Opposition leader and shadow finance minister Grant Gibbons yesterday said money coming into the local economy in the possible sale of the Bank of Bermuda, would have limited economic impact if it was immediately reinvested.

Estimates by bank management - with the $1.3 billion sale to HSBC pending shareholder and regulatory approval - put local shareholders as holding about 70 percent, or set to be paid than $900 million in the deal. But Dr. Gibbons said that while of the capital some may be spent, or used for consumption, the bulk would probably go into local or HSBC investments.

"This is a cash deal. Although shareholders are entitled to transfer their holdings into HSBC shares, they will start with cash and some may give some thought first to what they do with that."

He predicted that those with large shareholdings were likely to "simply find another investment, whether it be HSBC or a local stock that would pay a good dividend, as the Bank of Bermuda has".

For those who may have been largely invested in Bank of Bermuda shares, he called it a "wonderful opportunity" to diversify into a variety of stocks, and that that could be done with local companies, if shareholders wanted to keep their money in Bermuda.

He speculated that Bermuda companies could do well, if the deal went through, including investors' dollars going to the Bank of Butterfield, which has already seen its stock price rise since the announcement, and other companies like Belco and BTC.

Dr. Gibbons pointed out that some people may have shares through a pension fund, and that those would likely be transferred into another investment, but that no one was certain as to the extent that local pension funds held bank shares.

He recognised that some investors may choose to use the money they got from their bank shares on consumption, whether it be on home renovations, buying luxury items or to pay debt. But he said it would be incorrect to assume that much of it would be spent, as many investors - especially those with sizeable holding - would be more inclined to move their capital into another investment.

"My hope is that people would use the money wisely to diversify (investments) or to put it away for a rainy day in a stock or bond portfolio," he said.