MP's yesterday voted to change the structure of the Bermuda Monetary Authority (BMA), which Government said would result in international investors being assured the regulatory authority is independent.

But the Opposition United Bermuda Party said the reforms were "retrograde" because they actually increased the political influence the Minister of Finance will wield over the BMA.

The BMA currently has seven board members all appointed by the Minister of Finance and a full-time general manager which the board hires.

Under the reforms, which will centralise all the Island's financial regulators within the BMA, the board will be expanded to 11 members, and two new executive posts will be created.

The Supervisor of Insurance will move from the Registrar of Companies into the BMA, and a Superintendent of Banking, Trusts and Investments will be appointed to regulate operations under the Banks and Deposit Companies Act 1999, the Trust (Regulation of Trust Business) Act 2001, and the Investment Business Act 1998.

And a chief executive officer will be directly appointed by the Ministry of Finance.

Four board members will come from the financial services sector and four from the Insurance Advisory Committee, all of whom will be approved by Finance Minister Eugene Cox.

Mr. Cox yesterday told MPs that the reforms arose out of various financial reviews, including that by accountants KPMG.

"Overall, Bermuda was recognised as having adequate regulation of all of its services. However, there were areas which still had to be addressed," he said.

"During the past year the Government has reviewed the regulation of all financial services and has now provided for the independence of the Bermuda regulators responsible for this sector.

"With all the changes taking place, there is the need to review the corporate structure of the BMA to ensure that the authority can function effectively.

"Government and Bermuda regulators have agreed that it is in the interests of all to merge the office of the Supervisor of Insurance with the BMA as soon as possible. With this merger, the BMA would be responsible for the regulation of all financial services in Bermuda.

"This merger will not only strengthen our regulatory structure by providing for all regulatory services under the direction of one body, but the structure will continue to rely on industry advisors such as the Insurance Advisory Committee which has served Bermuda so well in developing a successful insurance centre."

He said the changes were based on other regulatory authorities such as the Financial Services Authority in Britain, whose chairman is appointed by the Chancellor of the Exchequer.

Opposition Leader Dr. Grant Gibbons said while the situation should be improved, the changes were a step in the wrong direction because they give Mr. Cox more political influence over the BMA.

The BMA currently has a general manager responsible for day to day operations appointed by the board, but now the new chief executive who will replace the general manager, will be appointed by Mr. Cox.

The Supervisor of Insurance is appointed through the Public Service Commission, but the new office-holder will have to be approved by Mr. Cox, who will also have final say over his or her salary.

"With the Supervisor of Insurance and the CEO, we are perhaps moving in the wrong direction and perhaps it needs to be rethought," said Dr. Gibbons.

"The independence is being curtailed because the minister must approve the individual and the remuneration. There was a chair of the BMA who was politically appointed and a general manager appointed by the board. The general manager's position is now being abolished.

"The new CEO is now a direct political appointment of the minister. (I doubt) taking the chief operating officer of the BMA as a political appointment was what was anticipated by KPMG and others.

"We are moving away from the political independence we were seeking to achieve. It is a retrograde step."

Dr. Gibbons suggested the chair of the BMA could be a political appointment to provide the link to Parliament while the Public Service Commission or the Governor, taking advice from the BMA, appoint the CEO.

Under the reforms, the CEO can be sacked if he is "unfit or unable" to do his job. Dr. Gibbons said this was too strong a test, and the minister should be able to fire the top officer of he or she was incompetent.

Mr. Cox said the changes were similar to those of the FSA, the British regulatory authority in London.

And given that Government "pays the bill," it needed to have someone reporting to Parliament to ensure accountability.

But Dr. Gibbons said Government was moving away from this because fees were being paid directly to the BMA rather than the Consolidated Fund.

Afterwards, Mr. Cox told The Royal Gazette although he had to approve the board nominations from the insurance and financial sectors, he would be "foolish" to interfere because he already relied heavily on them for their expertise. The new BMA would effectively be self-regulating, he said.