Finance Minister Eugene Cox says it is premature for Government to consider the possible economic impact of a $1 billion cash injection to the local economy if the sale of the Bank of Bermuda to HSBC were approved.

The deal, which would see bank investors receive $45 per share, is estimated to be majority held by locals, with bank CEO Henry Smith saying Monday that they believed about 70 percent of the 6,912 shareholders to be local. Broken down, that means that a large portion of the $1.3 billion sales price - more than $900 million - could flow into the Bermuda economy, if the deal gets shareholder approval when it comes up for a vote in February.

Mr. Cox said: "It is all premature. It is something that has not happened yet. The deal has not been closed and would not be closed until early next year. Anything we will decide, or attempt to decide at this point, is really an exercise in interest than one dealing with factual things that you could use to make a proposal on. I think it is premature, and speculating as well. The shareholders have not had their chance to have their say and neither has the Bermuda Monetary Authority."

Asked if the Finance Ministry was at least considering the economic impact of a significant capital influx, that if approved, could happen in a short time- as quickly as the next day, according to bank officials, Mr. Cox said: "Let us think about it. Any Government, if something happens that affects the economy, is concerned and is looking at what matters can be addressed with present resources as opposed to just ignoring it. I doubt anyone would want to do that. But the idea of shareholders, and the BMA agreeing (this deal) is still speculative, and I don't know if one would want to make a case on that, because what you write in the paper tomorrow is in New York or Boston before the week is out.

"It would be foolish for me, or anybody, to try and sit down and say because something is proposed, this is where it is going to end. That is speculative, as well as presumption and certainly it is premature."

Mr. Cox, who was joined in the interview by Financial Secretary Donald Scott, added: "The economy is not out there for Gene Cox or Donald Scott or others to direct it. We would like to be able to have that power to do that, but we can't. We do things based on experience and on what conditions are coming up."

Mr. Scott also pointed to the make-up of local shareholders - whether institutional or individual - being an unknown.

"We have not reviewed the shareholders books; we do not know where the concentration of shareholdings may be. We know that the Bank of Bermuda Foundation, for instance, is a fairly large holder and the behaviour of an institution will be different from the behaviour of an individual. We suspect that there are a number of pension funds in Bermuda that hold shares as well. And again institutional investors will behave differently when there is a pay-out, if the transaction goes through.

"For smaller shareholders, some people will reduce other obligations or a debt that they have, or choose to spend a portion of it, in Bermuda or overseas."

Mr. Scott continued: "The overall impact that it will have on the economy is really difficult to tell. Some people may spend some of it, on a luxury item or two that they have been contemplating the purchase of for some time. So retail sales in Bermuda may see a bit of a boom from that transaction, if it pans out."

He added that the construction sector - in part because of the high demand for repairs after Hurricane Fabian - was "running flat out".

To that end, Mr. Scott said those who chose to reinvest their bank holdings in renovations to property, may have to sit on their funds for a while. "There may be the desire on the part of some to do that, but as you know the construction sector is already running at full capacity so people having those kinds of thoughts may find that they have to wait for a while before they can actually spend it. They may hold it somewhere which means savings bonds may go up. There may be more activity on the Bermuda Stock Exchange; it is very difficult to know ..."

When asked if the local economy could handle two significant capital injections in a short period of time - with insurance checks coming in to cover claims after Hurricane Fabian and then the potential for shareholders to get cash in the bank deal - Mr. Cox said the market was "self-regulating" and also questioned if the economy was seeing insurance claims being paid all at once.

"With insurance checks, I do not know if they are coming in as fast as you think. I have been connected with one or two that have not come in that fast so I would say that is speculative again.

"The other thing that I would say is that the resources, the construction capabilities that we have are presently well fortified or well operating. The majority are well-fitted to doing the full capacity of work. The capacity to do the construction work that is necessary, the capacity to get investment money that is the point they are making, very much available maybe more so now, but let us also face the fact that people coming into money do not necessarily spend it off. So they will probably want to find a place to save.

"Things will be self-regulating because water finds its level. It is natural to do that."

And the Minister pointed to a history of dealing with past economic crises.

"I think we have two situations, thus far where this Government - PLP - has acted in a way in which has brought a sense of pride to Bermudians. We had 9/11 with the New York explosion, we then had Hurricane Fabian which, anything that was left undone was made up for with Fabian. And while I did not have a roof blown off, I did have a window crack with the wind. We have had a pretty terrible time."

When asked if Government might issue any sort of advisory on whether people should consider investment options, were the bank deal to be approved, Mr. Cox said: "I think if Government had to do that, that is how we would spend much of our time. I think that is not something that one would charge into at this point in time."

Mr. Scott added: "Again all of that is in the realm of private decision making which ordinarily is always accommodated by the market system, in any event. So I do not think that Government would necessarily intervene in a market transaction.

He continued: "What happens to the economy if there is this huge influx? Again that is assuming that it is spent, and there is a deal on the table, as I understand it, for investors to reinvest in HSBC. And again we don't know how many people will take advantage of that but it is an option that may be taken by those who presently hold Bank of Bermuda shares."

Mr. Cox said that shareholders already had their investment built up and it would be a question of what they decided to do with that, but regardless it would be a transfer from one investment to another whether it be into property or other market investments.

But he did not rule out taking some action, as necessary, if the sale to HSBC was to close: "This Government, certainly in my tenure here, has always tried to see what is in the best interest of the people in Bermuda and we would certainly be dictated by what is in the best interest of Bermuda. If it necessary to set up a task force to do some investigative work, we would do that - and willingly do that as we try to take care of our country."