A new EU deal has been signed which requires Bermuda's banks to hand over information about savings accounts to EU tax authorities.

Yesterday, 12 EU states finally signed a deal to provide exchange of information on non-residents savings to other member states.

The United Kingdom, as a member of the EU, has signed up to the new rules.

Bermuda as well as all the UK Caribbean and Channel Island jurisdictions are also committed to the new regime which is designed to end banking secrecy.

Diplomatic sources said that Bermuda has been party to agreements with both the US and the UK for some time and that the development would have more impact on other Caribbean jurisdictions.

The rules affect non-residents of Bermuda who have offshore accounts on the Island. If you are "tax-resident" in Bermuda, the rules do not apply to your accounts.

Some years back, the EU presented its members with a choice of either an exchange of information regime or a withholding tax structure to cut down on tax evasion by individuals who, for example, opened accounts in other EU countries and did not declare the interest to the inland revenue authority in their home country.

During the course of negotiations, it became obvious that other non-EU countries such as Switzerland and dependent territories such as Cayman Islands and the BVI should also fall within the rules. Otherwise, there would be a flight of capital to these third party countries.

Wednesday's agreement is the result of extensive negotiations, with major resistance from countries such as the Caymans.

Ultimately, such jursisdictions would have risked international isolation if they refused to get on board. Three EU states, Austria, Belgium and Luxembourg have refused to be part of the exchange of information regime, opting instead for a withholding tax.

Consequently, the new agreement is being called a "compromise" and a long way from the unified EU regime that was originally dreamt up 13 years ago. It actually comes into law in 2004, giving local banks and mutual funds some time to prepare for the ramifications of the new rules.

British Chancellor of the Exchequer Gordon Brown confirmed that ministers had struck a deal and hailed the accord as the outcome of years of detailed negotiations.

"Today's important agreement secures the principle of exchange of information on tax matters not one size fits all tax harmonisation," Brown said in a statement, stressing that no withholding tax would be imposed on the City of London.

Luxembourg and Austria had consistently vetoed a deal in the past, fearing the plan would give a competitive advantage to rival financial centres such as non-EU Switzerland.

Analysts said a deal could pave the way for further weakening of international banking secrecy, but that wealthy EU individuals seeking anonymity could still hide money elsewhere.

"Banking secrecy is coming down. There will be part of the moneys that will attempt to stay secret and part of the moneys that will come out from behind the cloak of secrecy," said PeterPaul Pardi, head of southern European business development from PIMCO, the giant US bonds fund manager.