Bermuda's banking sector is not likely to see rapid expansion, Bermuda Monetary Authority chairman Cheryl-Ann Lister predicted.

Mrs. Lister, who is both chairman and CEO of the body charged with regulation of the Island's banking, investment and insurance sectors, last week told The Royal Gazette she would not expect the sector to see overnight growth, even though foreign banks can now be considered for Bermuda licences.

Mrs. Lister spoke out on the subject in a wide-ranging interview on the BMA - which celebrates 35 years in 2004 - and following the first instance of the Island's banking sector opening up to a foreign corporation with the Bank of Bermuda's $1.3 billion sale to HSBC closing last month.

There have long been strict limits on the granting of Bermuda banking licences but Government has said in recent years that it would encourage modest expansion. Mrs. Lister said: "At this point, I do not necessarily see another one (bank coming in).

"Notwithstanding that we have now made it possible for the sector to expand, I don't think we are necessarily going to see expansion take place," she said, amid speculation from others that the Island could see other foreign banks try to get a foot in the door now that HSBC is here.

Bermuda, which has only five banks and deposit companies, stands in marked contrast to some other business centres including the Caymans which has in excess of 400 banks registered to its shores.

Mrs. Lister said: "We are not going to go the route of some other jurisdictions. You cannot (by law) have branch banks here; it has to be a subsidiary and it would have to provide domestic services.

"And Bermuda is not traditionally thought of as a banking centre so I don't see significant growth in that sector. I would say, maybe, three or four more (banks) over a period of time, at most.

"We are not looking at a major increase in the industry, and I don't think Government is looking at that either," she said. Last week, new Bank of Bermuda CEO Philip Butterfield also spoke on the subject, saying although he thought there could be interest from a few other foreign banks in setting up operations here, it would not be a "free for all".

Regulatory shift

Mrs. Lister said that the Bank of Bermuda, as a wholly-owned subsidiary of HSBC, is now regulated by both the Bermuda Monetary Authority and HSBC's home regulator the UK's Financial Services Authority (FSA).

"With HSBC's home regulator being in the United Kingdom there has to be cooperation with the FSA in terms of making sure that there is nothing developing with HSBC, as an entity, that we need to have concerns about. We also have to keep them involved in terms of supervision of the Bank of Bermuda as a subsidiary. I guess you could say in some ways it is less (work for us), but it does not mean our work (on the banking side) is significantly reduced as we have to go through the same processes of regulating the Bank of Butterfield as a global bank."

Mrs. Lister said historically the BMA could kill two birds with one stone in that regulatory trips, in years past, could be made to both Bank of Bermuda and Bank of Butterfield overseas offices. Now the trips will still have to be made - but only to the Bank of Butterfield's global operations after the Bank of Bermuda's overseas offices are to be absorbed into HSBC's worldwide network.

"The sale does and it doesn't (lighten our work load) because at the end of the day we had two entities so when we went, for example, to Europe, we went to see both the Bank of Butterfield and the Bank of Bermuda. Now we still have to go for the Bank of Butterfield's overseas operations. We can no longer realise any synergies like we did before. If we had to take five trips before, we still have to except now we are going to do one entity instead of two."