Finance Minister Bob Richards said the PLP encouraging a bank to increase credit and give loans ten years ago, “aiding and abetting” the economic downturn.

During the House of Assembly on Friday, the minister said he recently discovered a 2003 memorandum between the then Government and HSBC, who that year purchased the Bank of Bermuda.

“The things that jumped out of that memorandum of understanding to me was that the Minister of the day [Eugene Cox] required the bank to increase credit for credit cards significantly, increase loans and mortgages by $3 million or $4 million and then also to do a whole set of retail banking that they were doing anyway,” Mr Richards said.

“The significance of that is that the economy was already running in the red line at that point, and when the bank complied with the request of the government to increase credit, that’s when you started to see these 100 percent mortgages start to happen.

“And do you know what the result was? The result was that next year the GDP of Bermuda increased by 12 percent. In a year. The year after that it was nine percent. Really out of control. There was an aiding and abetting of this overheating. I’ve been talking about this for years. I’ve been talking about it for ages and there I had in front of me the proof of what I had been seeing for years, this MOU with HSBC.”

Mr Richards said the agreement and subsequent overheating of the economy had contributed to an “erosion of competitiveness” in the country and exacerbated the effects of the global economic downturn.

“I don’t know any other country that has had four consecutive years of economic contraction,” Mr Richards said. “Not even Greece have had four consecutive years. Maybe even five.[The PLP] not only allowed, but aided and abetted the overheating of the economy in 2003/2004.”

A PLP spokesman was contacted in connection to this story, but had not responded as of press time last night.

HSBC took over the Bank of Bermuda in 2003, but because the Bank of Bermuda had been given an excemption to the 60/40 ownership provisions in 2000, they first required the permission of Government.

That July, then-PLP backbencher Derrick Burgess said he had heard through unnamed sources that HSBC had approached the Cabinet about the purchase, but at that time Premier Jennifer Smith refused the deal. The takeover was announced three months later with the vocal support of Finance Minister Eugene Cox.