Bermuda: Offshore Business Sectors
Foreign banks were not permitted to operate in Bermuda until 2003, when the government allowed HSBC to take over the Bank of Bermuda. The Bermuda Monetary Authority supervises Bermudian banks. Each bank maintains its own trust company and the domestic banks operate a joint clearing system. Although few in number (just three until very recently), the Bermudian banks have expanded throughout the world and have subsidiaries in the major financial centres. They offer a full range of banking services.
The early decision of the Bermuda Government to exclude foreign banks may have owed more to self-interest than to fear of money-laundering or the OECD, but it turns out to have been very successful, leading not only to Bermuda's high reputation but to the establishment of strong, local banks, something that has eluded almost all other IOFCs. The unrestrained growth of the insurance and mutual fund sectors certainly doesn't seem to have been curtailed by any lack of banking variety. Indeed, the variety and quality of private banking services on offer has contributed strongly to the development of international business in and from Bermuda.
Although there are no foreign banks as such in Bermuda other than HSBC, a number of financial advisory and securities firms with foreign involvement have been established, some in connection with the Stock Exchange. There has also been considerable growth in securities trading, much of it based on the Internet. There are at least two separate hedge-fund trading operations, both supported by the Stock Exchange, giving investors 24-hour a day access to non-US domiciled hedge-funds on a world-wide basis.
The Bermudian banks themselves have become involved in e-commerce payment services in co-operation with Internet service providers, offering payment-processing facilities to 3rd-party banks and merchants world-wide. In addition, an Internet start-up company is offering secure Digital Certificates locally and world-wide from Bermuda.
The Investment Business Act 2003, which came into force at the end of January, 2004, provides that any person undertaking investment business in or from Bermuda must hold a licence from the Bermuda Monetary Authority (BMA), unless they qualify for an exemption. The IBA also prohibits persons from entering into an investment agreement with an individual in the course of or in consequence of an unsolicited call made on that person.
Legislation in this area was further clarified and enhanced with the Investment Funds Act 2006.
See Bermuda Table of Statutes for legislation affecting offshore and non-resident business.