Banks and Offshore Banking in Bermuda

Bermuda has connections with the worldwide Principle banking regulatory authorities such as the Offshore Group of Banking Supervisors and the Basle Committee on Banking Supervision. Since 1980, the Offshore Group of Banking Supervisors allows offshore centers clearly define their common ground as well as the extent to which any information is exchanged between them and the supervisory authorities to ensure that the information is compatible to their general functions as the offshore centers. The other activity it carries out is developing a coordinated response that is not only constructive but also positive, towards the approaches of other types of bank supervisory authorities.

Bermuda Banking Services

Until 2003, Bermuda banking services were offered by three established Bermudian banks, especially due to the exclusion of the foreign banks. In the present, the banks have the necessary networks for international correspondence as well as a number of overseas branches. Some of the sophisticated financial services including custody and securities issuance have now seen the involvement of foreign banks, which avail such services easily over the internet, causing the reduction in reliance on the local banking and financial infrastructure.

Although the foreign-controlled firms freely offer wide variety of financial services, besides deposit taking, the Bermudian Government has set some requirements to be made in regards to local activities: the firms should have 60% local ownership unless they are given special permission. Currently on the stock exchange there are eight trading members, most of which are owned by locals and seven out of them can sponsor listing. Some of the foreign firms can offer services such as dealing and trading services as well as electronic brokerage.

Bermuda passed a new anti-money laundering legislation via the Proceeds of Crime Amendment Act 2000, from June 1st 2000. This law applies to all financial and banking institutions and it is consistent with the International Anti-money laundering standards. With this act in place, all manner of tax evasion is a criminal offence.

One thing to know is that Bermuda is not considered as an offshore banking site because international Banks, both offshore and in-shore that are registered as banks in other countries may not be allowed to register and not operate as banks in Bermuda for the public. In Bermuda, there are currently four banks, all local. These banks are registered according to Bermuda’s law and not the United Kingdom Law. 60% of these banks are owned by the locals and through an agreement with Bermuda Government, their head offices remain in Bermuda and the staff in Bermuda should have a majority of Bermudians and their control must be Bermudian. There are exceptions to this as seen in the first-named bank below.

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Deposits with Bermuda Banks

When making deposits with Bermuda banks it is important to note that:

Banking Regulations

Banking regulations in the offshore centers in the Offshore Group come with essential elements, which include conditions of membership that require effective supervision, provided through effective legislation. The other is the applied commitment to the principles of effective banking supervision as embodied in the Concordant of Basle Committee, its supplements and minimal standards requirement. The other element is the necessary administration in place to oversee the commitment. Jurisdictional members of the Offshore Banking Supervisors are committed to the implementation of the Capital Concord of the Basle Committee and they have not only set, but also achieved more rigorous risk asset ration requirements, beyond the 8% minimum as set by the Basle Committee.

The Offshore Group of Banking Supervisors does not have any enforcement powers over its members but, just like the Basle Committee, it is set up to promote an effective supervision of the banks as based on the peer group principle. Thereby, the standards are set by the conditions of the membership.

The Basle committee on Banking Supervision was established by central bank governors of the Group of Ten industrialized countries in 1974. Its main aim was to strengthen the collaboration among authorities of different nations in their supervision of international banking. It holds meeting 4 times a year at the Bank of International Settlements in Basle Switzerland, from where it gets its name. Membership consists of senior officials of the Central banks and supervisory agents of the Group of Ten countries and the Grand Duchy of Luxembourg.

The reports and the recommendations of the Basle Committee are not legally binding but via discussion of the supervisory issues, it reaches a consensus on the practices that are considered the best in banking. These practices are embodied in the Basle Concordant that was first drawn up in 1975 and then extended in 1983. The committee has extended its work considerably over the decades and is updated on the major developments in banking, more so the progressive internationalization of banking.

Established Banks in Bermuda

HSBC/ Bank of Bermuda

Previously known as the Bank of Bermuda Limited, it is 100% owned by HBSC since 2004. It is situated at 6 Front Street, Hamilton HM 11 but has branches in different locations, including overseas.

As not only Bermuda’s second oldest but also its largest bank, it was established in 1889 as a going concern. It was formed by the take over of the branch of Bermuda Merchant’s Bank of Halifax, Nova Scotia, that was three years old and had split from the original agency holder N.T Butterfield & Son Ltd in 1886. The new bank was called Bank of Bermuda Ltd and was formally incorporated in 1890 and has grown to be the largest bank in Bermuda. It was once locally owned but that is not the current case, with a staff made of 2,150 employees not only in Bermuda but also throughout the world. It owns its real estate in Bermuda, just like other two banks.

It is open from 9AM to 4.30PM except the Church Street Drive-In which is open until 6pm on Friday and the eastern and western branches that are open from 9am to 4pm.

Over 42% of the its overall revenue is generated from the banks division known as the Global Fund Services, with 111 members of staff and the biggest fund management portfolio in Bermuda.

Bank of N.T Butterfield &Son Limited

Located at 65 Front &Reid Streets Hamilton HM 12, this bank has branches in other locations such as London. It has more than 790 staff in Bermuda and 808 in other locations, with 317 members of staff in Caymans in late 2006. It is Bermuda’s second largest yet the oldest bank.

Nathanial T Butterfield originated the bank in 1815 but in 1858 it was established as N.T. Butterfield &Son, operating from 1860s to 1886, when the new Bank of Bermuda, which was incorporated in 1904, acquired it.

It has a number of subsidiaries including Bank of Butterfield Executor & Trustee Company Ltd, Palmar Ltd, Field Nominees Ltd, Butterfield Trust (Bermuda) Limited and a mortgage company.

Early 2001, it acquired the Matherson Bank in England, renaming it to Bank of N.T Butterfield & Son Ltd (UK),which provides retail banking as well as full international business services. In 2002, it sold its interests in Hong Kong and in 2003; the ban bought Thorand Bank & Trust Company of Nassau, Bahamas and renamed it to Bank of Butterfield (Bahamas) Ltd, and the Mutual Bank of the Caribbean Inc in Barbados. In 2004, it acquired Leopold Joseph, a City of London merchant bank and its Butterfield Fund services (Canada) Ltd of Halifax Nova Scotia offers variety of services such as fund accounting and administrative services as well as alternative investment vehicles in North America.

Bermuda Commercial Bank Ltd.

Situated in 43 Victoria Street, Hamilton HM 12, Bermuda Commercial Bank is the third bank in Bermuda. It was incorporated in 1969 as Bermuda Provident Bank Limited. The banks largest shareholder is First Curacao International Bank NV, which acquired it in 1993 from Barclay’s Bank. With a staff of about 63 employees it is for international business only. In 2006, First Curacao International Bank had hundreds of millions of dollars in assets frozen by European Authorities. The two banks are owned by Mr. John Deuss, a Bermuda-based Dutch National.

The Bermuda Government benefits from not only licensing and regulating Bermuda banks, via the Bermuda Monetary Authority. Bermuda does not have a central bank; instead the Bermuda Monetary Authority is the regulatory body. The relevant pieces of legislation on banks in Bermuda include The Banks & Deposits Companies Act 1999 and The Banking Appeal Tribunal Regulations 2001.

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