A framework has been set out for the Bermuda Monetary Authority's (BMA) powers of intervention in troubled banks and a new deposit insurance scheme as announced in the Throne Speech.

At a press conference held yesterday, Finance Minister Paula Cox outlined the proposed legislation, which will be tabled in the House of Assembly, with the amendment to the Banks and Deposit Companies Act enabling the appointment of a manager to assume control of a licensed institution and provisions for them to act as a liquidator or receiver of a failed institution, based on court appointment.

The new plans would also allow for another bank to take on the deposits and assets of a failed or failing institution and the temporary transfer of assets of the deposit taking the institution to public ownership.

This follows the start of winding-up proceedings for local investment firm Emerald Financial Group and the Bermuda branch of the British American Insurance Company by the BMA earlier this year.

Ms Cox said the Ministry of Finance had been working on setting up a deposit protection scheme for bank's retail customers since autumn last year, with a consultation paper being drafted by the BMA in conjunction with the Ministry, assisted by the Island's commercial banks and deposit taking institution, in line with the standards of the Basel Committee on Banking Supervision and the International Association of Deposit Insurers.

The new initiative would include membership, deposit coverage, funding and determination of member premium contribution, designation of a corporation to administer and manage the scheme, the appointment of a board of directors of the corporation, financial and audit provisions including reporting requirements, payment of compensation in the event it was required, and protection from personal liability and preservation of confidentiality.

Ms Cox also announced the modernisation of the legislation governing the operation of credit unions under the Credit Union Act 1982, with the proposal to transfer complete regulatory and supervisory responsibilities to the BMA.

She added that a consultation paper on the proposals had been sent to the Bermuda Industrial Union Members Credit Union seeking its views and is expected to be concluded by the end of this month, with the new legislation to be address in the House.