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Bermuda FlagCurrency

Bermuda's banking scenario

How banks and trust companies operate in this Island community

line drawing

By Keith Archibald Forbes (see About Us) exclusively for Bermuda Online

To refer by e-mail to this file use "bermuda-online.org/banking.htm" as your Subject.

 

Bermuda money

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. 

Unlike UK banks, Bermuda banks charge (presently at least $6 a month) for current accounts. Their loan policies are ultra conservative, with loans constituting under 15% of total deposits, creating a low loan portfolio exposure. Mostly, they concentrate on fee driven business. The two main banks mentioned below have gone multi-national, with operations (branches, representative offices or wholly owned subsidiaries) in Barbados (Butterfield Barbados Ltd), Cayman Islands, Channel Isles, Dublin, Hong Kong, Isle of Man, London, Luxembourg, Mauritius, New York, Singapore, etc. 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 Foreign Exchange and other facilities and services. The Bermuda Government charges them the high banking fees, plus millions of dollars in Payroll Tax, so their interest rates are lower, interest bearing checking accounts do not exist and service fees to consumers are among the highest in the world. In the case of three of the four banks, their shares are traded on the Bermuda Stock Exchange. 

There are now four banks, with only one now local (used to be all four).  

Bank of Bermuda/HSBC

HSBC Bank of Bermuda

HSBC, Bermuda, Royal Gazette photo

Harbourview Centre, Front and Reid Streets, Hamilton. Phone 295-4000. Fax 295-7093. About 47% of the local banking market. 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. Since 1889. Formerly the Bank of Bermuda Limited. 

Butterfield Bank Limited

65 Front & Reid Streets, Hamilton HM 12. Phone 295-1111. About 40% of the local banking market. Main investors are Carlyle Group and the Canadian Imperial Bank of Commerce (CIBC), then Bermuda Government Pension Funds, Wellcome Trust, Julian Robertson and Goshen Investments LLC.  

Bank of Butterfield, Bermuda

Bank of Butterfield, Bermuda

Bermuda Commercial Bank Ltd (BCB) 

19 Par-La-Ville Road, Hamilton HM 11, PO Box HM1748, Hamilton HM GX, Telephone: 441.295.5678 Fax: 441.295.4759. 

Bermuda Commercial Bank

Capital G Bank Limited

19 Reid Street, Hamilton HM 11. And at Maxwell Roberts Building, Church Street. P. O. Box HM 1194, Hamilton HM EX. Phone (441) 296-6969. Fax (441) 296-7701. Bermuda’s largest privately-held full-service bank and deposit-taking company.

Free courtesy hyperlinks (links) 

to their main websites, which include full details of their histories and operations, will be shown gladly, to give their full details as Bermuda resources, once they return the courtesy with a  free reciprocal link to our main Bermuda Online website at http://www.bermuda-online.org. See our Links and Mentions policy at http://www.bermuda-online.org/links.htm. Until then, only basic contact information without email or website addresses can be shown, at our discretion. Updates to bank information. Banks are asked to let this author know of updated contact details, facts and figures. Please contact Keith Forbes at email kaforbes@logic.bm. 

Trust Companies

There are two types. 

Deposits made with all the Bermuda banks are

FDIC - type insurance not available in Bermuda

 Instead, in July 2011 Bermuda's House of Assembly parliament enacted an insurance scheme to protect individuals, charities and small businesses. Referred to as the Deposit Insurance Act, the recent global financial turmoil has led to a re-evaluation of the safety net. The Act will bolster public confidence in the banking system by providing insurance coverage to depositors in banks, credit unions (but not trust companies) that are members of the scheme. Membership of the Deposit Insurance Scheme [DIS] will be 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 will be $25,000, although that amount “could grow over time.” The legislation will put a Bermuda Deposit Insurance Corporation [BDIC] in place to administer the scheme, which will be funded by its members in advance of any claims, to bring greater stability and confidence to the Island’s financial system. The financial safety net typically consists of three elements: prudential regulation and supervision, a lender of last resort, and deposit insurance. In Bermuda, which has no lender of the last resort, the safety net relies heavily on prudential regulation and supervision by the Bermuda Monetary Authority [BMA]. 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. 

While a large country such as the US has a three-layer safety net of currency control, the Federal Reserve or central bank, and the Federal Deposit Insurance Corporation, Bermuda has no central bank. Instead, the BMA is the 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.

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.

Bermuda has links with principal banking regulatory authorities world-wide, especially with the Offshore Group of Banking Supervisors and the Basle Committee on Banking Supervision. 

Bermuda Bankers Association (BBA)

Since November 2007. Funded by its members. Serves as the main representative body for banks and deposit taking/lending firms on the Island. Similar to banker's associations in other important financial jurisdictions, the BBA serves as an industry think tank, lobby group and a forum for increased cooperation on non-competitive issues among the Island's banks. The BBA's stated mission is to be a leading contributor in the development of public policy on the financial services sector and to ensure that the legal and regulatory framework governing banks operates in an efficient, effective and fair manner. It  actively cooperates with other organizations locally and internationally in developing industry standards and conventions to enhance the efficiency and soundness of the financial system. It endeavors to encourage compliance with the highest ethical standards and risk management practices within the industry to ensure that Bermuda's reputation as a respected international financial centre is protected. 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 BMA acts as an ex officio observer of the BBA.

Bermuda's USA Patriot Act involvement

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.

ATMs

The Bank of Bermuda 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).

Bermuda's first bank and currency note came from Halifax, NS, Canada

Merchant Bank of Halifax overprinted Bermuda banknote 1883

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.

Applicable Bermuda laws

Laws of Bermuda Acts, Regulations and Statutory Instruments

Euro currency

 Incoming visitors from Europe should note that the Euro is not accepted in Bermuda. 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.

Foreign Currency Purchase Tax

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). 

Foreign Exchange brokers in Bermuda

Currently, none independent of the Bermuda banks above.

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Last Updated: February 1, 2012.
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