As part of its continued monitoring of market conditions in Bermuda in relation to the global financial crisis and its implementation of the Basel 2 capital accord, the Bermuda Monetary Authority (BMA) has been reviewing capital levels across Bermuda’s banking sector.
The BMA's findings show that Bermuda’s banks are exceeding the authority’s current capital requirements. However, the authority has announced that as a precautionary measure it is requiring banks to hold an additional capital buffer to withstand a severe economic downturn.
Based on stress test results, the authority and each bank have agreed on the level of capital that is required to absorb the losses simulated by the severe economic downturn; and still maintain high quality Tier 1 capital of at least 6% of risk-weighted assets, based on Basel 2 capital rules.
BMA CEO Matthew Elderfield commented: “The measures we have announced today mean that the Bermuda banking system will be ready to withstand a severe economic downturn and still be in a strong financial position. This is a precautionary measure in line with the prudent and conservative approach to managing the financial crisis which has been taken by the Authority, government and banking sector.”
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