total deposits of the system increased for the third straight quarter, climbing $2.4 million, or 1.9 percent, to $127.9 million.

Demand deposits and CDs both rose this period; demand increasing $379, 000, or 1.5 percent, to $26.2 million, and CDs rising $5.4 million, or 9.8 percent, $61.2 million.

Savings, however, dipped $3.4 million, or a minus 7.8 percent, to $40.4 million during the quarter. Yet, annually, deposits were up $10.2 million, or 8.7 percent, as all main categories of deposits rose between 7 to 13 percent, according to the report.

As a result of the divergent movements in lending and deposits this quarter, the loan-to-deposit ration dropped from 44 percent for the December quarter to 42 percent this period.

However, the ratio is up slightly from 41 percent for the same period a year ago, according to the report.

The system remains highly liquid with a total of liquid assets, which consist of cash and due from local banks, and due from banks abroad, of $84.8 million, according to the report.

This is an increase of $1.8 million, or 2.1 percent, from last quarter's total of $83.0 percent.

Liquid assets accounted for 59.3 percent of total assets of the banking system and 66.3 percent of total deposit liabilities.

At this level of liquidity, the banks have excess lending capacity, according to the report.

The Banking Board consists of Lrry Raigetal, chairman; Rose N. Nakanaga and Tony Otto, members; and Wilson F. Waguk, banking commissioner.