State Bank Set Ups is Costly, Bureaucratic

State Rep. Gene Ward
State Rep. Gene Ward, emcee
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State Rep. Gene Ward
State Rep. Gene Ward, emcee

The Hawaii Bankers Association reports setting up a state-owned bank, like the one suggested in HB 2103, is complex and potentially costly. The issue deserves thorough analysis. There needs to be proper vetting in order avoid burdening the state with more costly bureaucracy and a huge infrastructure startup cost.

Presently, there is no detailed business plan that addresses any of the implementation issues (startup time and diversion of funds; unknown funding source; state liability; policy conflict of social good versus profits; tying up of public funds, etc).


Per Hawaii Credit Union League, funds would be deposited into a state bank that would be insured by the state itself. Without the benefit of being insured by a separate entity, the state would be in an extremely precarious situation in the event of any financial difficulty within the bank or in the state.

DCCA’s DFI offered “comments only”, but those comments mostly warn of negative consequences. They stress that the creation of a task force is the more prudent approach.

• The bank’s board of directors is appointed by, and serves at the pleasure of, the Governor. Unintended consequence: when a new governor is elected, the entire board will have to be reappointed.

• Bank advisory board — as a policymaking group, its members should be aware of the federal management interlock act re: conflicts of interest. The act could limit their advisory board rulemaking ability. Rulemaking generally is by government agencies, versus policies generally made by private businesses.

• DFI doesn’t have enough staff to do the bank’s site exam. Usually site exams for a bank this size would take about 3 weeks.

• DFI would need new team of 10 additional staff to do the required quarterly reports. Reports takes 3 to 4 weeks to complete. Exam results are subject to federal confidentiality rules and only shared with specific board members of bank, not the general staff of any institution.

• The bill’s 45-day timeline for application review is not sufficient.

Rep. Gene Ward is a Republican who represents Hawaii Kai.

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