For decades, the chief characteristic of Bermuda’s regulatory approach to international finance has been summed up in the phrase “firm but sensible”. In some of the larger jurisdictions, red tape has all but overwhelmed businesses, without necessarily achieving much in the way of efficiency.

In the last few years, however, as global standards have changed, Bermuda has formalised its standards to meet or exceed international rules. How will the BMA continue to allow business to thrive, while increasing the degree of regulation and oversight it brings to bear on businesses in Bermuda?

“It is important that we are seen as an effective regulator, and that we are firm, yes, but that we don’t have regulation for the sake of regulation,” chief executive officer Mrs. Cheryl-Ann Lister explained. “We need a BMA that will allow quality businesses to operate effectively, but one that at the same time has the tools necessary to act when the laws are contravened.”

One way in which that can be achieved is through what is known as “risk-based regulation”. It’s a two-tiered approach that acknowledges that a multi-billion dollar company selling to its peers needs a different kind of scrutiny from a small company dealing with the public. Risk-based regulation also acknowledges that the customers of Bermuda’s largest companies, such as reinsurers, do not deal with the public, might have relatively few transactions despite the enormous amount of money they generate, and might have as their customers other insurance companies who are sophisticated financial entities.

The risk-based approach is designed in a way that is relevant for the type of financial services industry Bermuda has attracted. Risk-based regulation is used by all the top regulatory agencies, but it is not the be-all and end-all of the BMA’s style. “Ensuring that our risk-based framework is consistent with international standards is the next step,” Mrs. Lister explained.

International standards change, and lately they have changed more than ever before. A continuing challenge that regulators around the world face is keeping on top of these global standards, some of which the BMA is itself setting.

“Financial services regulators are going through tremendous change all over the world,” Mrs. Lister said. “Even the largest jurisdictions are having to cope with a raft of changing standards, so the challenges we are facing are no different than those being faced by any regulator in major jurisdictions.”

Bermuda’s international business sector is unique, not least because the Island is so small compared to, say, the US or other larger jurisdictions. “Plus, when a US company has a problem, a US company has a problem,” Mrs. Lister said. “When a Bermuda company has a problem, Bermuda and that company have a problem.”

The Island’s success has created an uneven playing field. As a result, the BMA carries out much more screening of those who want to do business in, or from, Bermuda than do many of their counterparts. For Bermuda, sometimes, internationally accepted standards just aren’t good enough.

“We have made significant strides towards implementing the international standards,” Mrs. Lister said. “There’s always more that you can do, however. Some of the things we’re doing we will achieve before the deadlines set by the international standards bodies. It’s important to note that in some areas, especially the insurance sector, we are heavily involved in framing the international standards. We’re on the committees that are creating the global standards.”

The BMA has hosted large numbers of visitors in the past few years, bodies with an alphabet soup of names: the OECD, FATF, KPMG, all reviewing the BMA’s standards and recommending improvements where necessary. The BMA passed all these tests with flying colours. Next up is the International Monetary Fund, the IMF, who will be back for their third review in the last few years in May and June, looking at anti-money laundering provisions and how the BMA stacks up against international standards in areas such as banking and insurance regulation. These reviews entail a considerable amount of work on the BMA’s part, but each success further validates Bermuda’s status as one of the world’s best-managed jurisdictions.

The BMA will continue to grow in the next few years, “but this is not growth for growth’s sake,” Mr. Richardson said. “This is structured, planned, strategic growth to match the growth that is also taking place in the industries that we regulate. In Bermuda, that growth is principally in the insurance and reinsurance sectors. So if you look at the kind of people we will be adding to the Authority’s staff, we are adding disciplines that are complimentary to the ways in which those firms are growing.”

As the Bermuda insurance and reinsurance sector has grown, it has become much more sophisticated, “which means that the kind of models that we use in applying our risk-based analysis of necessity have had to become more complex,” Mr. Richardson said. “The kinds of research that we do have had to become more sophisticated. And so the quality and range and competencies of the people that we have at the Authority have to grow in accordance with that.”

In turn, Mr. Richardson said, that imposes a requirement for an evolving style of leadership. Acknowledging the “excellent work that Mrs. Lister has contributed,” Mr. Richardson said that the BMA had an imperative, as well as an opportunity, to evolve. A couple of hours ahead of the official opening of BMA House, the Authority’s new headquarters, Mrs. Lister’s successor was announced as Matthew Elderfield, who will take over the post in mid-July. Mrs. Lister will stay on for a month to share her experience with Mr. Elderfield.

Today’s BMA is an integrated financial services regulator that is well positioned to move forward by evolving with the changing environment of the world of high finance.