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Bermuda Government Remains Silent On 60/40 Decision

Mairi Mallon, Royal Gazette

01 December 2000


This story is reproduced by kind permission of the Royal Gazette at http://www.accessbda.bm

Finance Minister Eugene Cox has still not made a decision on the possible relaxation of the 60/40 ownership rule, despite announcing he would do so by the end of October.

A month on and the Ministry of Finance said they cannot say when and if the decision will be made.

Peter Sousa, the Assistant Financial Secretary at the Ministry of Finance, said: "There is not much new. It is under active review by the Minister."

The Minister has promised a decision on whether the strict Bermuda ownership rules which restrict ownership to 40 percent foreign investment, will be relaxed.

Bank of Bermuda and Bank of Butterfield have both put in applications for exemption from the rules, which will allow them to get foreign investment.

For the past two years the Bank of Bermuda has been seeking an exemption from the rule that means that 60 percent of the bank has to be owned by Bermudians or Bermudian businesses.

Henry Smith, the bank's president and chief executive officer, said the bank wants to raise more capital and do this it has to get investment from abroad.

The Bank of Bermuda wants to list on the Nasdaq, and there is doubt whether the Nasdaq would allow the bank to float stock with the ownership rule in place.

The bank has said all along that its stock price is undervalued and that taking the bank onto the Nasdaq would be good for shareholder value.

Since speculation on the possibility of an exemption in June, the price of both bank's shares have soared to all time highs of $40.50 at the Bank of Bermuda and $20.50 for Bank of Butterfield.

Bank of Bermuda shares had previously stayed at $28.00 for months, but have jumped by $12.50 or 45 percent. The stock price has dipped slightly in the past month. Shares closed yesterday at $39.50.

Bank of Butterfield shares had been around $16.00, but have gained $4.50 or 28 percent since the summer. The price has also dipped in the past month, closing yesterday at $19.25.

Earlier this month the Bank of Bermuda said the delay has put it "in a difficult position" in trying to respond to queries from its shareholders, staff and other interested parties.

Andrew Brimmer, Government's economic policy advisor said earlier this summer that Mr. Cox was "hoping to make a final decision by the end of October" or sooner. But there has been no response.

Mr. Sousa said when asked if a decision would be made soon: "There are a lot of sensitive and important issues in considering the application. That is really all I can say."

The Bank of Bermuda's initial effort for an exemption failed in July, 1998 when the Progressive Labour Party, then in Opposition, blocked a private member's bill tabled in the House of Assembly for the exemption, because it dealt with only one bank and not all three.

Last September, the Bank of Bermuda applied to the Ministry of Finance for the exemption and the Bank of Butterfield followed this summer.

Bank of Butterfield earlier this month took out a legal filing in connection with the exemption.

Earlier this month a spokesperson for the Bank of Bermuda said: "We continue to have every confidence that the Ministry (of Finance) understands the critical importance of an overseas listing to the Bank's future and is aware that a considerable amount of time has passed since we submitted our application.

"In the meantime, we hope to work with the Ministry in order to move this forward on a prompt basis."

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