Money held in Bermuda bank accounts is perfectly safe, despite the financial shockwaves that have broken banks in the U.S, according to experts.

Share prices have plummeted at Bank of Butterfield and Capital G, as local companies feel the knock-on effect of America's credit crunch. The crisis has left some people wondering if one of Bermuda's banks could collapse, as several financial institutions have done in the U.S.

In America, the Federal Deposit Insurance Corporation guarantees to refund customers their money - up to a maximum of $100,000 - if a bank folds. However, no such safeguard exists in Bermuda.

The Bermuda Monetary Authority (BMA) yesterday stepped forward to reassure consumers, saying that banks here undergo close scrutiny and follow strict rules to ensure that people's deposits are in good hands.

Matthew Elderfield, Chief Executive Officer of the BMA, said: "Bermuda's banks are in a strong financial position despite the problems elsewhere. Bermuda's banks did not engage in the reckless lending practices associated with sub prime and Bermuda has a much stronger housing market than the U.S. or U.K.

"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... Bermuda's banking system remains well-capitalised and subject to strict oversight by the BMA."

A spokesperson for Bank of Bermuda said: "It should be noted that the BMA does impose a number of requirements to regulate the banking industry in Bermuda and provide a level of assurance and protection to the Bermuda community.

"As such, banks in Bermuda are required to meet certain capital requirements and adequate liquidity at all times, even in extreme market conditions. Bank of Bermuda exceeds those requirements and also observes prudent lending policies to protect our reserves."

Other experts point out that America needs a guarantee on personal deposits because it has a much larger and more diverse banking sector, with many small neighbourhood banks, which may be more vulnerable to financial shock. In Bermuda, with its small number of large and long-established banks, such a deposit guarantee would be entirely unnecessary.

We mistakenly included the Bank of Bermuda on a list of banks whose share values had 'plummeted' amid the current financial turmoil. We have been asked to point out that in fact, the Bank of Bermuda no longer publicly trades shares. It is part of the HSBC group, whose shares are publicly available. The Bermuda Sun regrets the error.