its downward spiral yesterday, plunging nearly 78 points as it lost nearly five percent of its value on $1 million worth of trading.

The substantial drop may be the largest one-day drop on the Exchange, but BSX officials late yesterday were unable to say.

The index has been moving lower since May 22. It was at first a gradual decline, but picked up momentum in the second week of this month. In the short period since the market opened for business last week Monday, the index has fallen more than 200 points.

Most observers believe the write-down by the Bank of Butterfield and subsequent downgrade by some rating agencies, together with the stalling of a Parliamentary measure to get the Bank of Bermuda a waiver from the 60/40 rule, have had a dramatic effect on the index's heavily-weighted bank stocks.

The BSX index opened Monday June 8 more than ten points above 1,700.

Yesterday, after just seven days of trading, it closed below 1,500.

It closed yesterday at 1,497.76, down 77.89 points or 4.94 percent on a share volume of 60,101, valued at $999,099. All four trading issues declined.

Bank of Bermuda fell $2 or 5.6 percent, closing at $34 on a volume of 2,441.

Bank of Butterfield closed down $1.125 or 7.0 percent at $14.875 on a volume of 52,160.

Bermuda Home fell 25 cents or 2.4 percent to $10.25 on a volume of 500 and Argus Insurance fell $1.50 or 8.1 percent to $17 on a volume of 5,000.

Bank of N.T. Butterfield & Son president Calum Johnston said there is misunderstanding within the community about his bank's status and its debt.

He said, "People are asking are we borrowing money, because we are short of money. But banks always borrow. Every deposit is in fact a borrowing.'' Bermuda Investment Advisory Services (BIAS) president, Robert Pires, commented: "There is concern that there are no bids in there. We have been shy of local shares for over 18 months now. There is concern about the problem that the Bermuda environment creates for local businesses.'' He said, "We're not surprised by the drop, but we are not happy to see it. I don't think the market was necessarily over-valued.'' Senior vice president and chief financial officer of the Bank of Bermuda, Ed Gomez, said, "Market changes probably continue to reflect a lack of liquidity.'' He added, "The bank continues to believe that its shares represent very good value. All aspects of our business remain sound.'' Chart by Bloomberg News BSX WOES -- The BSX index has been on downward slide since late May.