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The Bermuda Monetary Authority employs a risk-based approach in the regulation and supervision of banks and deposit companies in Bermuda. The regulatory and supervisory framework is underpinned by the principal legislation – The Banks and Deposit Companies Act 1999, coupled with the timely issuance of statements of principles, policy and guidance to the industry.

As a leading risk-based regulator, the Authority conducts supervision in accordance with the standards established by the Basel Committee on Banking Supervision, in particular with the revised Concordat and with the precepts for the supervision of cross-border banking. The Authority liaises closely with other regulators, both domestically and internationally, in order to ensure effective consolidated supervision, both in relation to entities for which the Authority acts as consolidated group wide supervisor and where licensed institutions may form part of international banking groups. The Authority’s supervision involves regular on-site visits and off-site surveillance, which includes the review of prudential returns on both a solo and consolidated basis and regular prudential meetings with senior management of licensed financial institutions.

The Authority assesses institutions in the banking sector using a risk evaluation model, and generally institutions where the risks are higher or increasing can expect to be subject to a higher incidence of on-site review and prudential meetings. The Authority has also introduced a stress testing methodology and monitors on a regular basis a set of Financial Stability Indicators based on the IMF’s core and encouraged set.