John Kephart President & CEO of Capital-G Bank who spoke to us on the impact of the financial turmoil on the Island's economy, the causes and solutions to the world economy collapse and the result of the change
 

Recently Banks have taken something simple and made it more complex and then passed it around without the knowledge of the outcome.  T he problem of the economic crisis was caused by simple home loans being turned into complex financial instruments, resulting in the banks having to write down their investments and entering the market to raise capital. The reality is that Bermuda is going to feel the knock-on effects of the US and global economic crisis - but should also see the benefits of a recovery after time

            In Bermuda the economic downturn had already taken effect and it is predicted that 2010 will possibly see a ramp up to recovery.  However, it would probably be 6 months after this before Bermuda starts its recovery.  We have been hit by the turmoil, as a centre of re/insurance by factors such as issued credit default swaps and in areas like jobs and the real estate market, we know for a fact that there will be a deficit of Expatriate workers on the Island and so rental prices will fall.  

            If the situation becomes severe, which we do not think is probable in the near-term, for example house prices fall to a level that is lower than the value of any loan on the property, people loose their jobs and cannot pay the loan, Capital-G is prepared. The bank had taken its own precautions to weather the financial storm, have put a cushion in as a maybe or possible back-up, building up additional reserves despite its parent company Gibbons Group adding $20 million to bolster the bank's "capital buffer" earlier this month.  At the end of the day a bank needs to make sure it's depositors money is safe and the Banks owners take the risk.  We are extraordinarily well-capitalised and the safety that comes with us is enormous.

            How will the next year play out with Tourism, will it recover? Will Capital dollars come to the Island?  Will the USA/ UK examine Tax Laws and how will we respond?  It will all take time to sort out.   However, one positive thing is Government's efforts on tax issues with the US and treaties with other OECD (Organisation for Economic Co-operation and Development) jurisdictions.   It is about making sure that the tax issues are not the issues that affect the Island.  The relationship with US Congress is a key relationship that needs to be maintained, but Government is doing a great job in these lines of communication.

            Capital-G has been here a long time from "The Woman's Shop" to a full service Bank which is a member of a larger much diversified group of companies.  We look after your money the same way we handle ours, very carefully