Bank of Bermuda and multinational bank HSBC would not this week confirm or deny a claim made on Monday that the latter was in takeover talks with the Island's largest bank.

Although not denying the claim, Bank of Bermuda boss Henry Smith said it was bank policy "not to comment on potential mergers and acquisitions". HSBC spokeswoman Karen Ng also said the group was not in a position to comment.

"We are given lots of proposals and we can't speak to every one. It is standard for us to not comment at all. We would only say something if an announcement was to be made," Ms Ng told The Royal Gazette from London.

The claim, made by BIU president and PLP backbencher Derrick Burgess on Monday, was said to be according to sources, that Mr. Burgess did not name. Mr. Burgess added that the bank had approached Cabinet on the matter but that was denied by Premier Jennifer Smith.

Bank of Bermuda, which was granted exemption from the 60/40 (Bermuda/foreign) ownership rules governing Bermuda companies in December, 2000, would however only be able to sell out to a foreign owner if given permission by the Minister of Finance.

At the time of being granted the 60/40 rule exemption, the bank was made to adopt a bye-law that would prohibit any shareholder holding more than 40 percent of the bank's shares to excercise the voting rights of those shares without the permission of the Finance Minister.

It was also stipulated at the time that the bank "maintain the Bermudian mind and management of the bank". This means the majority of the board of the bank must be Bermudian, the head office must remain in Bermuda and the shareholders meetings must be held in Bermuda."

In light of the claim made by Mr. Burgess, the Finance Ministry was asked by The Royal Gazette if a takeover bid by HSBC was being considered and what Government's policy was towards foreign institutions having controlling interest of a Bermuda company. No response was received from the Ministry by press time.

The matter did however make its way onto the radar screen of the international investment community with New York-based analyst Pavel Oliva putting questions to Bank CEO Henry Smith during an analyst conference call on Tuesday following the company's release of its second quarter results the previous day. Mr. Smith reiterated to the investment community on that call that the bank would not speak to any potential mergers or acquisitions. In addition, Mr. Smith responded on the conference call with investment analysts to what he called "other allegations" made this week by Mr. Burgess.

Mr. Smith underscored that the bank had no political alignments with any party: "We are not (aligned), we are politically neutral and have been for a number of years." Setting the background for the allegations, Mr. Smith told the investment audience that there was an election in Bermuda this week and added: "We are trying to stay neutral in this process."

The Island's regulatory body, the Bermuda Monetary Authority, with responsibility for granting banking licenses and supervising the sector, was also mum on the subject saying that it could not speak on matters pertaining to any particular institution.