It is an inescapable irony that the Bank of Bermuda, which was formed more than 100 years ago because Bermuda's merchants were dissatisfied with the performance of foreign banks, could now be sold to HSBC Plc.

Indeed, it is surprising that there has not been more of a public uproar about the sale of an institution that more than any other symbolises the success of Bermuda's economy since 1945.

Amid the vast amounts that have been written about the sale, which is due to be voted on on Monday, the fundamental question of whether allowing international banks into Bermuda is a good idea has not been fully answered.

The protection of the Bermuda banking sector, both through the 60:40 rule and a restriction on issuing banking licences, served the Island well from the end of the Second World War until today.

Not only did it create a solid core of locally owned banks, but it meant Bermuda avoided much of the bad publicity that offshore banking domiciles like the Cayman Islands and the Bahamas attracted when banks were embroiled in money laundering and tax evasion cases.

The question now is whether the advantages that international banks bring offset those benefits.

Free market enthusiasts will say yes, arguing that any form of protectionism is bad.

The Government has agreed. In part this was a quid pro quo for granting the Bank of Bermuda an exemption from the 60:40 rule in order to list on a US stock exchange. The Government said that if the Bank of Bermuda wanted to risk being owned by non-Bermudians as a result of its listing, then Bermuda should allow other foreign-owned banks into Bermuda. At the same time, Government said it saw the expansion of the banking sector as a valuable addition to the economy.

That may be so. Distinctions between different parts of the financial services sector have blurred. Insurers offer banking products and investment products. Banks offer insurance products of various kinds. Areas like trust management and mutual funds management are perhaps more important to the Bermuda banking sector than traditional lending and deposit taking services.

It is also fair to say that international banks are already in Bermuda in one form or another. HSBC has a small captive insurance management unit. Last year, Citigroup ? the world's biggest banking group ? bought mutual fund administrator the Forum Group while the Bank of New York bought International Fund Administration Ltd. a year earlier.

HSBC chairman Sir John Bond has said that HSBC would have set some form of banking operation on the Island if it did not get Government approval for the Bank of Bermuda deal.

So the Bank of Bermuda is already under some pressure. In part that is of its own making. Having listed on the NASDAQ in the expectation that its stock would rise and, more importantly, that it would be able to raise sufficient capital to compete with its peers and to service the Island's giant insurance companies, it has accomplished neither goal.

Now it says that it would not be able to compete with the international banks that could move to the Island.

On that point it is probably right. And there are benefits. The bank will see a good deal more trust business come to the Island and it should be able to leverage HSBC's stronger capital position to help to fund the Island's giant insurance companies.

The deal should also open up employment opportunities to Bermudian bankers, who will now have the chance to work anywhere in the world.

When those advantages are coupled with the bank's failure to leverage its overseas listing and the difficulty that a small bank will have competing against "mega-banks" like Citigroup, JP Morgan Chase and HSBC, then this is a sale whose time has probably come.

And if Bermuda is to continue to be a leading financial centre, it would probably benefit from having international banks as well.

That does not make it easy to swallow, and it is hard to imagine some of the giants of the bank's past like Sir Henry Tucker or Donald Lines going this route with any pleasure.

But in the circumstances, it is probably inevitable and may end up helping Bermuda. So this is a deal that probably will happen and which shareholders will support. But they should not do so happily and only time will tell if Bermuda will really benefit.