Government is keen to foster expansion of the Island's financial services sector, says Government Senator Raymond Tannock.

Leading the finance debate in the Senate, Sen. Tannock said international business had grown more and more important to the Bermuda economy as tourism declined.

He said the Island was the largest captive insurance domicile and had grown into one of the leading reinsurance sectors.

"International business has sustained growth in recent years," he said, adding that that sector is now the second largest employer, after Government.

"Consequently the expansion of the financial services sector has been assigned high importance by this Government."

Sen. Tannock said the Finance Ministry was doing a good job at overseeing the public purse ? praising, by name, representatives from various Ministerial departments present in the Senate yesterday ? including its zero-based budgeting approach having freed up money for areas of greatest importance.

Sen. Tannock also pointed to the findings of a report from the International Monetary Fund (IMF) ? made public this week ? as "another major milestone" for Government. The report was said to have found Bermuda compliant or largely compliant with some 85 out of 100 core principles or sub-principles that are individually rated covering banking, insurance, investment business and anti-money laundering/anti-terrorist financing controls.

Sen. Tannock said Bermuda had a "strong commitment" to have a regulatory environment consistent with international developments for the supervision of the financial services sector.

But Opposition Sen. E.T. (Bob) Richards said he had grave concerns on the level of regulation being adopted by the Island, saying it was putting Bermuda at a disadvantage against other offshore domiciles.

Naming one, he said Bermuda had fallen far behind the Cayman Islands in attracting mutual fund business.

Although Sen. Richards said Bermuda could not return to the old days when business was conducted "much more on a personal basis" ? saying he remembered those days as a "young Turk" at the Bermuda Monetary Authority ? but that it must guard against over regulation.

He said he was concerned that Government was showing too much "zeal" in complying with regulatory dictates from outside.

"You hear the refrain that international business is here because of regulation; you hear that makes Bermuda attractive. That kind of thinking is fraught with pitfalls. We have to strike a balance between agencies like the IMF and the competitiveness of Bermuda in the offshore world."

He said the Island was one of the pre-eminent offshore jurisdictions but there was a risk that "our eagerness to comply with overseas agencies" could jeopardise that.

Sen. Richards said it was important to understand why business was here, and pointed out the "abysmal records" from zealot regulatory bodies in the US and UK, having failed to guard those nations against the largest corporate scandals ? naming Enron in the US, and Robert Maxwell stealing away millions in the UK.

"We mustn't fool ourselves with all this regulatory nonsense. I understand we don't want to go back to the days...but these agencies in no way represent perfection."

But Sen. Tannock rebutted Sen. Richard's arguments, saying: "Our framework is very attractive. I get a bit concerned when people start talking about that."

In response to Sen. Richards saying Bermuda should be wary of following the example of its larger neighbours, the US and UK, in regulation, Sen. Tannock said his focus was Bermuda alone: "I'm not worried about US companies."

He said the fact that a company could come to the Island and be up and running in about two weeks was evidence that Bermuda had it right. "I'm quite comfortable with that; I think we stand in good stead."