The head of the Bank of N.T. Butterfield & Son Ltd has told employees the bank will be tightening its belt to reduce costs where available and staff hiring will be cut back with the prospect of a downturn in the Bermuda economy looming.

An open letter to staff from chief executive officer and president Calum Johnston, obtained by The Royal Gazette, warned the cost of any downturn in the economy to the bank would be "substantial" but he rallied the troops to "give their best in the difficult time.

Mr. Johnston said that the bank was "strong" and said no existing staff who are performing well will be laid off.

He also told employees that the downturn in the world economy will not only have an adverse impact on the bank but also the ability of some of its customers to pay back their loans.

And while he said that they must deal compassionately with those in difficulty, he added it was the bank's duty to produce a return on investment for shareholders and to pay interest on the savings deposits held in the bank.

Mr. Johnston said: "The cost to the bank of a downturn in the economy and of assisting those in difficulty is likely to be substantial. Therefore we must conserve our resources and reduce costs wherever possible.

"While we may not be able to hire additional staff as freely as we might wish, we will not make redundant existing staff members who are performing at a satisfactory level."

But he added that a difficult time lay ahead, not just for Bermuda, but for the world, but the Island had a good economy and the bank was in a good position to weather the storm.

"Bermuda has an economy that is fundamentally very sound and your bank is strong. I have no doubt that better days are ahead of us. All I ask now that each of us give our best in the interest of serving and helping our customers."

But he said that at the same time they must remember their duty to the shareholders who he said in the recent past have accepted the cost of generous bonus and option plans.

He said that he hoped that these bonuses and option plans for employees would once again be approved when the bank's financial position was strong enough to bear this cost.

He said: "While we grieve for the victims and their families we must, at the same time, turn our attention to the prospect of difficult times ahead in Bermuda. There is no doubt that many Americans and others will be reluctant to travel, and this is expected to have a serious adverse effect on tourism and business travel.

"There is already talk of layoffs and closures in the hotel and restaurant sectors of our economy, which in turn, will affect the retail trade and indeed will have a ripple effect throughout the economy."

Mr. Johnston added: "Clearly all of this will have an adverse effect on the business of the bank and we can expect a segment of our customers to experience difficulty in servicing loans.

"We are aware that our staff members are customers and that we are a community bank and must deal compassionately with those in difficulty."

Mr. Johnston also reminded staff that they can make donations to a fund for the victims of the attack and their families, and added the bank has donated $150,000 to the fund.