New BMA Banking Initiatives
In December 2011, the Bermuda Monetary Authority [BMA] published a Discussion Paper which represents the first step in the process of enhancing Bermuda’s current regulatory framework for banks in line with Basel III.
The Basel III rules form part of the Basel Committee on Banking Supervision’s response to the weaknesses in existing international banking supervisory standards highlighted during the global financial crisis.
The purpose of the BMA’s paper is to make the banking sector aware of the key features of Basel III, to offer preliminary thoughts on its implementation for Bermuda banks and to seek initial feedback from the banks and other stakeholders prior to a planned formal consultation process.
The key features include:
- A revised capital framework; strengthening the quality of regulatory capital; revising minimum capital standards to more accurately reflect risk; and the introduction of an additional leverage standard.
- Further amendments to risk management guidance.
- Expansion of existing market discipline and transparency rules.
- Introduction of an internationally observed regulatory minimum liquidity requirement.
The paper is available on the Authority’s website, www.bma.bm, and the market should submit comments to the BMA by February 29.
Additionally, the BMA has begun consultation with the market on its proposal to establish a Corporate Governance Code for Bermuda’s banks.
During the recent international economic turmoil, poor corporate governance was identified as one of the key factors contributing to banking failures.
One of the Basel Committee’s responses to the situation was to seek to raise the standard of international governance practice through revision of its “Principles for Enhancing Corporate Governance”.
The BMA has sought consistency with the Principles in the development of the Code it is proposing for Bermuda.
The draft Code sets out 13 principles with related guidance and covers the following key areas: board practices; the role of senior management; risk management and internal controls; compensation; complex corporate structures; and disclosure and
transparency.
The draft Code is also available on the BMA’s website. The deadline for market submissions is February 29.
