BMA boss will steer clear of politics
The Bermuda Monetary Authority plans to get more involved with Government in ensuring the Island’s financial stability — but it will steer well clear of politics.
That was the firm message from chief executive officer Jeremy Cox, who was speaking after he accepted the invitation from the BMA board of a second five-year term at the helm of the Island’s financial regulator.
In a wide-ranging interview with The Royal Gazette, Mr Cox stressed that there would be no breach of the BMA’s independence as it worked alongside Government bodies.
He also addressed the reasons why the fee-funded BMA’s payroll had more than doubled to around 170 people over the past few years and also the challenges of dealing with the perception of Bermuda as a tax haven when he meets with overseas bureaucrats and politicians.
Mr Cox said credibility, professionalism and value for money are the three ever-present objectives that guide what the BMA does.
Last Tuesday, the BMA set out its Business Plan 2015, spelling out its objectives for the year. Mr Cox hinted then at an expansion of the BMA’s role as it works more closely with the Finance and Economic Development ministries, and with the Bermuda Business Development Agency (BDA). He added: “It will mean the Authority becoming more involved in helping the Government develop Bermuda’s fiscal policies.”
In the interview, Mr Cox expanded on this. “The Government are the policymakers for the Island and we’re not sitting here trying to develop policy,” he said. “What we bring to the table is the independent regulator’s perspective, whether it’s interactions with the regulatory community, or with global firms looking to get a pulse on what Bermuda has to offer from a regulatory perspective.
“I think it’s quite normal for us, or any regulator, to provide that perspective.
“Political decisions aren’t what we’re discussing here. We’re talking about economic considerations that one would need to factor in whether we’re talking about financial stability, or how we’re going to develop that new offering for Bermuda and I think the regulator is a key player in that.
“We want to be part of the Bermuda team looking at those issues, because we don’t want to be operating in a silo. For the BMA to be charting its own course in isolation from the Government would be the worst thing for Bermuda.”
He stressed that there was no interaction with Government when the BMA was making decision on individual company matters.
The growth in staffing of the regulator in recent years is largely a result of the need — fully recognised by the industry — for the BMA to have the necessary resources for effective oversight of the Island’s large financial sector.
The BMA is not funded by taxpayers, but rather by the fees it levies on companies it regulates.
“We have a well informed industry that knows the link between credibility of the regulator and continued positive outlook on Bermuda and a continued positive environment for them to do business,” Mr Cox said. “And without the appropriate funding, no regulator can be successful.
“Firms understand the significant cost of having a quality team and the significant resources that the team needs to be successful in their jobs.”
Industry’s understanding of and support for the growth of the regulator’s resourcing was probably something unique to Bermuda, Mr Cox added.
“The BMA, for the last eight years, has been in regulatory framework growth mode, almost a re-engineering of its frameworks — and we’re not just talking about insurance, but also banking and investment funds,” Mr Cox said.
“As you’re changing your frameworks and there are more demands placed on you, you’ve got to make sure you can support that through good, qualified people who can be good regulators and supervisors. That’s what we’ve done.”
Value for money was key, he added, and the BMA could deliver it by efficiently providing an effective supervisory regime.
“We’ve always been very cost-conscious,” Mr Cox said. “That’s part of the reason why for the last three or four years, we’ve run at a deficit. We didn’t want to increase fees during a period when there was very slow growth in our international companies register.
“When things started to change we felt more comfortable — we put forward a proposal at the end of last year to increase our fees by about 3 per cent across the board.”
The BMA has a reputation, rare among financial services regulators, for listening to the industry it oversees, something Mr Cox believes is essential in creating good regulatory policy. Such contact helped to gain a perspective on the business drivers for regulatory change, he added.
For example, this week Mr Cox will meet with the Association of Bermuda Insurers and Reinsurers (ABIR) board members. BMA representatives also regularly meet with the Bermuda Bankers’ Association and with Bermuda Business Development Agency focus groups.
“There’s nothing worse than the regulator sitting on high, making decisions that clearly are going to affect their jurisdiction’s industries and the economic outlook for the jurisdiction, and being completely disconnected from the firms they’re supervising, or even the governments making the policy decisions for the country,” Mr Cox said.
“It’s flawed to think that you can operate in a silo and be as responsive as you need to be. It’s interesting that jurisdictions like the UK are now embracing an approach that’s more in line with what we do in Bermuda. That’s a positive development.”
Innovation in financial services — as has occurred with insurance-linked securities, accommodated by the regulatory framework for special purpose insurers in Bermuda — came from the industry itself, rather than the regulator, Mr Cox said. “Our job as a regulator is to be flexible and pragmatic enough to support that type of product being developed here. We support innovation through how we support our firms.”
The BMA’s credibility as a regulator is a crucial element of Bermuda’s credibility as an international financial centre. In his introductory remarks in the Business Plan, Mr Cox said Bermuda and others like it were “routinely attacked and demonised” overseas in despite the facts.
“I think Bermuda has had to deal with this tax-haven label for a number of years,” Mr Cox said. “There’s a need to address that. We should not stand by and allow that to continue without challenge.”
He said it was often a case of “perception versus reality”. One of the difficulties in addressing it was that the people in positions of power overseas changed and so the conversation had to start over with new incumbents.
“You can develop relationships with individuals over a period of years and the next thing you know, there’s a change,” Mr Cox said. “So there’s a need to be consistent in what Bermuda represents.
“It’s frustrating for me to continue to have to do the same thing over and over. But it’s what every jurisdiction has to do because people and positions change and international regulatory frameworks change.”
He gave the example of international anti money-laundering (AML) standards, for which Bermuda built a framework in 2007. The international requirements have changed in the years since. Bermuda is preparing for an AML assessment by the International Monetary Fund next year.
“You have to adapt to those changes, but you also have to make sure people know how you’re adapting,” he said. “The worst position to be in is you’re not sharing your road map and engaging internationally.”
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