with new taxes if income from tourism shrinks, a leading banker said yesterday.

Mr. Eldon Trimingham, chairman of the Bank of Bermuda, was speaking to shareholders during the institution's annual general meeting.

In his speech he said the decisive "no'' vote on Independence would substantially help in promoting Bermuda internationally as a secure and stable jurisdiction, but he also issued a warning for the future.

Independence, said Mr. Trimingham, had distracted attention from a range of issues that had "now become crucial'', including crime, violence and social problems caused by drugs.

He added another problem was the rapidly declining tourism industry, something not yet fully recognised as "the most serious matter''.

"If this is not checked and then reversed, it will impact on the job security of our largest sector of employment and also, as a consequence, our financial industry that is in no position to pass on new taxation to our customers to compensate Government for revenue lost due to failing tourism.'' Mr. Trimingham added he viewed the election of the Hon. David Saul as Premier and new Cabinet appointments with "great optimism'' and he said a combination of the tourist business working with the Tourism Minister and the Finance Minister would be essential to turn the industry around.

"Tourism as a whole is not profitable and therefore cannot attract fresh investment. No-one will put money in an industry from which there will be no financial return,'' said Mr. Trimingham.

"Our tourism plant is ageing, the product is outdated and we are told that the Island as a destination is too expensive. The falling air arrival figures demonstrate that our visitors are finding more competitive destinations elsewhere.'' If tourism continues to fall, the Government will start to lose revenue, but Mr. Trimingham said the financial community would have "great difficulty'' in paying more taxes to make up the shortfall.

"Unless tourism and the financial sector are viable they cannot continue to generate, directly or indirectly, the tax revenue they do now.

"With the situation as it is, it is clear tourism will continue to crumble and as a result yield even less revenue. The temptation will be to transfer that lost tax to the financial sector which will then suffer the same fate.

"The only solution is to reduce the cost of Government itself, an unpalatable and difficult task, but one that many have advocated in the past as essential in order to avoid the impasse in which we now find ourselves.''