The slowdown in the global and local economy is having a mixed impact on the Island's banking and mortgage sector.

According to banks across Bermuda, the US economic crisis has had a knock-on effect on their customers and where they are putting their money, whether it be in savings or investments.

Meanwhile, despite the fallout from the credit crisis, there is still plenty of liquidity in the local market, with the banks lending more money, in cash terms, than ever as revealed by the latest report released by the Bermuda Monetary Authority (BMA)

Butterfield Bank's assistant vice-president and investment centre manager Denise Penton said the world economy has had a negative impact on investments.

"A lot of people were surprised about the global economic impact was having in Bermuda," she said. "But we are not living in isolation we are definitely operating in a global economy."

She said clients were either being conservative with their savings or risk-averse, looking at long-term investments."We find that savvy investors are sticking to their investment plan," she said. "But when markets are down it is definitely a time to find opportunities for investments."

Ms Penton said some of her customers had voiced concern about what was happening with their investments, but she advised them to sit tight and not hit the panic button.

"For those already invested we have seen some concern, but it is really important to reiterate to them not to sell when the market is down because they will lose their net worth," she said. "It is just a paper loss of the market value it is not until you sell an investment that you actually realise a loss."

Historically financial markets have recovered from big falls and they are volatile by nature, claimed Ms Penton, offering some hope to investors.

Phil Jones, Butterfield Bank's head of retail banking, said that the bank's core business had stood up to the test during these difficult times.

"We have seen our deposits hold steady in fact they are trending up over the past three years," he said. "People are shying away from longer term investments and they are staying closer to cash."

He said that the bank had adopted a conservative approach to its deposits, investments and lending, and the fact it had been in business for 150 years spoke volumes for its style of management.

Shawnette Griffin, head of consumer credit at Butterfield Bank, said the lending side of the operation was also performing well in a challenging economic climate, with customers coming in and borrowing money for new builds and renovations.

Ashley Parker, head of banking at the Bank of Bermuda, pointed to the property market as a good example of how Bermuda's business sectors were reacting to the downturn in the economy.

"We had an event with our real estate partners a couple of weeks ago and they said that the market had plateaued out a little bit, but there was still good turnover and decent demand. Things seem to be levelling out, so we are going back to perhaps more of a normal market," he said. "In terms of business that we are seeing there are steady volumes.

"We have stuck to what we set as prudent and appropriate mortgage practices, so we are still seeing decent growth appropriate to the market, and this mortgage book is probably one of the cleanest mortgage books in the HSBC group."

He said that in the past the Island had been very resilient when the going got tough and did not see much influence from events in the US.

"Bermuda has been very resilient in times of downturns, particularly in terms of the US, and you are not seeing anything in our delinquency numbers that would say our clients are being impacted with what is happening in the US and what you are now seeing in the UK," he said.

"I think we are perhaps seeing some sense of people being more cautious about projects they do and really taking stock of the current environment, which we would really support people to do in terms of their numbers and their analyses."

As far as the bank's deposits were concerned, said Mr. Parker, the volumes had been reasonably stable over the past 12 to 18 months, with growth in its corporate book, while the number of delinquencies remained the same going back nine months.

"When the sub-prime issues came out in the US it had a big impact there, but we do not do sub-prime lending in Bermuda," he said. "I do think the market is just levelling out a little bit and that is not such a bad thing because it does tend to keep first home buyers in the market.

"I think its is a time to be prudent, whether you are a business person or in the banking sector."John Kephart, president and CEO of Capital G Bank, who has been in the banking sector for the past 36 years, said the impact of the economic slowdown on international business and tourism were being felt throughout the Island.

He highlighted the fact that tourist numbers were down, hotel occupancy rates had declined and thus less money was being spent in the local economy, and re/insurance companies and financial institutions were making big write-downs and losses as the main contributors to the problem.

"Every bank, our own included, believe we know what risks are in our portfolio, but there is always a certain element of the unknown," he said. "I have been in banking for a long time and I have seen two real cycles in the financial markets.

"A lot of people have only seen it go up and have no perception of what the environment would be like if it goes the other way. It is still good, but it is not fabulous."

Mr. Kephart said the most important thing was for the bank to continue to underwrite the credits it does as safely and appropriately as possible and felt that 100 percent lending was not appropriate considering the uncertainty surrounding the housing market at the moment.

John Whale, senior vice-president and treasurer of Capital G Bank, said the bank was seeing no shortage of deposits and doing a healthy amount of loans business.

"We are seeing people be relatively conservative, however there are more risk adverse investors.

"Our investors are pretty savvy people and they look to value.

"From the bank's perspective, we have got some new business opportunities to open up to us and continue at the pace we would like to see."

Jeff Conyers, CEOof First Bermuda Group, which does savings and loans, said he had not seen much of a change as a result of the downturn in the economy."Ithink it is fair to say that people are tending to be more conservative and I sense that they are watching their pennies," he said.

"I think we have not really seen it yet, but my sense is that the real estate market is getting to a point where people might step up to it a little bit more.

"In terms of the global economy, I have not really seen those trends translate to Bermuda per se."