Banks need to show they are willing to open up and extend credit to consumers and corporations before the financial markets and economy starts to fully recover.

That is the view of Craig Rimer, president of Cidel Financial Group and director of Argus Financial Ltd., who was in Bermuda last week to speak to investors about their portfolios and give them an update on the market.

Mr. Rimer also focused on the company's core business products and risk management, as well as attending an AFL board meeting and the launch of AFL Investments' new logo and image.

Talking exclusively to The Royal Gazette last week, Mr. Rimer said there were some positive signs that the equity market was beginning to bounce back, but warned that it may take some time to make a full comeback.

He said the biggest difference between the global economic crisis of the past 12 months, particularly since the turn of the year, and the last bear market of the tech crash in 2002, was the correlation with assets rising dramatically and being sold off.

"From the food that you consume to the gas that you put in the car and even stocks and bonds, everything is less than it was a few years ago, measured in US dollars," he said.

Mr. Rimer said that corporate government bonds were about the only asset class that offered any safety during these hard economic times as liquidity was forced out of the financial system, having the knock-on effect of investors scrambling to sell most of their assets, emerging markets stopping buying commodities and prices falling across the board. He admitted it was a very difficult period for investment managers, who usually found some protection in part of the market, but, despite help from diversification in currency and asset classes, in the past six months there was really no alternative to turn to.

"There were a number of factors which impacted the market, from Bear Stearns going bankrupt and the Federal Reserve forcing JPMorgan to take over the its assets to Washington Mutual being forced to be sold to JPMorgan for free basically and Lehman Brothers going bankrupt and the whole system going close to collapse," he said.

Mr. Rimer, who is also chairman of Cidel's investment committee and director and member of the investment committee of Orbit Asset Management Inc. (Bermuda), said the problem was no bank or lender wanted to extend its credit to anyone else, which spread from Wall Street to Main Street, impacting the consumer market as the cash flow dried up.

But he said there was reason for hope, with governments stepping in to bail out businesses and financial institutions, however it remained to be seen whether the various stimulus packages would work over a sustained period of time as leverage was shifted from the corporate world to governments.

"It has given people some optimism that we have seen the worst and that there will not be continued bankruptcies in the financial system and allowed the markets to rally from the levels of March," he said.

"We are 25 percent higher than six weeks ago, but still flat on the year - we need to look at it over a 12- to 14-month period really."

Mr. Rimer said there were some good indicators that liquidity was coming back into the financial sector, but added that until banks extended their credit once again and it spread to businesses, who in turn created profits, earnings and revenue growth, deficits would continue to exist and companies and their clients would struggle.

"There are a lot of positive signs, but if you put it into perspective with what has happened in the last 14 months it is very nice and comfortable, but we still have a very long way to go before we can say it is making a full recovery," he said.

"There is a lot that needs to happen before it's over. But, that is not to say there are no investment opportunities in the meantime. Because of the difficult, volatile times things will go up and down and our challenge is to identify which opportunities make sense and take advantage of those.

"I think Bermuda is going to be affected by all the same things as the rest of the world: people spending less money and less credit, which should and probably will have an impact on real estate prices, and corporations here will will face the same issues that international institutions go through worldwide.

"I think the message is an optimistic but cautious one, because the effects of an extremely precarious financial market collapse and, more importantly, a banking collapse, are going to take many years to flush out of the system fully - you just need to continue to diversify and be cautious about your investments."