Consultation Paper - Amendments to the Third Schedule of the Banks and Deposit Companies Act 1999 (2020-08-21)

Summary

This is a BMA consultation paper proposing amendments to the Third Schedule of the Banks and Deposit Companies Act 1999 to expand the permitted customer base for restricted banks. It responds to the finding that the existing restricted bank framework, created in 2018 to let restricted banks serve digital asset businesses, has been too narrow to be commercially viable. A draft Order (Banks and Deposit Companies (Restricted Banks) Order 2020) is annexed showing the proposed legislative text.

• Expanded customer base: Restricted banks would be permitted to serve overseas clients not resident or incorporated in Bermuda, casinos licensed under the Casino Gaming Act 2014, and Bermuda persons or businesses unable to obtain basic banking services from institutions licensed under section 14(5)(a).
• Evidence requirement: Before serving a Bermuda person or entity under the new category, a restricted bank must obtain written proof/evidence, in a form prescribed by the Authority, that the customer is unable to secure services from a section 14(5)(a) licensed institution.
• Minimum net asset requirement: The Authority is not proposing to change the current $10 million minimum net asset requirement under section 7 of the Second Schedule at this time, but is seeking stakeholder views on whether it should be lowered or risk-based for restricted banks.
• Basel III applicability: The Authority is asking whether restricted banks should continue to be required to comply with Basel III requirements.
• No competition with traditional banks: The expansion is not intended to let restricted banks compete with traditional banks for customers who are ordinarily resident in Bermuda and already able to access banking services.

This is a consultation only; no rule changes take effect from this document. The Authority invites written comments on the proposals and specific questions posed, with further consultation to follow before any legislative amendment is finalised.

Key obligations

• Restricted banks must obtain written proof/evidence, in a form and containing information prescribed by the Authority, that a Bermuda person or entity is unable to secure services from a section 14(5)(a) licensed institution before offering that person banking services under the proposed new Third Schedule category.
• Stakeholders wishing to respond must send comments to policy@bma.bm no later than 18 September 2020.

Applies to

restricted banks, banks and deposit companies licensed under the Banks and Deposit Companies Act 1999, digital asset businesses (DABs), casinos licensed under the Casino Gaming Act 2014

Deadlines

• 18 September 2020: Deadline for stakeholders to submit comments on the consultation paper to policy@bma.bm

Related documents

• This document amends Banks and Deposit Companies Act 1999