OBA: New Bank Class Plans Raise “Red Flags”

July 2, 2018 | 45 Comments

[Updated] “The Premier’s decision to create a new class of bank in Bermuda raise a series of red flags that should make Mr and Mrs Bermuda extremely concerned,” Opposition Leader Jeanne Atherden said today [July 2], adding that “if not done extremely carefully and transparently it could pose significant reputational damage to Bermuda.”

Bill To Allow For New Class Of Bank For Bermuda-Based FinTech Companies

Her comments follow after Premier David Burt announced he would be bringing amendments to the Banks and Deposit Companies Act 1999 to allow for a new class of bank providing banking services to Bermuda-based FinTech companies.

Speaking in the House of Assembly on Friday, the Premier said, “The‘ICO Bill’ and the Digital Asset Business Act, both passed in this Honourable House have set the stage for the increased incorporations and growing commitment to doing business in Bermuda by the most innovative companies from around the globe.

“The business conducted by these companies is not traditional,” the Premier said. “In the wake of the global financial crisis and the ever-broadening risk mitigation strategies, banks are increasingly risk-averse.

“While that is understandable, as given their risk tolerances, to date local banks have been unwilling to offer services to newly incorporated FinTech and distributed ledger technology companies.

“The simple fact of the matter is that the FinTech industry’s success globally depends on the ability of the businesses operating in this space to enjoy necessary banking services. In other jurisdictions, banking has been the greatest challenge and for us in Bermuda, it is equally so and must be resolved.

“Bermudians need options in banking; the FinTech industry needs an innovative, robust banking solution. Those needs are not mutually exclusive and this Government is prepared to take the steps necessary to achieve both goals.

“To ensure that the Government is able to effectively execute on its FinTech 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,” the Premier said.

Opposition Leader’s Comments

“The Premier’s decision to create a new class of bank in Bermuda raise a series of red flags that should make Mr and Mrs Bermuda extremely concerned,” Ms Atherden said.

Ms Atherden continued, “This raises so many concerns and so many questions and if not done extremely carefully and transparently it could pose significant reputational damage to Bermuda.

“Deregulating the Banking Act in order to make the industry more competitive might be a good thing for consumers. To do so just in order to bank proceeds of FinTech and distributed ledger technology companies begs the question of what type of banking institution fits that bill currently?”

Ms Atherden cited a letter the Bank of England recently sent to banks and insurance companies about crypto-assets.

She said that the letter, from Sam Woods a Deputy Governor, said: “Crypto-assets also raise concerns related to misconduct and market integrity – many appear vulnerable to fraud and manipulation, as well as money-laundering and terrorist financing risks” and noted the letter also said that “entering into activity related to crypto-assets may also give rise to reputational risks.”

The Opposition Leader, who is a director at the Bermuda Commercial Bank, said the Premier had met with the Bermuda Bankers’ Association [BBA] and said: “The Premier’s own statement acknowledged their reticence about entering this new field of finance due to risk appetite.”

She added: “How will a new bank be capitalized and whose money will be used to do this? Will there be an overseas correspondent bank? What regulations will be put in place to ensure no damage to Bermuda’s reputation?

“Premier Burt said the new banks will provide full services to their clients as well as servicing FinTech businesses, while providing residents with more choice and competition. How might this impact traditional bank businesses, the services that they provide and jobs that they support in order to fulfil their licence requirements?

“There is also an issue with correspondent banks. US Banks that happen to be correspondent banks for Bermuda banks have said the lack of regulations internationally surrounding cryptocurrencies has led them to not be willing to entertain this particular business, as the risks do not outweigh the unknown reward.

“I am also particularly concerned that the Premier says there is 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.’

“Does this mean that this new bank could be the bank for casinos as well? We have seen no progress for 11 months from this Government on gaming and one of the main issues has been banks’ reluctance to take casino money because of an absence of regulations. Is this a way around that? It also puts a question mark over the Premier’s much vaunted FinTech fund – who will bank that money?”

“The Premier says that consultation has started on this, but also says that legislation will come to the House ‘shortly’. There has to be in-depth consultation and he must reveal, step by step, what his plans are to the public and the members of the House of Assembly. Surely even his own MPs can see the inherent dangers of this proposal?”

On the FinTech Fund, Ms Atherden said: “What we cannot see in the legislation are details of any guidelines governing applications for funds, source of funds or the assurance and oversight that the intended funds meet the desired results.

“The money can be given to the Government from a range of sources – some funds as a consequence of a signed MOU between the Government and its FinTech partners, some funds received for other purposes including supporting community based initiatives.

”The disposition of the funds is at the discretion of the Minister of Finance and the Minister of eCommerce, but what we cannot see in the legislation are details of how the disposition is related back to the original purpose for which the funds were given. It is different from the Confiscated Assets where Government has complete discretion on disposition.

“The control on the disposition under Management of the Fund places emphasis on the Minister directing the Accountant General to pay out the funds, we don’t see sufficient indication that the Accountant General is required to know that the disposition met the receipt requirements.

“There does not appear to be a requirement to state exactly what the funds will be used for and keep them separate by category of use. Because of that, we fear it could be open to abuse.”

Ms Atherden added: “When the Premier originally made his statement about the Fund he referred to ‘some background noise that seeks to diminish the work that the Government is doing in the establishment of this industry for Bermuda.’

“I took that to be a reference to the very legitimate questions my Honourable colleague and Shadow National Security Minister Michael Dunkley asked in reference to cryptocurrency which Minister Caines himself admitted were good questions.

“To be so dismissive of asking very pertinent questions about issues that affect the people of Bermuda is not something we expect from a leader who says he puts Bermudians first. It is beholden on Government to not offhandedly dismiss but to give detailed answers so the public can form proper opinions.

“Our job as the Opposition requires that we raise legitimate concerns especially those designed to improve outcomes for all Bermudians.”

Update July 3, 10.22am: PLP Senator, Mr. Anthony Richardson said, “It is unfortunate that the OBA has been reduced to blatant fear mongering in response to the excellent progress being made by the Government in the development of new employment and educational opportunities for Bermudians in the Fintech industry.

“The Fintech industry needs an innovative and robust banking solution and Bermudians need more banking options. We believe that the creation of a new class of bank addresses both needs. The Bermuda Bankers Association and the Bermuda Monetary Authority also agree with our approach.

“The Memoranda of Understanding signed with some of the leading companies in the digital asset industry are intended to diversify our economy and offer jobs and millions of dollars in scholarships for Bermudians to train or retrain for opportunities within this exciting new industry.

“With the creation of a new class of Bank, Bermuda reinforces its place as a global leader in this industry. We anticipate further growth in jobs and opportunities for Bermudians.”

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Comments (45)

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  1. Bermewjan says:

    Finally, some sensible thinking.

  2. Redrose says:

    Yup, oba is spot on

    • Smith says:

      Yes always are look at what obaUBP cost us.

      The Government had to pay out $650,000 in redundancy packages to BAS Serco staff after they did not renew the company’s contract to run the airport.

      • The Original Truth™ says:

        Forget about BAS Serco. $650,000 is a drop in the ocean to the billions annually Aecon’s Skyport will bring us once the new Airport is completed.

        • hmmm says:

          Please elaborate how a new airport will bring in BILLIONS??

          • A new Airport requires massive spending on planning, engineering, infrastructure improvements, labor, equipment, etc and that before the thing is even built. Then, once completed, more investment will poor in from Vendors, commercial real estate interests, and service providers, all who will hire many locals and will spend an enormous amount of money on real estate and construction. A well planned airport always benefits the local economy.

            • Miami Beach says:

              “billions annually” LOLOL

              During the construction phase many business will benefit we can agree on this it’s normal. However on a more serious point this airport is not going to produce a BILLION annually which means every year after it’s built.

          • The Original Truth™ says:

            What Skyport is doing will attract more airlines to Bermuda & better flight deals. This will bring more air arrivals. More air arrivals will bring billions in profit.

  3. sandgrownan says:

    It gives numpty nuts somewhere to launder casino money too…..

  4. Bermudas says:

    Oba has always been spot on .

  5. Wahoo says:

    Plp driving our economy down the the yellow line like there is no tomorrow….wish they would think about the passenger.

  6. Stevie says:

    Agree. Burt never been sensible himself. Now going to help PLP bankrupt Bermuda again.

    • frank says:

      will these banks be conducting business like the other banks?

      • The Original Truth™ says:

        Not in a million years. They are not regulated like the real banks are & never will be. The real banks are backed by government treasuries so if they get robbed your investments are safe. If these wannabe banks get robbed your not seeing a cent back to you.

        • Cmon says:

          That’s BS and you know it! Just look at the too big to fail banks recently and stop spreading lies!

          • The Original Truth™ says:

            No lie spreading. You’re just clueless.

            Federal Deposit Insurance protects banks against bank fraud & Securities and Exchange Commission protects against stocks, bonds & other securities fraud.

            There’s no commission to protect crypto investors. You get scammed & there’s no one to get it back for you.

            https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation

            https://en.wikipedia.org/wiki/U.S._Securities_and_Exchange_Commission

            • Cmon says:

              FDIC only insures up to a certain amount of deposits on account! Read a book jacka$$ and shut up!

              • The Original Truth™ says:

                Yeah, $250,000 max in each bank you have an account in.

                Most don’t even have that much in a bank so they get the full back.

                Do you know what you get back if scammed in crypto? I do. You get zip, zero, nada, nichts, nil, nothing. How many more ways can I say it until you understand the difference.

                It’s fine that you use derogatory names against me because I don’t feel so bad calling you what you are. You deserve the name that us real investors call someone who believes they made a good investment when they haven’t.

                You are what we investors call a Bagholder & you can look that one up too.

                BTW because I’m a REAL INVESTOR every time you pay a electricity bill, airport fees, a meal at KFC or buy something from amazon you pay me. So, thank you bagholder.

                • Ok says:

                  Good for you jacka$$! It’s because of investors like you that drives up consumer costs! And I am cash only – should not use your credit card system!

    • Wahoo says:

      Maybe plp would like to accept payment in bitcoins. Yet to hear what the Wayne Furbert thinks, is he still the jr. Minister? I bet he can shed some light on it for us.

  7. the usual suspect says:

    The world is changing beyond a phenomenal pace, as it stands bermudians don’t give useful ideas for its people on a whole, just ideas that are good for a select few. I’m guessing that someone wants to march now. This is not the most stable idea but it’s an idea with useful proportions to not just the rich bermudian, but the poor one as well. If this is not Forte, come up with something better that can be done as a collective not another solo bermudian dream.

  8. Cmon says:

    Keep asking questions and unless it benefits OBA members personally then don’t move it ahead. Delay, debate and deflate. That’s the OBA way!

    And what does Atherden and Dunkely know about technology? Absolutely zero.

    • Smith says:

      Dunkely knows about milk and a fake smile. Atherden knows how to follow UBP orders.

    • SMH says:

      “And what does Atherden and Dunkely know about technology? Absolutely zero.”

      So, they’re right there with you, the entire PLP and it’s followers….good of you to admit that you’re all clueless!

      • The Original Truth™ says:

        You don’t need to know about tech to know that something that’s not regulated by the global banking community is extremely risky & potentially fraudulent.

        • If you understood cryptocurrencies and distributed ledgers, you would not believe that.

          • The Original Truth™ says:

            I understand that it’s impossible for someone to change a distributed ledger but it’s not impossible to counterfeit a crypto and then trade the counterfeit on a ledger. I’ve only dabbled into crypto slightly & that was one experience I had. The company claimed it was an outside job but that doesn’t make me feel any better. Now my money is stuck because I don’t like cashing out at a loss. I’m glad I only put in a gambling amount but I feels sorry for those who use crypto as an investment & put in real savings.

            Another type of fraud is a pump & dump. I have not experienced this with cryptos but have with a security. SEC helped me get my money back but I can imagine this in crypto & no regulatory system like sec to track down who did the dump. It would be easy to do if a group got in on the initial offer then pumped the crypto to a good strike price then dump & cash out quickly.

            Then there’s all the gas fees that I have lost on transferring my crypto to cold storage or to trading sites. I understand it all to be a rip off from my experience.

            I’ve had much more success with securities & would recommend anyone to invest in them before thinking about cryptos.

  9. Cmon says:

    “how will this impact traditional bank business”? Well for one it will introduce competition and get us into a new industry which we need for jobs and it will provide capital to lend to Bermudians. Unlike the OBA have you tried getting a loan from the banks recently? They show you the hand unless you have the right name or colour. I guess the OBA don’t want us to have an opportunity to work in high tech and accounting and other areas around Blockchain or have access to a new source of money for young people to have a chance to own a piece of Bermuda?

    • SMH says:

      Yup, it’s always the ‘mans’ fault…even when the PLP government is in power!
      What has the government done so far? They’ve removed rights from a segment of the population…why? Because they’re bigots.
      Why are you so proud of your bigotry? While the rest of the world matures, Bermuda devolves.

    • jt says:

      So nothing concerns you about this. Ok then. You go right ahead and pin your personal assets to these banks. Advise all your friends to do the same. Spread the word.

    • shrew says:

      there is a VERY GOOD reason why no bank anywhere will open accounts for anyone or any entity doing crypto biz. just think about that for a minute.

      • Plenty of banks work with crypto. In fact, most have their own crypto departments. Property licensing and legislation is needed so that everyone knows the ground rules and company’s can proceed with proper due diligence and setup internal compliance standards.

  10. Alan says:

    Well the Premier is at it, he might create a fe other new classes of bank, including:

    One for the Casino and Gaming industry since the existing ones are apparently not interested.

    One that serves locally owned companies without directors/shareholders having to sign away their life savings.

    One that actually serves the community it profits from rather than maximizing returns at the expense of that community in favor of in faceless foreign owners.

    This should be about believing in ourselves and our future and plus expecing financial institutions, especially the one that was bailed out by the earlier PLP Government with a bond guarantee, to serve the community.

  11. archie says:

    This: Surely even his own MPs can see the inherent dangers of this proposal?”

    No, they will follow like the good little sheep they are.

  12. SMH says:

    “One that actually serves the community it profits from rather than maximizing returns at the expense of that community in favor of in faceless foreign owners.”

    This happened under the plp’s last reign of issues..and you voted for them again?

    LOL

    • Earth watch police says:

      I thought plp didn’t like foreigners from what I hear all these deals with foreigners what about us.

  13. Joe Bloggs says:

    I just hope Bermuda’s new class of banks does not make us the butt of jokes such a Liberia’s shipping registry does for that country.

  14. Ttyl says:

    I’m just waiting for the oba to actually state facts and tell the truth. This fearmongering is past ridiculous. I mean ZERO facts to state their case just blowing hot air LIES as usual. Its getting to a point where the oba are completely laughable at this point. I mean almost every single deal the PLP have signed in regards to fintech has brought millions of dollars of investments. The entire world is moving towards fintech and cryptocurrency and you have this draconian obaubp party that can’t show you one kick of evidence that this is going to fail. Unit the Oba can provide some actual facts and evidence, nobody is going to listen to your lies.your fan club of Oba trolls will but not the rest of the island. Give it up already. Why don’t you all work on those 2000 jobs already instead of trying to get a photo Opp for building a wall that was already damaged under the oba term!

    • Ttyl says:

      Until*

    • shrew says:

      hahahah. NO MONEY is here yet dude! the PLP can sign whatever they want but until actual money is here and is being spent keep your pie hole shut. stop drinking the green juice.

      • Ttyl says:

        They signed agreements and contracts with money involved. If you don’t understand how contracts work I suggest YOU keep your mouth closed. And have you seen anything stating the money isn’t here yet? And you implying that it isn’t here yet doesn’t mean it’s not coming. Again you oba trolls and your vague lying statements that can’t even hold air yet alone water.

    • Double S says:

      Hahahaa. MoUs are not legally binding commitments and not one investment has hit our shores. Such sheep you fan guys are.

      • Ttyl says:

        So your trying to say they haven’t signed not one commitment? Smh I’m not going to argue with a bunch of trolls

  15. smile says:

    I do not think our Minister of finance has a particularly strong understanding of the risks surrounding cryptocurrencies.

    OR he does realize this is potentially a bad idea but enjoys feeding spin to the people…….. “Millions of dollars in scholarships to train Bermudians” in Fintech. Give me a break.
    See the bloomberg article below showing that 92% of Cryptocurrency companies that had over $50mil market caps were a) scams b) Failed or c) Dead

    Good luck Bermuda. Hopefully Burt doesn’t do too much damage to the islands reputation.

    https://www.bloomberg.com/news/articles/2018-06-28/crypto-coin-graveyard-fills-up-fast-as-icos-meet-their-demise

    • Dumba$$ says:

      Because they were not regulated jacka$$ – that’s the whole point of Bermuda being regulated! Some real stupid people live on this Island!

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