Financial Crime World

Title: Bermuda’s Banking Regulations: A Comprehensive Overview

Bermuda’s regulatory framework for banking and finance is managed by The Bermuda Monetary Authority (BMA), which oversees various rules and guidelines as per the Banks and Deposit Companies Act 1999 (BDCA). This article delves into national banking authorities, licensing requirements, cross-border activities, organizational structures, and compliance issues in this sector.

National Authorities: The Bermuda Monetary Authority (BMA)

BMA, as the primary regulator for institutions engaged in deposit-taking business within Bermuda, ensures adherence to the BDCA.

Banking Licenses

An entity carrying on deposit-taking business in or from Bermuda, with a Bermudian incorporation, warrants the need for a banking licence.

Licence Classes

Under Bermuda’s regulatory regime, three classes of licences are issued:

  • Banking licence: Entitles an institution to accept and hold deposits, make loans and advances, and underwrite or arrange contracts of insurance.
  • Deposit company licence: Allows deposit-taking only, and must be affiliated with a licensed bank.
  • Restricted banking licence: Permits specialised transactions, like factoring, discounting bills of exchange, or managing commercial loans.

Cross-border Activity

Although mere cross-border deposit-taking business does not require a licence under Bermuda’s regulatory framework, correspondent banking relationships must address clearing and settling local payments issues.

Cryptocurrencies: The Digital Asset Business Act 2018 (DABA)

DABA regulates the issuance and custody of cryptocurrencies by Bermuda registered companies. Requirements include maintaining a surety bond or trust account and indemnity insurance.

Application and Average Timing

The application process entails an initial information-gathering phase, a business plan, and BMA feedback. Subsequently, the formal application is submitted. The BMA targets a three-month assessment period, but the timing may vary depending on the application’s completeness.

Bermuda’s evolving regulatory regime facilitates innovative solutions and caters to various financial sectors. Significant changes include:

  • Innovation Hub and General Regulatory Sandbox: Encourage the testing of new technologies.
  • Fintech regulatory regime: Focuses on information security, particularly cyber risk management.

Despite these advancements, challenges such as digitalization, data processing, and the ongoing COVID-19 pandemic pose potential threats to the financial sector’s success in Bermuda.