Banking insight


Key figures at the Bermuda Commercial Bank (BCB) outline the bank’s offering to the insurance and reinsurance community, and address those challenges faced by BCB and the wider banking industry.

Horst Finkbeiner, chief operating officer

Having been up and running a year since the sale of the bank to the new investor group, what have been the key challenges faced by the bank over the last 12 months and how have you sought to surmount these obstacles?

We faced several challenges coming out of a period in which the sale process prevented us from making any significant changes. We had to rebuild our brand and our place in the market at a time when the world’s economy was depressed, refocus our asset management programme and initiate projects to upgrade our infrastructure. These are each in themselves major projects—taken together, they represent a significant effort.

To a large degree, we have been successful. BCB has updated its brand and image, and has become visible in the marketplace again. In the markets we serve, we are establishing ourselves as the first choice for private wealth and corporate clients, and our business is expanding. Our asset management programme has yielded solid, sustainable revenues while keeping a conservative risk profile. And while our systems and product work continues, we have added new key staff and made a strategic investment in Westhouse Securities Limited in London. Our ability to achieve all this rests on the strength of the BCB team and the resources brought by the new investor group, and the support of our shareholders.

How is BCB looking to differentiate its offering from the competition?

BCB has always been a conservative bank and this served us well during the global financial crisis. We never invested in the instruments that caused problems for so many of our peers, nor did we get involved in the property markets. Our capital adequacy ratio and leverage ratio remain far more robust than industry averages, something that our clients seek and appreciate. We are focused on private wealth and corporate banking, which are markets that we serve well. Further, we genuinely offer a level of service that is difficult to find elsewhere. We don’t use a call centre or voice response telephone system, we answer our own phones. Our entire team—right up to the top of the bank—are available to help clients. Our strength, focus and level of care give us a distinct competitive advantage.

What are your ambitions for growth over the coming five years?

We are tremendously excited by the next few years. We will mature our systems platform and use the technologies to deliver stronger services to our clients. We are already expanding our presence in the Bermuda market and will seek to establish ourselves in new jurisdictions. There will be more challenges to enjoy, but as the adage goes, smooth seas do not make skilful sailors.

Greg Reid, chief financial officer

What are key financial challenges presented by economic conditions in Bermuda and globally for BCB, and how is the bank looking to insulate itself from choppy economic conditions?

Like all banks, BCB remains challenged by the current low interest rate environment. That being said, BCB is in the very interesting position of having come through the global credit turmoil of the last few years unscathed and with our capital base fully intact. Where we identify opportunities, we are in position to take advantage of these opportunities. And we do see quite a number of opportunities. Locally, we see a still very valuable business community looking for innovative new products that we are now in a position to offer. Whilst overseas, we see growing markets in South East Asia that the bank is exploring with our investor group.

What approach is the bank taking to further strengthen its financial position and are you looking to secure further investors in the bank?

BCB is in the rather unique and certainly enviable position of having gone through the global financial crisis with an almost 100 percent cash balance sheet. We therefore suffered no direct impact from the credit crisis and our capital position remains extremely strong. We suffered no writedowns or impairments for the simple reason that we had no credit or investment positions throughout this period. We now utilise the substantial experience within our investor group for balance sheet management purposes. This process has resulted in a limited diversification out of cash and into a portfolio of investments that adhere to our conservative risk philosophies while at the same time providing higher yields to the bank.

A priority for the bank right now is stable organic growth. We remain confident that we offer a very strong product which will propel this growth.

Glendall Phillips, general manager, banking

Where do you see the future in banking and how can BCB as a small bank deliver an international service?

There is the belief that the banking models used by the large international banks have made these institutions susceptible to the types of problems that caused the financial crisis, and to reduce and avoid the recurrence of similar problems in the future, solid banking activity will lie in the hands of smaller banks. Banks therefore need to adapt to continuously changing economic conditions and take the necessary steps to satisfy their customer base.

"There is a need for banks to offer a comprehensive range of international solutions to assist their clients in meeting obligations in every corner of the world-- from establishing a banking relationship, to liasing with counterparties, managing the riks, financing and reviewing of trade transactions, and remitting cash balances."

As the world shrinks and trade and political boundaries are removed, requirements from globe-trotting clients have become more acute. There is a need for banks to offer a comprehensive range of international banking solutions to assist their clients in meeting their obligations in every corner of the world—from establishing a banking relationship, to liaising with counterparties, managing the risk, financing and reviewing of documents associated with local and international trade transactions, and remitting cash balances.

At BCB, we are aware of the issues facing businesses and provide our clients with the solutions to handle those issues. We are able to render a personalised, high-quality, complete banking solution which:

• Is designed specifically or tailored to meet our clients’ needs

• Delivers personal service with an experienced dedicated relationship staffer

• Gives our clients ready access to their funds money

• Provides the convenience of online banking

• Provides the convenience of operating multi-currency accounts.

BCB, as a small financial institution, is structured in a manner to recognise the changing environment, harnessing technology, and tailoring its services and products to accommodate its clients’ needs.

Neil de Ste Croix, general manager, trust services

How are you looking to further develop your trust business? What will be the major drivers of growth?

The bank itself came through the global financial crisis with a cash balance sheet unimpaired by loan or investment problems, and is poised to make strategic acquisitions. We are currently in discussion regarding the purchase of another trust company in order to provide us with a larger share of the market as well as open up new sources of business. With the increased regulation being placed on trust companies, it is expected that a number of the smaller players in the market will either merge or sell themselves to larger companies with more robust compliance and reporting infrastructure.

In addition, we continue to leverage the long-standing relationships we have with professional advisors around the globe and we keep abreast of the various changes around the world in order that we can fully understand the nature and reasoning of the estate, tax and legal planning behind each new relationship.

Randy Morris, general manager, fund services

Greater regulation for funds is on the horizon. What impact do you think it will have upon fund business at BCB and in Bermuda?

Bermuda has always been regarded as a domicile in which investment funds operate in line with international best practices. This is due in large part to the fact that any regulatory changes implemented in the past, and contemplated for the future, are only implemented after an in-depth process of consultation between the Bermuda Monetary Authority and the local fund businesses service providers, including the local fund administrator, and lawyer and audit firms. This helps ensure that any amendments and additions to the existing investment fund regulations meet or exceed international regulatory standards, while still continuing to offer less bureaucracy and regulatory interference so as not to compromise the standards necessary to manage and grow businesses. In so doing, Bermuda is recognised by international bodies as being amongst the best regulated and most compliant jurisdictions worldwide.

With the measured and conservative efforts to improve the Bermuda registered investment funds product, coupled with Bermuda’s excellent professional reputation, sophisticated infrastructure, ability to handle sophisticated client needs and the depth of experience of its service providers, Bermuda is regarded as a premier offshore financial and servicing centre for the investment funds industry. Bermuda continues to be the preferred jurisdiction for many fund managers, and this can only bode well for the future development and expansion of the fund industry.

Cayman is the leading offshore funds destination. Is there an ambition in Bermuda to compete and do you think that there is a role for BCB in pursuing such a goal?

Bermuda’s fund industry recognises and acknowledges that the main problem is that the Cayman Islands has become the epicentre for investment fund incorporations because the Caymans law firms have done a good job selling themselves and Cayman to fund managers and their lawyers.

"Locally, we see a still very valuable business community looking for innovative new products that we are now in a position to offer."

In many respects, Bermuda and the Caymans are very similar jurisdictions; however, the main perception is that it is both quicker and cheaper to incorporate an investment fund in the Cayman Islands. While this may have indeed been true a few years ago, this is no longer the case. Bermuda has reacted decisively, making investment fund registration quicker, easier and cheaper as a direct response to the frustration among fund promoters with the length of time they experienced when creating, domiciling and listing an investment fund structure in Bermuda.

Bermuda and BCB recognise that they need to set the record straight in order to win back Bermuda’s business share from Cayman and a concerted effort is being made to do just that. Organisations such as Business Bermuda, with direct involvement and assistance from the Bermuda Government and local service providers, are diligently promoting Bermuda as a premier offshore financial and servicing centre for the investment funds industry, by touting Bermuda’s clean image and the fact that Cayman’s reputation for quickly signing off new incorporation applications and relaxed oversights has led to several recent hedge fund collapses. While Bermuda cannot realistically compete on a cost basis, it can compete most effectively when considering the value for money spent.

Bermuda, BCB, banking, insurance, reinsurance

Bermuda Re