Stakeholder Letter - Consultation Paper - Amendments to the Third Schedule of the Banks and Deposit Companies Act 1999 (2022-05-18)

Summary

This is a stakeholder feedback letter from the Bermuda Monetary Authority (BMA) following its August 2020 Consultation Paper on amending the Third Schedule of the Banks and Deposit Companies Act 1999 (BDCA). It summarises stakeholder responses and confirms the Authority's final policy positions on expanding restricted banks' permitted customer base, adjusting minimum net asset requirements, and applying Basel III to restricted banks.

• Expanded customer base: The Third Schedule will be amended to allow restricted banks to serve overseas customers and to serve Bermuda residents and businesses unable to access any of the services described under Section 14(5)(a) of the BDCA, not just the narrower categories in the original proposal.
• AML/ATF and sanctions compliance: Restricted banks remain subject to Bermuda laws, including AML/ATF and sanctions requirements, applied under the Authority's risk based methodology.
• Minimum net assets reduced: Section 7 of the Second Schedule of the BDCA will be amended to reduce the minimum net asset requirement for restricted banks at the time of licensing from 10 million dollars to not less than 5 million dollars.
• Basel III confirmed: The Authority confirms its original position that restricted banks will be required to comply with Basel III requirements once those requirements come into effect.
• Forthcoming guidance: The Authority will issue further guidance on how restricted banks should determine that a Bermuda resident or business is unable to access banking services under Section 14(5)(a).

The letter states these amendments will be formally recommended to the Second and Third Schedules of the BDCA, with additional guidance to follow; it does not itself enact legislative changes.

Key obligations

• Restricted banks must continue to comply with Bermuda laws, including AML/ATF and sanctions requirements, when serving expanded customer categories
• Restricted banks will be required to maintain minimum net assets of not less than 5 million dollars at the time a licence is granted, once the Second Schedule amendment takes effect
• Restricted banks will be required to comply with Basel III requirements once such requirements come into effect
• Restricted banks must be able to demonstrate, per forthcoming BMA guidance, that a Bermuda resident or business customer is unable to access services from traditional banks before offering them services

Applies to

restricted banks, banks, deposit companies