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International Monetary Fund

This paper presents an assessment of Financial Sector Supervision and Regulation for Bermuda. The Bermudian authorities have made impressive progress in developing and implementing a risk-focused approach to supervision across the range of their sectoral supervisory responsibilities. Full rollout of the risk-based regulatory system to all market segments is, however, required for achievement of comprehensive oversight of the market. To support the introduction of a formal risk-based supervisory system, the banking department has been restructured.

International Monetary Fund

In the case of Bermuda, application of risk-based approaches seems particularly relevant not only to the insurance sector, but also to other types of financial and nonfinancial activities. The legal framework for investigation and prosecution of money laundering (ML) is well developed, and law enforcement and prosecutorial staff are highly motivated and professional. Bermuda’s Financial Investigation Unit (FIU) should be more adequately funded, staffed, and provided with additional technical resources, including, for instance, expertise in forensic accounting. A key strength of Bermuda’s supervisory regime is the integrated nature of financial sector supervision.

International Monetary Fund

This paper assesses the financial sector regulation and supervision in Bermuda in the context of the offshore financial center assessment program. The assessment reveals that the financial, regulatory, and supervisory framework is well developed in banking, the key areas of securities regulation, and antimoney laundering and combating the financing of terrorism (AML/CFT). Banking supervision is largely in conformity with the Basel Core Principles. The regulation of investment intermediaries and collective investment schemes, the main activities of the Bermudian securities industry, is working effectively. However, some deficiencies were noted in the assessment of insurance.

International Monetary Fund

This paper presents key findings of the Detailed Assessment of the Observance of Standards and Codes in the Financial Sector of Bermuda. The small number of licensed deposit-taking institutions in Bermuda are part of the broader financial intermediation sector. Typically, some 50 percent to 60 percent of the banks’ income is fee based. The value of client assets and the volume of their activities are the main generators of this income. Efforts to reduce employee and occupancy costs that reflect the high cost of doing business on the island are continuing.

International Monetary Fund. External Relations Dept.

No one quite knows how much money is laundered every year, but informed guesses estimate that the illicit economy could amount to as much as 2–5 percent of world GDP. National law enforcement agencies have been fighting financial crime for many years, and the terrorist attacks of September 11, 2001, made the fight against money laundering and the financing of terrorism a top priority also for the international community. The IMF has emerged as a key player because of its expertise in financial systems and near-universal membership of 184 countries. Camilla Andersen of the IMF Survey asked Barry Johnston, Assistant Director in the Monetary and Financial Systems Department, who leads the IMF’s financial sector work on anti-money laundering, and Jean-François Thony, Assistant General Counsel in the Legal Department, who is in charge of the legal aspects, about the progress made to date.

Andrew K. Rose and Mark M. Spiegel*

One reason why countries service their external debts is the fear that default might lead to shrinkage of international trade. If so, then creditors should systematically lend more to countries with which they share closer trade links. We develop a simple theoretical model to capture this intuition, then test and corroborate this idea. [JELF15, F33]

International Monetary Fund. External Relations Dept.

This paper explains how the World Bank carries out its most characteristic activity: the identification, preparation, appraisal, and supervision of projects for economic development. The paper highlights that project lending is intended to ensure that the World Bank funds are invested in sound, productive projects with the purpose of contributing both to the borrowing country’s capacity to repay and to the development of its economy. It is in the coincidence of these two purposes that the Bank’s functions as an international financial institution merge with those that it has increasingly assumed as a development institution.