Government?s chief economic advisor yesterday said the decision to let HSBC Plc buy the Bank of Bermuda is only the first step in the Finance Ministry?s plan to open the Bermuda market to foreign financial institutions.

Dr. Andrew Brimmer, who has been advising the Ministry of Finance on economic matters since 1999, told last nightthat the opening of Bermuda?s financial services sector through the HSBC transaction was in line with Government?s strategy to expand the financial services sector through active pursuit of foreign investment capital.

Dr. Brimmer said: ?For Bermuda to be a world class financial centre there has to be more than one top bank. The financial services industry is an amalgamation of different services, there has to be an aggregate of services.?

HSBC will transfer some of its money management activity from the Caymans and from Hong Kong to Bermuda. But we hope that Bermuda can also attract other world class money management firms and trust companies.

?My own view is that Bermuda ought to be prepared to host such institutions, consistent with maintenance of stability and growth opportunities for Bermuda itself.

?In the Ministry of Finance, they have not stopped considering what other types of institutions Bermuda should try and attract. We did not close the shop with this (HSBC) transaction; this is not the end of the road.?

Dr. Brimmer, speaking from Washington, DC said he was actively and directly involved in Government?s negotiations with HSBC including ?numerous? meetings with the Bank of Bermuda?s CEO Henry Smith and COO Philip Butterfield, beginning months before the transaction was made public last week.

He said some of those meetings were held with Ministry of Finance Financial Secretary Donald Scott and sometimes he met with the bank?s executives on his own.

Dr. Brimmer added that HSBC?s interest in the Bank of Bermuda had been welcomed by the Minister of Finance, as it was in line with a plan the Ministry has had from 2000 to open up the sector to foreign institutions.

He said: ?The Minister was delighted when Bank of Bermuda informed him that they were trying to team up with a foreign partner as they were in need of more capital. HSBC was the institution they were looking at and had even begun discussions with.?

Dr. Brimmer added that the Minister was briefed on the Bank of Bermuda?s goals and objectives and kept informed on a continuous basis as they pursued the opportunity. He said the Ministry had been actively involved from early in the summer on the matter.

Dr. Brimmer said: ?This transaction was clearly a high watermark for the Minister in transforming the financial services industry in Bermuda but it is not the end of the line.?

He added that the Ministry is working to encourage other world-class institutions, whether banks or trust or asset management companies, to come to Bermuda.

He said the HSBC transaction ? which he characterised as involving ?much exchange, this process took months? ? and others that would follow, were seen as part of a careful plan that the Government had to encourage the growth of the Island?s financial services and international business sectors.

Dr. Brimmer said: ?In the year 2000, the Minister asked me to look at future sources of economic growth, specifically with an emphasis on employment. I did that, and looked five years out. For planning purposes we had to talk about a specific time horizon and made it from 2000 to 2005.?

?It was clear from that study and assessment that tourism, which had been the principal source of growth and employment was likely to continue to decline. The sectors that were growing were the financial services and international business sectors.?

Dr. Brimmer continued: ?I made an assessment of where the prospects of growth were, and concluded those two areas would likely be the drivers of development in the future.

To that end, he said he met with a wide cross-section of business leaders: ?In developing an outlook we talked to a number of Bermuda business people including the Bermuda International Business Forum, and had a number of meetings with all of the senior management at the banks.

?We also talked to the insurance companies and the lawyers ? they are the real intermediaries and local spokespeople. Any investor interested in Bermuda starts with the lawyers, and that is where we started,? Dr. Brimmer said.

Dr. Brimmer said that in his advising the Ministry he works with both Mr. Cox and Mr. Scott, and the rest of the ministry team, stressing that he is asked to look at certain areas but it is a ?team effort?.

?I do not do number crunching. I do analysis, assessment and weighting but the whole team is involved,? he said.

He continued: ?In exploring with each financial institution, we asked what they saw as their own future, what they saw as their own plans. I was pleased that they were quite candid and open. The point is that we came away with a pretty good idea of there they would like to go and the type of business they would like to engage in.?

The end result of Dr. Brimmer?s assessment was a plan to actively open the sector: ?Along the way we developed an approach to provide a basis for attracting financial services to Bermuda because the industry would bring capital and direct foreign investment.

?You might think of it this way. In the past Bermuda made its palaces available and was prepared to be hospitable to foreign investors but Bermuda had not campaigned for foreign investors. But if you look at other countries, many have actively campaigned and promoted their benefits to potential investors.

?Bermuda?s thinking has been to announce its advantages and then wait for others to come. That hasn?t been the case in tourism where Bermuda has actively advertised and has US offices, it actively campaigns. But in finance and international business, Bermuda did not have an active campaign.?

Dr. Brimmer said he thought the time for allowing in foreign financial services companies was here: ?Bermuda is not only ready for this but needed this. We went further we looked at what kind of companies the Island should try and attract.?

He said: ?In terms of insurance, Bermuda already has world-class systems. Bermuda is one of the leading insurance markets, and especially in reinsurance. But what it does not have is world-class banks, money management firms, trade financing firms and so on. I felt if it was to compete in the future, in a world that is already and is becoming even more competitive, Bermuda had to attract several world class banks.?

Dr. Brimmer said the world?s top 20 bank ? he named some of those including Citigroup, Bank of America, Barclay?s, HSBC, Deutsche Bank ? were looked at.

?If you pick up any listing of banks by size, deposits or assets, these are easily in the top ten and we looked carefully at more, including Swiss banks.

?What I am saying Bermuda needed to have was banks with leadership, which depends on size, scope and capitalism.The Ministry accepted that model and soon thereafter began to weigh enquiries in the context of that framework.?

Dr. Brimmer said the policy resulted in Minister Cox granting exemptions to the Island?s banks on the 60/40 ownership rule and that the Bank of Bermuda was the first.

?Bank of Bermuda took the lead. They said to the Minister that if they were to grow they needed access to further capital and it had to come from abroad, as there was not enough in Bermuda to meet their needs. The Minister listened to that and gave the exemption.?