HAMILTON, BERMUDA – The Financial Policy Council (FPC) held its fifteenth meeting on 3 December 2020 via teleconference. All members were able to participate on the call.
The meeting focused on pathways to sustainable growth in Bermuda, discussing both risks and opportunities emerging from the new economic conditions created domestically and globally by the Covid-19 pandemic.
FPC Members welcomed the work underway to develop an Economic Recovery Plan in a timely manner, addressing the impact of Covid as a priority and which would be based on principles of fairness and equity for all Bermudians, financial viability where support is given, and fiscal prudence in managing Bermuda’s finances. Members stressed the importance of implementing effectively the recovery measures to be agreed to in this plan, as well as maintaining Bermuda’s competitiveness in the global arena.
Members discussed plans to develop a National Digital Bank (NDB), welcoming Government’s efforts to produce a feasibility study and business plan to assess its potential and viability. FPC recommended that this work should be undertaken by a suitably qualified and independent professional consultant, with special care taken in outlining the objectives of the bank, considering the commercial realities to avoid the bank becoming a burden on the state, and applying appropriate regulatory standards.
In relation to the fast moving development of Central Bank Digital Currencies (CBDC) and stablecoins, FPC noted the potential of these both to provide enhanced services for Bermudians, and to act as an intermediary for international developments in this space. FPC members looked forward to more in depth discussion on the issues at the next FPC meeting, which would review both international developments as well as considering the implications for Bermuda, including opportunities and potential risks both macro and micro.
Members also discussed the future of Bermuda’s banking sector, noting the island’s unusual and contrasting characteristic of hosting two distinct sub-sectors: international, which competitively services the global International Business (IB) hub, and domestic where the small size of the market makes competitive cost of delivery of services by incumbents a challenge. From a financial stability perspective FPC noted the importance of addressing the needs and concerns that arise for each sub-sector. The CEO’s of Bermuda banks, together with the Bermuda Bankers Association attended FPC for a preliminary stock take of both public policy and government priorities on the one hand, and the issues these give rise to for the banks. The intent to ensure continued dialog on the issues as between Banks and Government was welcomed.
In relation to tax matters, FPC noted the Government’s two overriding priorities namely: firstly, to review and reform the domestic tax structure given the need for fiscal prudence and to underpin recovery, and secondly, to respond to the OECD/EU (Organization for Economic Cooperation and Development / European Union) set of initiatives on transparency and fairness. If both aspects could be tackled holistically this might provide an opportunity both to address domestic issues as well as persisting negative attitudes to the jurisdiction in the tax haven sense. Members would be supportive of such an approach if it can be developed, whilst noting the need to ensure the attractiveness of Bermuda to the IB sector as well as the inevitable impact on Bermudians.
The next formal meeting of the FPC is scheduled for April 2021.