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By Keith Archibald Forbes (see About Us) exclusively for Bermuda Online
While Bermuda is certainly an offshore international business and insurance center, it is not an international banking center. International banks, which in other offshore locations and also in many onshore jurisdictions, are allowed to register as banks and can operate in those countries, are not allowed in Bermuda to register or operate as banks.
Banks are listed by size, not in alphabetical order.
HSBC, Bermuda, Royal Gazette photo
Harbourview Centre, Front and Reid Streets, Hamilton. Phone 295-4000. Fax 295-7093. Since 1889. Formerly the Bank of Bermuda Limited. The largest by a considerable margin and most profitable Bermuda bank, especially since February 2004 under HSBC ownership when acquired for US$1.3 billion. At HSBC acquisition the bank employed 1,050 people but reduced this to about 730 in 2012. About 47% of the local banking market. Charges a monthly checking account fee.
65 Front & Reid Streets, Hamilton HM 12. Phone 295-1111. About 40% of the local banking market. Main investors are the Canadian Carlyle Group (18.64%), until 2015 the Canadian Imperial Bank of Commerce (CIBC), 18.64% (together they owned nearly 40%), then Bermuda Government Pension Funds, Wellcome Trust, Julian Robertson and Goshen Investments LLC. Like all local banks, charges a monthly checking account fee.
2013. April 28. The fifth-biggest bank in Canada is to end its ownership stake in Butterfield Bank, noted Butterfield CEO Brendan McDonagh. He thanked Canadian Imperial Bank of Commerce (CIBC) for the support it has given during the past five years. There had been speculation that CIBC might eventually takeover Butterfield Bank. Instead, the Canadian bank, which holds 19 per cent of Butterfield’s issued common shares, is to fully divest itself from its partial ownership of the bank when the share repurchases are made, which will be on or before Thursday. Butterfield is spending $120 million to repurchase and cancel 80 million shares owned by CIBC. Finance group Carlyle Global Financial Services will buy CIBC’s remaining 23.4 million shares in the bank. The stock is being repurchased at a discount price of $1.50 per share. Butterfield’s common shares closed at $1.97 on The Royal Gazette/BSX Index yesterday before the announcement was made. In 2010, CIBC was part of a rescue investment group that pumped $550 million into the bank. At the time Butterfield was struggling due to the economy and toxic loans. It was given a new lease of life thanks to the refinancing. CIBC and Carlyle Group each injected $150 million and took an equal 22 per cent ownership of the bank at the time. The companies bought the stock at $1.21 per share. The new capital allowed Butterfield to de-risk its balance sheet and sell off hundreds of millions of dollars worth of troubled investments that had been backed by US mortgages. The bank yesterday reported a first quarter profit of $26.8 million, a 15.8 per cent improvement on the same period last year. Shawn Beber, CIBC’s senior vice president, strategy and corporate development, is to step down from the Butterfield board at today’s general meeting. The repurchase and cancellation of CIBC’s shares will result in a 14.7 per cent reduction in the number of outstanding common shares “which will have the effect of increasing all other shareholders’ proportional ownership positions in Butterfield.
Bank of Butterfield, Bermuda
Bermuda Commercial Bank Ltd (BCB)
P. Gutteridge Building, Hamilton, PO Box HM1748, Hamilton HM GX, Telephone:
.One of Bermuda’s four licensed banks. Charges a monthly checking account fee and more. On June 2, 2015 it announced it was moving its custody services relationship to Royal Bank of Canada’s (RBC) investor & treasury services, an award winner in the global custody services sector. BCB said its custody provides a single dedicated contact person to ensure that the client does not feel ‘lost in the stream’ as is the case in many large institutions.
Owned by Somers Ltd. A listed Bermuda-incorporated international financial services investment holding company whose major assets include its 100 percent owned subsidiary, Bermuda Commercial Bank Limited, one of Bermuda’s four licensed banks and a 62.5 percent holding in Waverton Investment Management Limited, a UK wealth manager with over US$8.7 billion assets under management. The Group’s other investments include an approximate 68 percent economic interest in the London Stock Exchange listed Private & Commercial Finance Group PLC, a UK asset financing company, an 84.6 percent stake in Westhouse Holdings PLC, a corporate and institutional stock broking group, a 30 percent economic interest in Ascot Lloyd Holdings Limited, a UK independent financial adviser and a 21 percent economic interest in Merrion Capital Holdings Limited, an Irish financial services group.
19 Reid Street, Hamilton HM 11. P. O. Box HM 1194, Hamilton HM EX. Phone (441) 296-6969. Fax (441) 296-7701. On January 7, 2014 it amalgamated with and on April 22, 2014 changed its name. Formerly Capital G Bank Ltd.
2015, April 8. The Gibbons family bought back control of Clarien Bank Ltd, just 15 months after it sold a controlling interest in the institution. The news was announced in an earnings announcement published yesterday. The statement did not specify why Edmund Gibbons Ltd (EGL) had repurchased the 80 per cent stake in the bank that it sold to CWH Ltd in January 2014. Asked the reasons for the Gibbon's’ resumption of full ownership, a Clarien spokesman said: “As a result of robust discussion within the bank’s strategic planning process it was agreed between shareholders that EGL once again take a sole ownership stake in Clarien Group Ltd (CGL). CGL will continue to explore arrangements with partners to allow for growth, expansion into new product areas, and in planning for Basel III compliance.” The terms of the deal were not disclosed. In January 2014, EGL sold a four-fifths stake in the former Capital G Bank Ltd to Bermuda exempted company CWH Ltd. Two of the founders of CWH, Ian Truran and Zoran Fotak, became co-CEOs, but Mr Fotak left the role in October last year. Two months later he took a new post as CEO of CWH — the holding company of the bank’s majority shareholder at that time. The Clarien spokesman said the CWH founders who would continue to be involved with the bank were Mr Truran as CEO, Keith Stock as chairman and David Carrick as chief financial officer. There was no mention of any role for Mr Fotak. In the bank’s statement yesterday, EGL director James Gibbons said: “On behalf of Edmund Gibbons Ltd and the Gibbons family, we are pleased to report that we have become sole shareholders of Clarien Group Ltd. We remain committed to expanding Clarien Bank Ltd’s financial services business by working with strategic partners that will support our overall investment strategy to deliver world-class products and services for residents of Bermuda and international clients from around the world. We will continue to work towards Basel III compliance as it is phased in given the extra responsibility that brings to us as a designated domestically, systemically important institution.” Clarien also revealed that net profit in 2014 slumped to $500,000, down from $3.6 million in 2013, representing an 86 per cent drop. The bank said that core earnings, which exclude one-time charges, rose 44 per cent. Net operating income was flat at $51.7 million. Borrowers’ struggles were also reflected in the bank’s results, as non-performing loans — 90 days or more past due — and impaired loans represented 13 per cent of Clarien’s total loans. Loans categorized by the bank as “impaired” totaled $62.4 million and represented 7 per cent of the loan book, up from 5 per cent in 2013. Specific provisions on the balance sheet against impaired loans increased to $18 million last year, up from $11.6 million in 2013. The value of total loans fell by 7 per cent to $876.4 million from $942.6 million in 2013. “Bermuda continues to be challenged by its current economic position as evidenced by some of our clients’ inability to service their debt payments,” Mr Truran said. As a result, net provisions on loan losses rose by 27.3 per cent from $7.7 million in 2013 to $9.8 million in 2014. We continue to work empathetically with our clients to facilitate their long-term financial successes and early indicators for the year show some improvement in the relevant sectors of the economy.” He added that the bank would be “strengthened by the increased support of EGL and the Gibbons family” with their return to full ownership. Mr Truran said the bank’s consolidated capital ratio improved to 15.52 per cent from 14.84 per cent. The bank’s statement added: “During the year, Clarien Bank undertook a strategic review of its property portfolio and determined that certain premises would no longer be required in the ongoing operations of the company. Therefore the Bank distributed a property to its parent company, CGL, at its carrying value as a common control transaction.” On the balance sheet, Clarien’s total assets fell by more than 11 per cent to $1.18 billion at the end of last year from $1.33 billion 12 months earlier. Deposits and interest owed to depositors totaled $1.08 billion at the end of 2014, down by more than $140 million or 11 per cent, compared to a year earlier. Summing up last year, Mr Truran added: “In 2014, Clarien Bank achieved its goal of becoming a more operationally efficient bank focused on service excellence, with a greater proportion of non-interest income, resulting in fewer risk-weighted assets on the balance sheet. Clarien Bank saw an increase in total revenues, and the decline in our profit was predominantly due to large, one-off expenses that will not have any continuing effect on earnings going forward.”
Until April 2015 the bank was part of Clarien Group Ltd, a wholly owned subsidiary of Bermuda exempted company CWH Ltd. The deal gave the newly formed Bermuda company a controlling interest in what was until April 22. 2014 the Capital G Bank Ltd. Edmund Gibbons Ltd, which had earlier wholly owned the institution, remains involved as a minority shareholder. Subsidiaries with their new names are Clarien Brokerage Ltd, formerly Capital G Brokerage Ltd; Clarien BSX Services Ltd, formerly Capital G BSX Services Ltd; Clarien Investments Ltd, formerly Capital G Investments Ltd; Clarien Nominees Ltd, formerly Capital G Nominees Ltd; and Clarien Trust Ltd, formerly Capital G Trust Ltd.
Charges a monthly checking account fee.
All four Bermuda banks charge at least $8 a month for current accounts and levy other banking fees and charges considerably higher than their USA, Canadian and UK counterparts. In services, facilities and competence the local banks benefit the economy generally and enjoy many advantages, especially to visitors and newcomers who, in their own home countries will not find any of their High Street banks with the same national and international range of easy Foreign Exchange and other facilities and services. But the Bermuda Government charges them some of the highest banking fees in the world. Plus, they pay millions of dollars in Payroll Tax for their labor-intensive staff. Thus their interest rates are lower, interest bearing checking accounts do not exist and bank service fees to consumers are the highest in the world.
In July 2011 Bermuda's House of Assembly parliament ( finally) enacted an insurance scheme to partially protect individuals, charities and small businesses, with the Deposit Insurance Act. Membership of Bermuda's Deposit Insurance Scheme [DIS] - see Bermuda Deposit Insurance Corporation (BDIC) below - is mandatory for all four commercial banks, the one deposit company licensed under the Banks and Deposit Companies Act 1999 and the sole credit union. The maximum threshold for compensation is, compared to the USA's $250,000 a mere $25,000, although that amount “could grow over time.” The legislation put the Bermuda Deposit Insurance Corporation [BDIC] in place to administer the scheme. In Bermuda, which has no lender of the last resort and no central bank, the safety net relies heavily on prudential regulation and supervision by the Bermuda Monetary Authority (BMA) which overall administers and regulates the scheme. Deposit insurance is a guarantee to depositors in a bank that they will be compensated up to a maximum specified amount of their deposits upon failure of that institution. This legislation came many years after The USA, UK, Canada and elsewhere enacted the FDIC and equivalents, and for significantly larger amounts than Bermuda's $25,000 where the BMA is the only banking-relevant regulatory authority and the relevant pieces of legislation are The Banks & Deposit Companies Act 1999 and The Banking Appeal Tribunal Regulations 2001. The BMA is responsible for the licensing, supervision and regulation of all financial institutions in Bermuda (including those conducting deposit taking, insurance, investment and trust business). Since 2009, the BMA has required all Bermuda banks to ensure they have a "capital buffer" which would keep them on a solid footing even in the case of a dramatic worsening of economic conditions. The BDIC deposit insurance of $25,000 per depositor is the result of a collaborative effort between financial regulator the Bermuda Monetary Authority (BMA), the Ministry of Finance and the Bermuda Bankers Association (BBA). Technical advice was provided by the International Monetary Fund. Deposit insurance is a guarantee to depositors in a bank that they will be compensated up to a maximum specified amount of their deposits upon failure of that institution. It has three main objectives, to protect small depositors; promote stability in Bermuda's financial system and economy by providing prompt reimbursement or access to insured depositors' funds; and promote competition between financial institutions in Bermuda. Under the legislation, membership of the scheme is compulsory for all relevant financial institutions. The premiums are paid by the banks as a fixed percentage of insurable deposits. The Bermuda Deposit Insurance Corporation has an appointed board of directors to run the scheme. The legislation also entails elements on protection from personal liability and preservation of confidentiality.Bank deposits in Bermuda banks or trust companies by US or other non-Bermudians are not covered by the US Government's Federal Deposit Insurance Commission (FDIC) which insures deposits of all kinds in all USA licensed banks up to $250,000 per depositor for all deposits, savings and individual retirement accounts.
Bermuda bank deposits are not covered by the UK Government's Financial Services Compensation Scheme (FSCS) - http://www.fscs.org.uk/ - under the UK Financial Services and Markets Act, 2000. It too offers a hugely more generous financial compensation than Bermuda, but significantly less than in the USA. Currently, individual UK-based bank clients are insured up to £75,000 pounds sterling. However, from July 2015 this will be upped to £1 million for those who have large sums in their accounts arising from the sale of their homes. (There is no such similar plan for Bermuda, where most houses sell for well over Bda $1.5 million and some for as much as $20 million and the average condominium sells for over $800,000). Also, in the UK, the FSCS pays compensation usually within 7 days of a bank, building society or a credit union failing, except for more complex claims that might take 20 days. Most recently, the FSCS declared it may not even be necessary to claim from it even when a financial organization fails because it ensures customers will have continuous access to their funds via another FSCS mechanism whereby accounts are transferred to another financial organization in the event of a bank or similar going bust. However, continuous access applies only to sums within the £85,000 threshold, not to temporary large balances of up to £ 1 million caused by the sale of a property. No such provisions in any of these categories are made in Bermuda.
In addition, they are not licensed to conduct banking business in the United States or Canada.
Nor are they covered by any Canadian or European or any other country whose nationals live and/or work in Bermuda.
Investment vehicles and services of Bermuda banks have not been registered or licensed under any United States securities legislation and are not being offered, directly or indirectly, in the United States or in any of its territories or possessions or areas subject to its jurisdiction or to its citizens or persons thereof.
The Bermuda Government has not approved any local bank as the depository of public funds. Instead, it awarded this to the Bank of New York.
|Laws of Bermuda||Acts, Regulations and Statutory Instruments|
The Bank of Bermuda/HSBC and Bank of Butterfield have Automatic Teller Machines (ATMs) scattered throughout Bermuda, plus full service offices in and beyond the City of Hamilton. Most American, Canadian & other visitors will find that if they need cash in Bermuda, local ATMs from either of the two largest local banks will service them. But the dollar notes they dispense will be in non-exportable Bermuda dollars only (which cannot be cashed overseas).
This established a comprehensive bank insolvency framework that meets international standards and operates independently of general insolvency law. Amendments to legislation have been made to allow the BMA to license money-service businesses. In the past, the BMA has been unable to license these businesses because the money service business regulations do not provide sufficient details for appropriate oversight.. However, changes to 2007 legislation allow the BMA to license and regulate the industry. Legislation governing the insurance and reinsurance sectors, also policed by the BMA, are being updated in line with global developments. Bermuda banks can address the Island-wide need to increase the flow of credit to help re-flate the economy, providing Bermudians with the support they need for their business ventures, their educational ambitions and their dreams of home ownership.
Bermuda banks charge between 4 and 5 points more for foreign currency purchase transactions than US, Canadian, British, etc banks do. For example, on February 1, 2013, see the UK rate of 1.6266 at http://www.bm.butterfieldgroup.com/Business_Corporate/treasury/Foreign_Exchange_Rates/Pages/Home.aspx compared to http://www.hifx.co.uk/.
The Bermuda Dollar, not an exportable or international currency, is not available from any bank in USA, Canada, UK, etc. and only usable within Bermuda. But for all non-Bermudian visitors the US Dollar - on which the Bermuda Dollar is based and in Bermuda is worth the same - is accepted everywhere in Bermuda despite the fact that Bermuda is not part of the USA politically and is not a US Commonwealth country like Puerto Rico or the USVI, etc. Until 1970 but not thereafter, Bermuda had its own local pound sterling notes, based on UK sterling. All visitors from the UK, Canada, Europe and elsewhere should bring US dollars only. If visitors who purchase goods and services in Bermuda get their change offered in Bermuda dollars they should ask if it can be exchanged for US dollars.
Founded in 1994. The organization that in Bermuda represents the trust and related industry. BALT is a forum for the interests of its stakeholders and acts as a representative body for all 30 companies licensed by the Bermuda Monetary Authority to carry on trust and related business in Bermuda. BALT makes representations to Government and is often invited to deliver submissions and reports on trust legislation, fiduciary ethics, good practice and regulation of the industry. The Association is a key contributor to the Bermuda Business Development Agency's strategic plan to promote existing international business and actively develop new business in Bermuda.
Since November 2007. Funded by its members. Created its own (voluntary) code of conduct for its member-banks. Serves as the main representative body for banks and deposit taking/lending firms on the Island. Similar to banker's associations in other financial jurisdictions, an industry think tank, lobby group and a forum for increased cooperation on non-competitive issues among the Island's banks. Stated mission is to be a leading contributor in the development of public policy on the financial services sector and ensure the legal and regulatory framework governing banks operates in an efficient, effective and fair manner. All the Island's chartered banks and lending/deposit taking institutions are eligible for membership and currently all banks doing business in Bermuda are members. The Bermuda Monetary Authority, responsible for the licensing, supervision and regulation of all financial institutions in Bermuda (including those conducting deposit taking, insurance, investment and trust business), is an ex officio observer of the BBA.
First Bermuda Banknote, 1883. A Canadian $5 note printed for the Merchant Bank of Halifax and converted to a £1 1 shilling (one guinea) note for use in Bermuda.
The Merchants' Bank of Halifax (later, the Royal Bank of Canada), established in Halifax in 1864, opened an agency in Bermuda in 1882 via the local Butterfield's Bank. On October 6, 1883, it issued its own money for use in Bermuda. It began circulating a $5 Canadian note printed by the American Bank Note Company in Ottawa for its bank in Halifax and converted to a one pound, one shilling (guinea) note for use in Bermuda. This Canadian/Bermudian note has considerable historical value as the first "Bermudian" paper money to arrive in Bermuda; some 31 years before Bermuda got its own official currency notes. Later, the Merchants' Bank of Halifax divorced itself from Butterfield's Bank in Bermuda and ran its own branch bank in Bermuda for four years. Thus it also became the first (and only) non-Bermudian bank in Bermuda. Later yet, the Merchants' Bank of Halifax's Bermuda operation was bought out by banking newcomers in Bermuda who established from it the present day Bank of Bermuda Ltd.
First Bermuda Government £ sterling note of 1914, also printed by the American Bank Note Company in Ottawa.
BMA House, 43 Victoria Street, Hamilton. P O Box 2447, Hamilton HM JX. Tel: (441) 295-5278. Fax (441) 292-7471. 2014. November 8. Bermuda’s financial watchdog is to get new powers to police banks. The Bermuda Monetary Authority (BMA) would be able to intervene in case of “a troubled bank.” The move is in line with International Monetary Fund recommendations made in 2008. To address this recommendation, the Government has brought legislation to establish a special resolution regime for banks licensed in Bermuda. The purpose of this resolution is to address the situation where all or part of the business of a bank has encountered, or is likely to encounter, financial difficulties that cannot be resolved by any other means. The Banking Special Resolution Regime Act 2014 established a comprehensive bank insolvency framework that meets international standards and operates independently of general insolvency law. Amendments to legislation have been made to allow the BMA to license money-service businesses. In the past, the BMA has been unable to license these businesses because the money service business regulations do not provide sufficient details for appropriate oversight.. However, changes to 2007 legislation allow the BMA to license and regulate the industry. Legislation governing the insurance and reinsurance sectors, also policed by the BMA, are being updated in line with global developments. Bermuda banks can address the Island-wide need to increase the flow of credit to help re-flate the economy, providing Bermudians with the support they need for their business ventures, their educational ambitions and their dreams of home ownership. Government was also examining a “reverse mortgage” scheme and talking to the Bermuda Bankers’ Association in an attempt to allow seniors to access money locked up in their homes. There are many elderly people in Bermuda who own their own homes, many valued at more than a million dollars, but who do not have the cash flow to maintain an adequate lifestyle or to pay for rising healthcare costs. Reverse mortgages can be an option for people who want to turn substantial home equity into cash in order to ease these challenges. Banking remained an important earner of foreign exchange for the Island. The Government is concerned about shrinkage in the banking sector, in terms of its lending policies and employee numbers. The Ministry of Finance, as a result, is examining policy reforms to expand and diversify the banking sector and, by extension, Bermuda’s foreign exchange earnings and the capacity for job creation. The Government is in talks with the banks and other interested parties with a view to changing bank and deposit company law. Accountancy firms could also offer community support by donating time for audits and reviews of community clubs required under the Charities Act. Accounting firms can adopt a club in this regard, freeing up precious dollars to support their worthy operations.
As a result of the enactment of the USA PATRIOT Act (Public Law No. 107-56 - October 26, 2001), the U.S. Department of the Treasury has issued regulations requiring U.S. financial institutions to obtain certain information relating to foreign banks that maintain relationships at U.S. financial institutions using a certification form. This certification is needed to comply with provisions of the USA Patriot Act. Bermuda banks are involved when they, as foreign banks, maintain relationships at US financial institutions, using a certification form. This certification is needed to comply with provisions of the USA Patriot Act, and a relevant Patriot Act Certificate is available for inspection at the Bermuda banks concerned.
Incoming visitors from Europe should note that the Euro is not accepted anywhere in Bermuda as a trading currency. They should use US dollars. But all Bermuda's banks offer the Euro - € - to all visitors and business executives or representatives heading for Ireland and EU countries of Europe. Avoid using Euro traveler's checks, instead use credit or debit card cards at ATMs of banks in Euro countries.
Those likely to be affected by FATCA include US citizens and green card holders resident in the US and living abroad such as Bermuda who have foreign financial bank accounts, financial interests and other holdings; US residents for income tax purposes (those who do not have a US passport or citizenship but have resided in the US long enough to meet the substantial presence test), and others with US connections such US owned foreign entities. Also liable are US-classified foreign financial institutions and non-financial foreign entities including all those with US proprietary investments, US account holders, or other US financial dealings. FATCA cooperation is both encouraged and enforceable in Bermuda because Bermuda has signed Tax Information Exchange Agreements (TIEAs) in the last few years with the United States and other countries. TIEAs, tax treaties, and Intergovernmental Agreements all aid in mutual information exchange cooperation. In cases where tax evasion, etc, is suspected or determined, the US Internal Revenue Service has profound regulatory powers (agreed on by the TIEAs and tax treaties) to request detailed significant confidential information on specified US individuals and related parties.
May 22, 2013. More than 250 local industry professionals were told “now is the time to take action in preparation for FATCA”, during KPMG’s second FATCA forum, held earlier this week at the Fairmont Hamilton Princess. Building on the topics raised during the 2012 FATCA forum, the interactive session again asked the question “Are you ready for FATCA?” and delivered the message that as we approach the looming FATCA threshold dates, it is clear that FATCA is not going away. Discussion covered a wide range of topics, including FATCA from a global perspective; Bermuda’s response to FATCA; the Intergovernmental Agreement (IGA) models; FATCA’s potential impacts on business in Bermuda; and the cost of compliance and impact on customers, investors and counterparties. Describing why KPMG in Bermuda felt it was important to run a second FACTA forum for Bermuda professionals, KPMG managing director Charles Thresh, said; “This US legislation will have far-reaching consequences for the financial industry worldwide and Bermuda is no exception. If companies haven’t yet started planning for FATCA, it is not too late to become compliant, but the window is closing and the time to do so is now.” A key component of the panel portion was discussions around the IGA models, with particular interest on the differences between Models 1 & 2, the potential benefits and impacts of a Model 2 IGA, and the potential impact of FATCA on Bermuda’s insurance, funds, trust and banking industries. Additional analysis was also sought around the final FATCA regulations, as issued January 17, 2013, and a high degree of interest was shown around the compliance timeline, strongly echoing last year’s forum. In the wake of the timeline discussion, consensus again reflected that the time for Bermuda companies to act on FATCA is now. Describing the global implications of planning and preparation, David Neuenhaus, KPMG global FATCA lead partner said; “How companies transition to FATCA compliance will have a significant impact on their relationships with their customers, investors, counterparties and services providers. Companies who are early adopters of a robust compliance programme will have the competitive advantage — so a timely response is key.” This year’s forum was led by Charles Thresh, Managing Director of KPMG Advisory, Bermuda with keynote address provided by KPMG Global’s David Neuenhaus and Daniel Dzenkowski, and additional local market insights from KPMG FATCA team members including Catherine Sheridan Moore, James Berry and Will McCallum. In addition, valuable industry insights were provided by Kiernan Bell, managing partner, Appleby; Alison Morrison managing director, Oyster Consulting; Peter Pearman, partner CD&P; and Lyndon Quinn of HSBC.
On October 11, 2012 it was announced in the Royal Gazette daily newspaper of Bermuda that Bermuda’s four banks are facing a 2013 deadline to supply a list of all accounts held by US citizens to the US tax authorities. Failure to do so would mean the local banks would face a 30 percent withholding tax on all the many transactions they do with the USA. The obligations have been placed onto all non-US financial institutions by the Foreign Account Tax Compliance Act (FATCA), enacted by the US Congress in 2010. For Bermuda banks, compliance may entail a lot of work. As well as the thousands of US guest workers on the Island, there are many dual-nationality Bermudian-Americans, and spouses of Americans, people with an American parent and green card holders, who fall into the category of “US persons” whether or not they possess a US passport. The USA is one of few countries in the world that taxes its citizens living overseas on the income they earn outside the US. With the US Government’s national debt up around the $16 trillion mark, the Internal Revenue Service (IRS) is seeking to maximize tax revenue — and a growing focus is Americans overseas that may be slipping through its net. A recent visitor to Bermuda was Anne Hornung-Soukup, finance director of American Citizens Abroad (ACA), an advocacy group which has long fought for taxation based on residency rather than citizenship, as practised by most countries. In an interview she outlined her concerns about FATCA. "What FATCA means is that every financial institution in the world outside the US will effectively be an instrument of the IRS. How it will work in practice is posing a lot of problems. They’re struggling to put the system in place. There are a couple of models being discussed. The first is that the information from the bank goes straight to the IRS. For them to give this type of information directly to a foreign government is against the law in many countries. In the second model the information would go to the domestic authorities, for example the Bermuda Government, who would then pass it onto the US Government.” Some European governments, including the UK, have agreed to provide account holders’ information to the IRS on the condition of reciprocity. Germany, for example, has reportedly been particularly vocal about the need for US banks to supply information about German account holders in return for their Fatca compliance. Some have suggested that the clampdown could backfire, if institutions or countries choose not to comply with FATCA, and their clients and residents pull their money out of US investments. US citizens resident overseas have been required to report their US bank accounts and file tax returns for decades, but only in recent years has the IRS been really clamping down on compliance. For more information on FATCA, visit http://www.irs.gov/Businesses/Corporations/Summary-of-Key-FATCA-Provisions
All who work in or have business dealings in Bermuda or who visit there on vacation should note that Bermuda, uniquely in the economies of the international business centers, has a Foreign Currency Purchase Tax (FCPT). It applies to the purchase of all non-local currencies including the US Dollar. In theory the Bermuda Dollar is on a par with the US Dollar but in in fact it is worth less. Why? Mostly on account of the FCPT, also because of Bermuda bank currency processing charges, in addition to the FCPT applied on every transaction. On February 26, 2010 the Bermuda Government doubled this tax, from one half of 1% to a full 1% per transaction.
This includes all purchases of foreign currencies for travel and business purposes and all telegraphic (wire) transfers of monies from Bermuda to individuals and businesses abroad. This means that in addition to bank charges built into the cost of wire transfers, government alone will now charge consumers $1,000 for every $100,000 taken or wired abroad. There is no Government Receipt given for this FCPT charge. The local-only Bermuda Dollar is not exportable. It is not used by traders world-wide. It is not cashable or exchangeable by any foreign banks. It is used only by local citizens and residents - not by international companies based in Bermuda (all of which use US dollars).
Currently, none independent of the Bermuda banks above.
Should not be brought by newcomers, tourists or visitors. No longer accepted or issued by any Bermuda banks, hotels, guest houses or other accommodation or any restaurants or stores.
No longer usable in Bermuda, see above story
Last Updated: July
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