A leading banker has sounded the alarm over moves to wipe out exchange controls. And he raised the prospect of making US dollars the Bermudian currency.

Bank of Bermuda president Mr. Donald Lines said the Island was heading towards "unchartered waters''.

Finance Minister the Hon. David Saul, the Bermuda Monetary Authority, and possibly the Cabinet, were committed to eliminating exchange controls, he claimed.

There were only two ways to proceed with such abolition, he added. Bermuda could either: Retain the Bermuda dollar and phase out exchange control by relaxing regulations in a controlled manner; or Eliminate controls and at the same time replace the Bermuda dollar with the US dollar as our local currency.

Mr. Lines, also the bank's Chief Executive Officer, made his comments in the Bank of Bermuda's quarterly letter to its shareholders.

"No matter which of the options Government chooses we are entering unchartered waters and the results of such a journey are going to be unpredictable -- but of this we can be assured, freedom from exchange control, while attractive to each of us as individuals, will certainly make us much more dependent on overseas interests and subject to their controls.

"It will increase our exposure to the vicissitudes of a new world order and the economic changes which major governments have difficulty controlling.'' Mr. Lines, who retires at the end of March, said the bank backed the relaxation of controls.

It also supported the abolition of the Foreign Currency Purchase Tax.