The boss of HSBC's private banking has claimed in an interview that the London-based bank had been in negotiations to buy Bank of Bermuda for four years.

This directly contradicts the official line from Bank of Bermuda's management which states that negotiations only started in February this year.

And it also means, if the HSBC statement is true, that when the bank applied for exemption from the 60/40 ownership rule in 2001, it knew it was being targeted for a buy-out.

But a spokesperson from Bank of Bermuda last night said that it was only early in 2002 that HSBC first approached the bank about a possible acquisition, but the deal went nowhere.

Clive Bannister, chief executive officer of HSBC's private banking, is reported as saying in an interview with the well-respected Dow Jones Newswire that the deal took four years to to come together.

“HSBC bought Bank of Bermuda for $1.3 billion in October, but it was a special deal that took more than four years to put together, he (Mr. Bannister) said,” said the news report.

In a recent interview with The Royal Gazette, the bank's president and chief executive officer Henry Smith said that negotiations only started in February 2003.

A spokesperson for the bank said last night when asked to comment on the Dow Jones news story: “The Bank of Bermuda and HSBC have had a business relationship for many years, with HSBC providing the bank with sub-custodian and correspondent banking services as well as foreign exchange, credit and other related products.

“But it was not until early 2002 that HSBC first approached the bank about a possible acquisition. No proposal was made at that time and after a brief time the parties terminated these preliminary discussions.

In February 2003, the subject was again raised by HSBC, and following preliminary discussions in April, the bank and HSBC entered into negotiations concerning the possible acquisition of the bank.”

Back in April 2002, when asked if there was a possibility of a large bank such as Chase Manhattan coming in and swallowing up the bank - one of the fears often expressed when the bank had talked about floating - Mr. Smith said: “We hope not. The Minister of Finance may have something to say about that.”

Mr. Smith added at the time: “We are first and foremost a Bermudian company with a firm commitment to the local community.”

But the bank announced at the end of October that it had approved a take-over bid by the huge multi-national HSBC, the world's second largest bank.

Mr. Smith has said that the proposed buy-out, which still has to be approved by shareholders and the Bermuda Monetary Authority, made sense with the Government's plan to open up the financial sector and possibly allow in more banks.

He said it was better to join with a bank like HSBC rather than have to compete with such a huge organisation.

In response to a question about the buy-out and the promises made in 2001, Mr. Smith said: “I was not saying, and I could not ever say as a board member, that if the right offer came along we would just burn it.

“We would not be doing our duty to shareholders if we did. But more importantly, the environment today is very different from that on listing.

“We certainly had hopes that with listing we would be able to springboard into growth and remain independent.

“All of us in management were thinking along those lines.

“But we ran into in terms of the markets and the environment, what we now recognise is it makes more sense to combine with HSBC.

“And when I talk about being driven by change, that includes the fact that Government said it was going to open up (the Island's financial services sector). That was a big factor.”

In the Dow Jones interview Mr. Bannister said HSBC bought Bank of Bermuda primarily because of its tax business and hedge-fund expertise