Bermuda’s financial watchdog is to get new powers to police banks, Government revealed yesterday.

Governor George Fergusson, delivering the Throne Speech, said the Bermuda Monetary Authority would be able to intervene in case of “a troubled bank”.

He added the move was in line with International Monetary Fund recommendations made in 2008.

“To address this recommendation, the Government will bring forward legislation to establish a special resolution regime for banks licensed in Bermuda,” Mr Fergusson said.

“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 will establish a comprehensive bank insolvency framework that would meet international standards and operate independently of general insolvency law.”

The speech also said that amendments to legislation would be made to allow the BMA to license money-service businesses — a worldwide growth area.

“The growth of money-services businesses globally has created new businesses in line with the changing electronic marketplace,” Mr Fergusson said. “The Authority has been unable to to license these businesses because the money service business regulations do not provide sufficient details for appropriate oversight.”

Mr Fergusson said, however, that changes to 2007 legislation would allow the BMA to license and regulate the industry.

Legislation governing the insurance and reinsurance sectors, also policed by the BMA, will be updated in line with global developments.

“Bermuda banks can address the Island-wide need to increase the flow of credit to help reflate the economy, providing Bermudians with the support they need for their business ventures, their educational ambitions and their dreams of home ownership,” Mr Fergusson said.

He added that 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,” the Governor said.

“Reverse mortgages can be an option for people who want to turn substantial home equity into cash in order to ease these challenges.”

He said that 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,” Mr Fergusson said. “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.”

Mr Fergusson said the Government was in talks with the banks and other interested parties with a view to changing bank and deposit company law.

The speech added that 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,” Mr Fergusson said.