The Island is proving "resilient" in the face of the global economic plunge which has stock markets reeling around the world and brought massive financial corporations to their knees, the Bermuda Monetary Authority said yesterday.

BMA chief executive officer Matthew Elderfield said Bermuda's banks are heavily capitalised and did not engage in highly risky lending practices, its housing market is much stronger than that of the US or the UK and its insurance sector has had only limited exposure to the sub-prime crisis.

Characterising the current economic turmoil reverberating through the globe as a "storm", Mr. Elderfield predicted Bermuda would hold strong throughout it. "These difficult conditions may continue for a while; however, history has shown that Bermuda's people and financial markets are no stranger to storms, and have weathered them well," he said.

"The strength, quality and resilience of our financial markets means Bermuda is well placed for the current challenging environment."

In a statement released by the BMA, Mr. Elderfield said the regulator is continually monitoring developments and assessing potential local impacts. "Undoubtedly this has been a period of concern and uncertainty for us all within the local community," he said.

"As the regulator of Bermuda's financial services sector, our priority has been to ensure that stability in our local markets is maintained for customers using those services, and also for the long-term health of the local economy.

"The authority is in regular contact with both banks and insurers, the statement said."Bermuda's banks are in a strong financial position despite the problems elsewhere," Mr. Elderfield said. He added: "The authority requires Bermuda's banks to hold capital levels that are significantly above minimum international standards; this provides an important buffer against financial problems.

Bermuda's banks are also subject to strict rules that require them to maintain strong liquidity, or cash, positions. Some Bermuda banks do have investments in sub-prime assets, but actual losses to date have been limited.

The banks have fully disclosed their positions to the Authority. No Bermuda bank has suffered a credit rating downgrade as a result of the sub-prime crisis. Bermuda's banking system remains well-capitalised and subject to strict oversight by the BMA

."Local insurers also had limited exposure to sub-prime, he said, although a "small number of firms have had significant underwriting exposure through their financial guaranty business".

"Over the past few months there has been progress in achieving acceptable commutation agreements to eliminate some of these exposures," Mr. Elderfield said. "The authority continues to work with the few firms that are most impacted.

The authority is also monitoring underwriting exposure through D&O (directors' and officers' insurance) and similar businesses but these losses will take some time to materialise

"The BMAis also playing an "active role" in an international regulatory task force managing sale of assets of AmericanInternational Group (AIG). On Monday, AIG president and CEO George Cubbon told The Royal Gazette, the assets sale should have minimal "impact" locally, however.Mr.Elderfield said the BMA has been taking a "proactive role" since market disruption began in August of 2007, "through a combination of specialised market surveys, stress testing, enhanced supervisory monitoring and restructuring negotiations with challenged financial guaranty companies".

"We are working closely with market participants and international regulators to manage the impact on Bermuda's financial markets," he said. He also welcomed the passage of the $700 billion bailout package in the United States last week and said, while the impact of this development may not be immediate, "it is a significant step towards addressing the current dislocation in the global financial markets".

For local investors,Mr.Elderfield recommended a cautious approach. "Retail investors should think carefully before trading in these volatile markets and should take professional advice if they do so," he said. "Investors should contact their pension or investment manager with any questions.

They should also note that investment firms and pension managers are required to keep those funds separate so they are safe if anything goes wrong, unless the investor has explicitly agreed otherwise and the BMA has accepted that satisfactory alternative arrangements are in place."