A new advisory body set up to help Bermuda safeguard its economy from systemic risks met for the first time yesterday.

The Financial Policy Council (FPC) will aim to monitor areas of potential financial systemic risk, recommend moves to strengthen regulation of the financial-services industry and also help devise plans for when things go wrong — such as bank failures.

The advisory body is chaired by Bob Richards, the finance minister, and its members include Jeremy Cox, the chief executive officer of the Bermuda Monetary Authority and three independent experts.

Mr Richards said: “In today’s uncertain global economic environment, it is essential that we remain focused on maintaining the health of the financial sector in Bermuda — and the potential risks to the economy.

“All countries, including Bermuda, are facing threats to their financial stability and many are responding to them. For us in Bermuda this development represents a vital move further to underpin our own financial stability.”

The external members include Sir Andrew Large, former deputy governor of the Bank of England, now an adviser to central banks and governments.

Sir Courtney Blackman the former Governor of the Central Bank of Barbados and Ambassador for Barbados to the US also sits on the council, as does Michael Butt, a veteran of the insurance industry and chairman of Bermuda-based Axis Capital Holdings Ltd. The FPC will meet three times a year.

Mr Cox said: “It is critical that existing customers and those considering doing business in Bermuda see us as a jurisdiction where safety, soundness and fiscal credibility have top priority.

“Bermudians must continue to feel that their hard-earned assets are safe and secure and that decision-making as it relates to Bermuda’s long-term financial stability is of the highest standard.

“This work is key to the Authority’s objective of maintaining financial stability and the soundness of financial institutions in Bermuda, as well as being aligned with supporting Bermuda’s role as a leading international financial centre.”

Many countries began to take financial stability more seriously after the global financial crisis in 2008, when US investment bank Lehman Brothers folded and many other institutions were kept afloat by government-funded bailouts.

Bermuda was not as badly affected as some, as its flagship insurance industry came through largely unscathed. However, Butterfield Bank suffered hundreds of millions of dollars in losses on investments linked to soured US residential mortgages before its future was secured by the combination of a government-guaranteed capital raise and a huge cash injection from a group of private-sector investors.

Government stated: “The formation of the council will overarch a strategic project begun five years ago to strengthen the financial stability framework in Bermuda.”

The work done in that time includes the formation of a deposit insurance scheme and the implementation of tougher international-standard regulations, which require banks and insurers to maintain larger capital buffers to be able to withstand a severe economic downturn or financial shock.

Bermuda’s major banks started this year to report under Basel III banking regulations, while the BMA’s insurance regulation was earlier this month given “third-country equivalence” with the European Union’s new Solvency II regulations by the European Commission.

In 2011, the BMA also formed a dedicated systemic monitoring and analysis function to provide early warnings and take necessary actions to enhance its existing regulatory framework. The BMA’s Financial Stability department’s team of six is led by senior adviser George Pickering.

More recently, the Financial Stability Committee (FSC), a committee comprising senior officials from the Ministry of Finance and BMA, was established to provide a supporting role to the FPC including in relation to implementing its recommendations.

The Ministry of Finance and the BMA, along with the Department of Statistics, will also work closely with the FPC to provide it with data relevant to its work.

The FPC’s recommendations will include early warning functions, but will extend to further development of the recovery and resolution regime in accordance with standards laid down by the Financial Stability Board set up in Basel by the G20.