Statement of Principles - Banking and Deposit Companies Act 1999 (December 2012)

Summary

This Statement of Principles explains how the Bermuda Monetary Authority interprets and applies the minimum licensing criteria in the Second Schedule to the Banks and Deposit Companies Act 1999, and how it exercises its powers to grant, restrict or revoke licences and to obtain information from licensed institutions. It replaces the December 2010 version and should be read alongside the Authority's Statement of Principles on the Use of Enforcement Powers (October 2012).

• Fit and proper persons: Directors, controllers and senior executives must be fit and proper, judged on competence, soundness of judgment, diligence and probity, including criminal record, regulatory censure and past business conduct.
• Shareholder controllers: Higher standards apply the greater a controller's shareholding or influence; the Authority also assesses risk of financial or reputational contagion to the institution.
• Corporate governance: Institutions must implement corporate governance policies and processes appropriate to their nature, size, complexity and risk, including the 'four eyes' requirement that at least two individuals effectively direct the business.
• Prudent conduct, capital and liquidity: Institutions must conduct business prudently, maintain adequate capital adequacy, adequate liquidity, adequate provisioning for asset depreciation, and adequate accounting and record-keeping systems.
• Consolidated supervision: Group structures must permit effective consolidated supervision by the Authority.
• Continuing compliance and notification: Licensed institutions must meet minimum licensing criteria at all times and must alert the Authority immediately of any breach, potential breach, or proposed material change in business, and of material information affecting fitness of vetted persons or suitability of major shareholders.
• Information and reports: The Authority may require production of documents or information under section 40, commission reports from auditors or independent experts, and enter business premises under section 41 in specified circumstances.
• Licensing and revocation discretion: Part 3 and Part 4 set out the considerations relevant to granting a licence and to restricting or revoking one, including emergency intervention where depositor interests are at risk.

The Principles are of general application to all institutions licensed under the Act and may be revised from time to time; any material change will be published or a revised version issued under section 9(2) of the Act.

Key obligations

• Institutions must meet the minimum licensing criteria in the Second Schedule at all times.
• Institutions must notify the Authority immediately upon becoming aware of a breach or potential breach of the minimum licensing criteria.
• Institutions must alert the Authority to any proposed material change in their business.
• Institutions must notify the Authority immediately of material information affecting the fitness of any person subject to vetting.
• Institutions must notify the Authority immediately if they become aware of material concerns regarding the suitability of a major shareholder controller.
• Institutions must have at least two individuals effectively directing the business (the 'four eyes' requirement).
• Institutions must implement corporate governance policies and processes appropriate to their nature, size, complexity and risk profile.
• Institutions must maintain adequate capital, adequate liquidity, adequate provisioning for depreciation or diminution in asset values, and adequate accounting and record-keeping systems.
• Institutions must produce documents or information to the Authority when required by notice under section 40 of the Act.
• Institutions must submit financial and other information about their business at intervals determined by the Authority.

Applies to

banks, deposit companies, directors, controllers and senior executives of licensed institutions, shareholder controllers

Related documents

• This document is made under Banks and Deposit Companies Act 1999