Bermuda Commercial Bank Now Exempt From 60/40 Rule

by Amanda Banks, Tax-news.com, London

04 May 2001

First it was the Bank of Bermuda, then the Bank of NT Butterfield & Son and now it is the turn of the Bermuda Commercial Bank (BCB) to be granted a licence by the Minister of Finance, Eugene Cox, which allows the bank to break the 60/40 Bermudian ownership rule, effective from April 27.

The 60/40 ownership rule means that any company which is listed as a local company must be owned by a 60 per cent majority of Bermudians or Bermudian companies - the other 40 per cent can be owned by people or institutions from outside Bermuda.

But this can severely affect the banks' shares. In a press statement, Mr John Deuss, Chairman and Chief Executive Officer of the Bank, explained: 'BCB's shares, currently trading at BD$7.00 per share or at 66% of their book value of BD$10.62 per share, are undervalued. Based on the experience of the other two banks, BCB's share price may benefit from the lifting of the ownership restrictions.'

The 60/40 rule has effectively rendered the BCB shares unavailable for non-Bermudian investors. This goes some way toward explaining why the Bank's shares are undervalued when compared to the share prices of the two other Bermudian banks, which trade at greater than 200 per cent of the book value and are already reaping the rewards of the recently obtained waivers from the 60/40 ownership restrictions.

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