By Pesi Fonua

The construction of an multi-storey building on the Nuku‘alofa waterfront by a new entity the “Oriental Investment Development Bank” has been quietly proceeding following a ground breaking ceremony on April 4.

But according to regulators, the bank does not hold a licence to operate a bank in Tonga.

The ground breaking [2] at the bank’s construction site on Hala Vuna, Ma‘ufanga, was officiated by the Ma‘ufanga estate owner, Lord Fakafanua (the Parliamentary Speaker), with the Chinese Ambassador to Tonga, HE Wang Baodong, and a Mr Zang, reported to be one of the investors in the “Oriental Investment Development Bank” building project.

It was significant that on April 3, only a day before the ground breaking, Tonga’s National Reserve Bank released a Press Statement stating they: “would like to remind the general public that only licensed banks shall use ‘bank’ as part of its name and any representations made by an entity that can appear to be advertising itself as a bank without a valid banking license is prohibited under the Financial Institutions Act.”

Yesterday, 15 July, a spokeswoman for the National Reserve Bank of Tonga, confirmed that the only licensed Banks in Tonga are:

• Australia New Zealand Banking Group (ANZ Tonga)
• Bank of the South Pacific Ltd (BSP)
• MBF Bank Ltd.
• The Tonga Development Bank (TDB).

A spokesperson for the Ministry of Infrastructure that is responsible for approving the construction of commercial buildings in the Nuku’alofa Central Business District, when asked by Matangi Tonga, was not very clear on whether or not they had approved for the construction to go ahead, but he was certain that it was an eight storey building, and that it is an office building for a bank.

Meanwhile, a five-storey building is depicted in the architect’s impression on the billboard at the construction site.

Four licensed banks

The banking business in Tonga has been through a few changes during the past few years.

In July 2013 the Pacific International Commercial Bank, a Chinese-Tongan venture began its banking operation in Tonga. But on 26 July 2016, the National Reserve Bank of Tonga revoked its Banking Business License.

In 2015 the Bank South Pacific of Papua New Guinea purchased [3] the Westpac Bank of Tonga, the oldest bank in Tonga, which had been operating since 1974 [4]. (Government legislated in 2008 [5] to sell its shares in Westpac Bank of Tonga). Bank South Pacific Chairman Sir Kostas Constantinou, announced on 14 July 2015 the completion of the purchase of Westpac Banking Corporation’s operations in Tonga, Samoa and Cook Islands for AUD$91 million.

Tonga today has four licensed banks. They all operate as commercial banks, excepting for the Tonga Development Bank that is also operating as a development bank. The TDB established in 1977 is offering lower interest rates to borrowers for specific projects that are funded by aid donors.

The change over for the Tonga Development Bank to also operate as a commercial bank, according the CEO TDB Leta Kami, began about three years ago, and they are still working to fulfill their commercial banking [6] operation.

In June this year the Minister of Finance, Hon. Pohiva Tu‘i‘onetoa signed an agreement with the Public Service Retirement Fund Board (PSRFB) for its purchase of a 15% shareholding [7] in the TDB for $7.5million pa'anga. The three shareholders of the TDB are now the Tonga Government 70%, with 15% each for the Public Service Retirement Fund Board and the National Retirement Benefit Fund Board.

Parliament passed the Tonga Development Bank Bill on 13 March 2019, and it remained one of a number of Bills that were still waiting for the consent of His Majesty in Privy Council.