For years, Butterfield Bank was perceived as a steady if unspectacular institution, turning in reasonable profits, paying their shareholders a reasonable dividend and quietly benefiting from Bermuda's long period of economic growth.

That perception may not have been entirely accurate, and there were certainly bumps in the road, but even if it was often overshadowed by its bigger and more aggressive rival, the Bank of Bermuda, Butterfield seemed to be, above all things, safe. Safe for depositors and borrowers, and safe for investors.

Recently, that perception changed. A more aggressive philosophy took over. Record earnings followed record earnings for quarter after quarter and the bank, which had been chastened by an expensive and unsuccessful foray into London in the late 1980s, began rapidly expanding overseas again. As the good times rolled, the Bank's share price did too.

When something seems too good to be true, it often is, and so it has proven with Butterfield. Facing the prospect of literally running out of capital, the 152-year-old bank was yesterday effectively taken over by foreign investors, its share price having slumped to a fraction of its former value and its dividend cut to zero.

A large part of its problems stemmed from unwise investments in sophisticated packages of US mortgages and other forms of debt – the same asset-backed securities or "financial weapons of mass destruction" that turned "toxic" and brought Wall Street to its knees at the end of 2008.

Clearly, Butterfield had little idea of what it was getting into and even less of how to get out of it. For the last two years, there have been hundreds of millions of dollars of write-offs of these investments, each time with the assurance that should be the end of it and the bank was now poised to recover.

But these assurances have been proven worthless and yesterday, the bank finally took the step of writing off the rest of the investments. But the cost was that they have had to issue new shares to foreign investors in what amounts to a fire sale and leaves local shareholders (who have had absolutely no say in this) with stock worth less than half what it was traded for a day earlier, along with the mortifying suggestion that they will need to buy more stock in the bank through a rights issue if they ever wish to see their investments recover.

The good news is that the deposits of those customers who have remained loyal to the bank are safe. But what remains incredible is that virtually no one has been held accountable for bringing a vital Bermuda financial institution to its knees.

Chief Executive Officer Alan Thompson was allowed to "retire" yesterday and Chief Financial Officer Richard Ferrett departed last year. But the board of directors, who were above all supposed to be looking after the shareholders' interests, remain in place, from Chairman Robert Mulderig on down.

This is a nonsense. Having failed so miserably in their duties, they should do the honourable thing, return their directors' fees, and resign.

There are other concerns. A year ago, the Bank issued $200 million in preference shares in order to restore its capital position after the last round of writedowns. The preference shares were supported by a guarantee from Government and carried an overly generous eight percent dividend. The offering therefore carried the support of Government and of the bank's regulator, the Bermuda Monetary Authority and was over-subscribed.

Yet one year later, the bank has been forced to raise a further $550 million in new capital. The Government should be as aggrieved as the shareholders, but it begs the question of how much due diligence was actually carried out by the Ministry of Finance and the BMA. Hindsight shows that not enough was done – a terrifying prospect for a supposedly sophisticated financial jurisdiction.