reports.

When The Deposit-Taking Business Act 1998 is passed the Bermuda Monetary Authority (BMA) will gain increased powers, giving it licensing jurisdiction over the Island's financial institutions.

The recently passed Investment Business Act 1998 also extended the BMA authority, handing regulation of the investment sector over to the regulatory body and increasing reporting requirements.

Under the deposit Act the BMA will become responsible for collecting some of the $2.6 million in annual fees currently paid to Government from the Island's banks, deposit companies and trusts. Fees will also be set for investment firms.

Whether those monies stay in the BMA's coffers will be up to the Government, but these could also be another source for revenue for the Island's central bank.

As BMA General Manager Malcolm Williams said on Friday, once the two Acts come into force, the regulatory body will have more powers than the Bank of England. The Bank of England was recently stripped of its authority over the UK's banking system. Under the new Acts the BMA will also have the authority to issue codes of conduct relating to deposit-taking companies and to the investment sector, in effect giving it the power to form new regulations.

However, the stipulation is that the codes must be issued in consultation with the Minister of Finance and the businesses involved.

Mr. Williams has of course heard the rumblings among some in the Island's financial community of those worried about the BMA's growing might. Is it about to become a truncheon-wielding ogre with claws of red tape to lash victims down? Mr. Williams smiles at the suggestion. "Under both Acts we will be accountable for our actions,'' he said. "We will be accountable through our annual report. We will also be responsible through statements of principles under which we will operate.'' He added the statements of principles are in the process of being laid out and will be the guidelines restricting the BMA's authority and actions.

"Even though we are getting these powers we will get a menu set by Parliament,'' he said. "There will be very little discretion. We are happy to take on the responsibility with accountability to the market and to Government. It is necessary and to the extent it can be written into legislation -- fine.'' Mr. Williams made the comments at an interview after a speech on the new powers of the BMA at a monthly luncheon of the Chartered Institute of Bankers held on Friday at The Club.

The new Act will bring Bermuda's three banks and its deposit companies, currently governed by two separate Acts, under the BMA's ambit. Banks and deposit companies are currently under the authority of the Minister of Finance.

It will now be up to the BMA to decide what companies and sectors may be classified as deposit taking institutions. For example, some people at the luncheon suggested trusts companies, insurance companies, investment firms and travel agents might also be considered for licensing under the Act.

"Possibly,'' Mr. Williams replied.

Bank of Butterfield president and chief executive officer Calum Johnston interjected: "As long as you regulate them on the same playing field.'' The other possibility is that if other sectors get licensed under the Act they could also be issued the right to do foreign exchange transactions. That right was recently extended to deposit companies.

"These are the sort of questions we at the BMA will have to deal with,'' Mr.

Williams said.

Another important offshoot of the Act is once the current banking Act is replaced, the sector's ownership rules will then fall under the discretion of the Minister of Finance as laid out for local businesses under the Companies Act. The bank Act is the only piece of legislation that enshrines regulation limiting foreign ownership to a maximum of 40 percent in a specific sector, and doesn't leave the decision to the discretion of the minister.

The regulation came under scrutiny when the Bank of Bermuda this year attempted to gain exemption through a private bill and failed. When the new Act comes in force the bank will simply have to apply to the minister, bypassing the need to go before Parliament.

The removal of the specific requirement for the banks also takes some of the pressure away from the BMA in case one of them gets into financial trouble.

The BMA currently has the authority to lend money to a bank to prop it up -- a lender of last resort. With the removal of the requirement, it will make it easier to consider the option of inviting an overseas institution to step in as a saviour.

BMA'S Malcolm Williams: "We will be accountable''