up to police Bermuda's massive financial sector.

And Finance Minister Grant Gibbons told MPs that Bermuda had to change its rules to keep up with international regulations.

Dr. Gibbons was speaking as he introduced the Deposit-Taking Business Bill to the House of Assembly yesterday.

He said: "The goal of this legislation is to safeguard the banking and deposit-taking system both domestically and internationally.'' Dr. Gibbons added that the Basle Committee on Banking Supervision, a Swiss-based international standard-setter, had published 25 principles of banking -- and countries would be assessed to check compliance from 1999.

He said: "By introducing the key elements of the Basle principles, the Bill will provide Bermuda with a well-defined framework for regulating and supervising deposit-taking services.

"The Bill will clearly indicate Bermuda's intention to keep its supervisory procedures in step with international standards.'' Dr. Gibbons explained the Bermuda Monetary Authority would ask private accountancy firms to assess controls in the financial sector.

At present, supervision is based on quarterly returns and meetings with senior managers at deposit-taking institutions.

And Dr. Gibbons warned the 60/40 ownership rule to guarantee majority Island ownership "could be counter-prudential.'' He said: "Any banking crisis might require an urgent injection of external capital into a troubled banking entity, to protect depositors, the overall system and prevent a systemic crisis.'' The new Bill was drawn up by Ministry of Finance experts, the BMA and the Attorney General's Chambers.

Dr. Gibbons said the Island would have to allow for transfer of information between the BMA and other supervisors of the banking system.

He added: "Information would pass only on `a supervisor to supervisor' basis and the protocols would clearly allow for it to be withheld if it is suspected that it is going to be used for anything other than prudential supervision.

"Rarely would that require the transmission of customer-specific information, except where such information related to large concentrations of deposits or loans or involved other systemic concerns.''