Some banking sector analysts have suggested that a piece of Wall Street will move offshore if new restrictive legislation is passed and Bermuda is one of its possible new homes.

The US Congress is working through new financial regulation legislation that could put restrictions on banks' trading activities.

According to a story by US television network ABC News, some major US banks are already making contingency plans to move trading operations to locations such as Switzerland or Bermuda.

"Absolutely, banks are exploring moving their derivatives trading businesses offshore they will have to, if this bill passes," said Dick Bove, a banking sector analyst at Connecticut-based Rochdale Securities. "It's not just a possibility, it's a certainty."

Switzerland, unlike Bermuda, is already a global banking hub, and is seen as the most likely alternative location. Bermuda, Luxembourg and the Cayman Islands are other possible locations, Mr. Bove added.

Bermuda has only four licensed banks, but its huge insurance industry and substantial funds sector, qualifies it as an international financial centre. Just a two-hour flight away from New York and with good connections, its geographical position could prove an attraction to the Wall Street insititutions.

Mr. Bove's views are echoed by Kevin McPartland, a senior analyst with the TABB Group, a New York City based financial markets research firm.

"This is not just posturing," Mr. McPartland told ABC. "We have had conversations to show there is real concern in the banking community. The laws are extreme enough that banks would have little choice but to move some, if not all, of their derivatives business offshore."

The prospect of New York jobs moving offshore is one that could persuade lawmakers to reject the tightest of the trading provisions.

Tanya Beder, chief executive of SBCC Group, a trading risk management firm in New York, and a former trading executive at Citigroup, told ABC: "If the reform is too onerous, banks will either move their trading businesses offshore or invent new ways of circumventing the rules. The genie is out of the bottle."

Financial reform passed in the Senate last week; a companion version of the bill already passed in the House in December. Merging the two bills via a reconciliation process is expected to take at least a few weeks.

Among the most controversial Senate provisions is one that would force Wall Street banks backed by the Federal Reserve, such as Goldman Sachs, JPMorgan Chase and Morgan Stanley, to cordon off certain derivatives, or "swaps," businesses into separate subsidiaries.

Furthermore, the bill contains a measure that would force the multi-trillion-dollar swaps trading business onto public exchanges or regulated swaps execution platforms, as well as subject it to the involvement of third-party clearinghouses. Swaps contracts are side bets on the directions of things such as interest rates or commodities prices, bets that banks and large investors, such as hedge funds, enter into with one another.

Such swaps bets are underwritten by banks, or dealers, and they are done either to hedge risk or speculate for profit. Swaps instruments can replicate, synthetically, a host of transactional outcomes, such as credit defaults.

By some estimates there are more than $600 trillion worth of derivatives securities on global balance sheets, though this is a "notional" figure reflecting the total amount being theoretically being wagered by financial parties, and not the actual market value of all existing swaps contracts.

The shift in swaps trading proposed in the Senate bill would likely cost banks billions in revenues, as activity moves to more transparent venues, such as exchanges and clearinghouses, and away from private, unregulated "over the counter" transactions which the banks currently control.

Banks would also be required, under such a scenario, to outlay much more capital as collateral in the event a trade goes sour and massive losses are incurred, such as the losses on credit default swap trades that brought down AIG.