Bermuda: BMA Chief Announces Business Plan For 2010

by Phillip Morton, Investors Offshore.com

21 January 2010

The newly-appointed Chief Executive Officer of the Bermuda Monetary Authority (BMA), Jeremy Cox, has outlined the BMA's regulatory plans for 2010, which will include preparing for regulatory equivalence with regards the insurance sector; possible regime changes in the banking industry following the global financial crisis; and introducing regulation to further protect consumers.

Announcing the plan, Cox said: “The [BMA] is committed to improving transparency around the work we do. We are therefore pleased to be able to share our work plan for 2010 … It outlines the critical initiatives the [BMA] will undertake during the next 12 months to develop Bermuda’s regulatory framework in order to achieve key strategic goals, such as regulatory equivalence.”

Preparing for regulatory equivalence

While the focus of the BMA's work in this regard is on obtaining broad equivalence for its framework for commercial insurers under Europe’s Solvency II Directive, it is also closely monitoring developments in other markets, particularly within the US.

Craig Swan, Director of Policy, Research and Risk Assessment at the BMA, who is leading the BMA’s Solvency II-related initiatives said: “This year we plan to focus on particular framework developments under Pillar 2 of the Directive, covering qualitative review of risk management both by companies and supervisors. We will be conducting extensive consultation with (re)insurers about the related enhancements to Bermuda’s regulatory framework.”

Cox added: “We are committed to working towards Solvency II equivalence. However, it is important to note that we do not intend to simply duplicate Solvency II provisions; we will apply framework changes that are consistent with the Directive in a manner that is appropriate for the nature of the Bermuda market.”

The BMA also intends to set Own Risk Solvency Assessment requirements, under which Bermuda’s large commercial insurers will provide their own assessment of their capital needs, taking into account the risks to which they are exposed, and how they mitigate such risks. The BMA is also establishing eligible capital rules, and conducting further consultation on proposed public disclosure standards for commercial insurers; additionally, it will introduce an Insurance Code of Conduct during 2010.

New regulation deriving from the financial crisis

Commenting on regime changes following the global financial crisis, Cox said that the BMA intends to continue monitoring developments in financial services regulatory standards during 2010, and also to contribute to the ongoing debates on global regulatory reform via its participation in the work of international standard-setting bodies.

Regarding the Bermuda market’s preparedness for these upcoming changes in global regulation, Cox stated: “With respect to our banking sector, Bermuda’s banks are relatively well prepared for changes we expect from the Basel Committee of Banking Supervisors, which is working to raise global standards particularly as they relate to capital adequacy. Since the banks are already required to maintain capital levels above the international standard, we believe they are in a strong starting point to meet any new regulations coming out of Basel.”

Consumer Protection

Asserting the authority's final main goal for 2010, Cox said: “The [BMA] intends this year to place further emphasis on the issue of consumer protection with specific supervisory regime enhancements, as well as outreach activities. Activities will be focused on the local banking and investment markets, aligned with the development and introduction of key regulatory and/or supervisory projects in 2010 that relate to consumer protection. This move follows challenges experienced last year in the local market that had direct impact on a number of retail consumers of financial services.”

Graeme Dargie, Director, Banking, Trust and Investment at the BMA, said: “The goal with these activities will be to ensure that the enhancements will provide added protection to retail consumers in the Bermuda market, while also being consistent with applicable global standards and best practices. We will also seek to help consumers of financial services make informed decisions.”

Key initiatives in the 2010 Business Plan under consumer protection are the establishment of a Deposit Insurance Scheme (DIS) for the banking sector, and a revised Code of Conduct under the Investment Business Act 2003 for the investment sector. The BMA will also be enhancing its intervention powers with respect to banks. It intends to foster financial literacy among local consumers of financial services and to develop a dedicated education and awareness initiative in that regard.

Concluding, Cox added: “The DIS will complement our existing supervisory regime for banks and provide an added layer of protection for local bank depositors in the context of volatile global financial markets. Our intent with the revised Code of Conduct for the investment sector is to enhance disclosure practices and clarity of information provided to clients by investment providers, which will assist consumers with making informed decisions when purchasing their products. Our proposals regarding bank intervention powers is in line with global trends in banking supervision and will allow the [BMA] to intervene quickly in cases of troubled banks, for the ultimate protection of customers and to support market stability.”

“This year’s Business Plan builds upon the considerable work we have already completed on a number of significant enhancements to Bermuda’s regulatory framework.”

“We are maintaining the momentum of regulatory change and extensive market consultation established in previous years, and we have again set an aggressive agenda that will drive continued enhancements to the standards and quality of Bermuda’s risk-based framework.”

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