In what the Government has said will be the next new pillar of Bermuda’s economy, Premier and Minister of Finance, David Burt, told MPs on Friday, there’s a ‘new class of bank’ on Bermuda’s horizon.
In a Ministerial Statement, the Premier said the new legislation paves the way for new services that cater to Bermuda-based fintech companies.
While noting that the new fintech sector had faced “understandable resistance” from banks, he said: “It does not fit the mould of what we have come to know as Bermuda’s traditional model.”
As well as servicing digital business, he said the new banking institutions will also provide local residents with “more choice and more competition”.
He also noted that the Ministry of Finance had started consultation on banking reform, in keeping with the Government’s Budget Statement.
Amendments to the Banks and Deposit Companies Act 1999 creates a new restricted banking licence, that sets out the types of services they could provide, with provisions for the Minister, after consultation with the Bermuda Monetary Authority, to amend their activities to “encompass new innovative business”.
“Bermuda must be nimble, or we will be left behind,” said the Premier, who met with representatives of the Bermuda Banking Association on Thursday.
“The fact is that local banks do not currently have the risk appetite to accept persons in the digital asset space,” he said.
The island’s traditional banks “need not worry because existing banks are not doing this type of business”, he added.
The licence will allow the new banks to provide full services to their restricted clients, under the new legislative amendments due to be tabled in the House “shortly”.
In his opening remarks, Premier Burt noted that the new Progressive Labour Party government “is on the cusp of marking one full year in office”.
“These eleven months have been a non-stop effort to deliver on what we promised the people of Bermuda and what they in turn gave a resounding mandate of support,” he added.
“While there are some easy, short-term fixes for the issues in our community, our responsibility as the Government is to take the long view and lay a foundation on which we can build the prosperity of future generations.
“This includes building the necessary capacity for Bermudians to properly reap the benefits of growth in this economy.”
In the area of FinTech and distributed ledger technology, he said: “The world’s leaders in this area have been attracted to Bermuda directly as a result of the foundation we have laid legislatively and in the regulatory space.”
Prior to introducing the legislation to regulate digital asset businesses, he noted that the Minister of National Security and a technical team,”consulted with the Bermuda Bankers’ Association (BBA), outlining the Government’s plans to position Bermuda as a premier jurisdiction for distributed ledger technology”.
“The response received from the BBA was commensurate with their ongoing need to manage their risks to continue to operate in accordance with their existing correspondent banking relationships”.
“Their reticence, no matter how well-founded, cannot be allowed to frustrate the delivery on our promise of economic growth and success for Bermudians,” said Premier Burt.
“To ensure that the Government is able to effectively execute on its Finech initiatives, as well as encourage responsible FinTech innovation that provides fair access to financial services and fair treatment of consumers, the Banks and Deposit Companies Act 1999 will be amended to allow for a new class of bank that will provide banking services to Bermuda based FinTech companies.”
He also expressed gratitude to the Bermuda Monetary Authority who have advised on the following proposals:
- including a new class of license that may be granted by the BMA called a Restricted Banking License
- adding a new Schedule to the Act that outlines the types of business undertakings that Restricted Banks can service, together with a provision that permits the Minister of Finance, after consultation with the BMA, to amend the business activities from time to time to encompass new innovative businesses
“These amendments will allow for local and international participants to fill a critical need in servicing FinTech companies. However, it is not only FinTech companies that need more banking options, Mr. & Mrs. Bermuda should have more choice and more competition,” said Mr Burt.
“Reform of our domestic banking sector is necessary to reduce costs for Bermudians, while providing more opportunities for Bermudians to work and more access to capital enabling more Bermudians to become owners and not just employees.
“Our traditional banks, those household names, have played their part in this community over many years.
“It is a fact of business and a fact of life that survival and growth can only be achieved through an ability to evolve and innovate.
“Legacy industries the world over have lost that ability and the future belongs to those who can quickly lay a foundation for growth, respond to emerging trends and preserve a reputation for sound management in the process. For countries it is no different, Bermuda must be nimble or we will be left behind,” he added
“The people of Bermuda demanded change in 2017 and spoke loudly of the need to transcend the transactional and deliver a transformational agenda.
“The proposals outlined today [Friday, June 29, 2018], are a critical first step towards broadening banking services and is another step forward in the commitment we made to building a better and fairer Bermuda.”
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