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OCFI Prepared For New Government Transition

The merging of insurance and financial commissions among the issues under consideration


December 21, 2000
Copyright © 2000 CARIBBEAN BUSINESS. All Rights Reserved.

The Office of the Commissioner of Financial Institutions (OCFI), one of the government agencies most respected by Puerto Rico’s financial industry, is preparing itself for the governmental transition and also for the future.

As the year draws closer to an end, the OCFI is grappling with several issues faced by the government agency in the wake of financial industry deregulation.

"We are in the process of preparing a draft of a Financial Code to bring the entire statuary framework under one coherent document," Commissioner of Financial Institutions, Joseph O’Neill told CARIBBEAN BUSINESS.

"This would have the same functionally as the Insurance Code in simplifying and streamlining the current array of laws," O’Neill added.

"In light of new deregulation, it would be a good time to evaluate merging this office with the Office of the Insurance Commissioner," O’Neill said.

"In the new deregulated environment, financial holding companies will most certainly be the leaders in providing all financial services," said O’Neill. "Public policy for the services provided by these institutions would ideally be centralized in one financial regulator at the state level."

Meanwhile, the commissioner reflected on his public service as a government official. "Also, we are proud of the revolution in this Office and in the financial system in this past decade," O’Neill added.

"Puerto Rico’s financial system basically doubled in eight years from total assets of $55.1 billion in 1992 to total assets exceeding $110 billion in 1999. Likewise, the profitability in the corresponding period has more than doubled, as total earnings of financial entities approximate the $1 billion mark," O’Neill said.

For O’Neill, the catalyst for this robust growth was the deregulation policies of the past years. A modern legal and regulatory framework was formed by totally revamping almost every law and every regulation that governed the financial industry

"The Financial Modernization Act of 1999 (usually known as the Gramm-Leach-Bliley Act)–probably the 20th century’s most significant financial legislation–will profoundly effect our financial system," O’Neill indicated.

O’Neill was referring to the recent amended Banking Act that includes, as a banking power, the ability to sell insurance products. Additionally, the Puerto Rico Insurance Code was modified to allow affiliations between the banking and insurance industries and to provide the consumer safeguards in accordance with the Gramm-Leach-Bliley Act.

O’Neill pointed out, "the Uniform Securities Act of Puerto Rico was also modified to ensure that any entity in the securities business operates under the same set of rules."

In anticipation of those changes, the OCFI implanted a broad restructuring. Previously the office had operated with three areas (depositary, non-depositary and securities), each one responsible for each type of financial institutions. "Now the OCFI has been reorganized into two main areas: exams and regulation," said O’Neill. "Now regulators oversee the different functions, irrespective of the legal structure of the financial institution."

With the implementation of Law 319 of October 23, 1999, another important change gave the OCFI powers of a public order government agency.

"The law facilitates background checks on those interested in opening international banks or casinos on the island–among other ventures–by expediting the exchange of information among agencies. It would help to crack down on illegal activities such as money laundering," O’Neill explained.

To become a more efficient and productive regulatory agency, the OCFI recently signed a Memorandum of Understanding with Federal Bureau of Investigation and with the Housing and Urban Development. "Furthermore, the office has expanded its agreement with the Justice Department to assure prompt prosecution of violators of local statutes. Now the Justice Department has three full-time prosecutors that exclusively for referrals originated by the Commissioner," said O’Neill.

This Caribbean Business article appears courtesy of Casiano Communications.
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