The Bank of Bermuda will remain headquartered on the Island and will proceed with a secondary listing on a US stock market, company President and Chief Executive Officer Henry Smith said yesterday.

He was speaking at a press conference called yesterday to squash rumours the bank was about to relocate to another offshore jurisdiction.

Rumours were rife in the market after the bank's bid to seek exemption from the Island's foreign ownership legislation was turned down by Parliament this week. The legislation limits foreign ownership in local companies to a maximum of 40 percent.

The bank argued it needed the exemption to make a secondary listing on the Nasdaq stock exchange. Executives argued the secondary listing was needed to increase stock liquidity, and relatedly as a means of raising capital forinternational growth. The bank is currently only listed on the Bermuda Stock Exchange.

His manner and voice laden with frustration and anger, Mr. Smith said the bank's board of directors had not made any decision yet as to how to proceed making a secondary listing without the exemption.

"We have to reconsider our options,'' he said. "We have not made a decision as to what to do next. The rumours are all incorrect.'' One step the bank was not going to take was to move from Bermuda to another offshore jurisdiction.

"We plan on staying in Bermuda,'' he said. "Being here is a huge part of our international competitive advantage. We would be insane to think of moving this organisation.'' In Monday's Parliamentary vote on the bank's private bill 13 UBP MPs voted for passage, 15 PLP MPs voted against. Another ten MPs were absent or could not vote due to potential conflicts of interest. One UPB MP, Trevor Moniz, abstained.

Mr. Smith said he was frustrated with the vote against the bill as bank executives had met with both party leaders over the past year to explain the reasons for seeking exemption.

"We thought we had the support of both parties,'' he said in an interview after his press statement. "Both parties generally expressed understanding.'' Mr. Smith attributed the defeat in the bank's bill to politics in an election year and to a lack of understanding by MPs of the reasons for seeking the exemption.

"We have to assume the timing was terrible given the political situation,'' he said.

He said the bank had created enough built-in protections to ensure there would be no takeover attempt to control the company.

He said the bank currently was capitalised at $420 million which was enough for present needs. However, the bank might need to raise more money in the future to fund growth either organically by opening new offices or expansion, or though acquisition. There was no acquisition under consideration at the moment, he added.

The competitive threat came to Bank of Bermuda's overseas operations from overseas competitors. Half of the bank's income is generated from overseas operations. The bank needed to grow those operations in order to survive.

"Our competitors are growing,'' he said. "They are amalgamating and acquiring businesses. We cannot sit still. We need to position ourselves for growth. Our business plan is to grow by leveraging our international business.'' Meanwhile, two local investment analysts remained confident in the bank's long-term outlook despite the setback. The stock price fall on Tuesday of $5 to $35 was a sign of nervousness among investors who had anticipated a price gain on a secondary listing.

Scott Lines of Lines Overseas and Jeff Conyers of First Bermuda Securities agreed the bank needed access to capital for growth but had been stymied due to politics.

Mr. Lines said the whole issue of the 60/40 ownership rule needed to be addressed. The rule was made to protect local businesses but now it served as a hindrance in certain sectors including banking and the investment business.

"It's now a competitive disadvantage,'' he said. "Local companies need to be able to make strategic alliances and to have access to capital.'' He said the bank stock was a good buy in the $30 range whether it listed overseas or not.

Mr. Conyers said the unsuccessful bid was a short-term setback.

"The bank was a victim of bad timing,'' he said in reference to the upcoming election. "Over the next six months to a year this issue (exemption from 60/40) will be resolved. In the long term I don't see it (the vote) as an issue. It will have a severe impact if the bank needs to raise capital quickly...There are more expensive ways of doing that.''