Capital G became a bank yesterday, a move which president James Gibbons said follows the company's substantial growth over the past five years.

Mr. Gibbons said the deposit company's assets have grown 169 percent in the last five years - which in hard money translates to $500 million. He added that in the last year, alone, the company has taken in about $100 million.

That growth, Mr. Gibbons said, has led to an 80 percent increase in its work force; only seven percent of which are positions filled by work-permit holders. The Gibbons Deposit Company, which will now become known as Capital G Bank, first started taking deposits more than 60 years ago.

The Bank will fall under the Capital G umbrella which includes investment and trust divisions. The new bank will focus on the local market, with the continued offering of local mortgages - a key factor in the granting of a bank licence - as well as expanded banking services.

Finance Minister Eugene Cox said the Bermuda Monetary Authority (BMA), which issues the licence, did a detailed review of the company "to satisfy itself that the company would have the expertise, systems and controls to enable it to operate a more broadly based banking business prudently".

Mr. Cox said it was important that bank licensing: "Would not diminish or undermine the company's ongoing commitment to the provision of mortgage funds within the local market.

"Government has received very firm assurances from the company that local currency mortgage lending will remain a core activity of the new Capital G Bank."

Capital G Bank president Sarah Farrington said becoming licensed as a bank does not mean the company will offer checking accounts.

"At this time, we intend to enhance our savings offerings," Ms Farrington explained.

The new bank does however intend to build a network of ATM's.

And access to bank networks will enable a move in to the E-commerce arena - including Internet banking.

Both of these moves, Ms Farrington said, mean the Bank will establish only one branch - at its existing offices on Reid Street - as people can use ATM's and the Internet to perform many banking transactions.

Of a move in to international sectors, Mr. Gibbons told The Royal Gazette, for the moment, the company will continue its focus on the local market, as it "builds out its systems".

Mr. Gibbons added: "We want to walk, before we run."

Government called the decision to grant this banking licence, as consistent with its "objective of maintaining and promoting competition in the financial services market.

The result should be to provide greater choice for consumers and greater incentive for banks to improve efficiency and service levels on a continuous basis."

Mr. Cox said he is very conscious of the need to move carefully in increasing competition in a highly sensitive and economically critical area such as banking."

Of the licencing of a wholly Bermuda-owned company, Mr. Cox said: "Expansion need not always mean the introduction of new foreign-owned companies in to Bermuda."

When asked yesterday for a reaction, Richard Ferret, chief financial officer of the Bank of Butterfield said: "We regard competition in the financial sector as extremely healthy both for customers and indeed for the banks themselves.

"(The) Bank of Butterfield is a strongly capitalized and highly liquid bank and is committed to meeting the evolving financial needs of the communities we serve."

Meanwhile, Bank of Bermuda CEO Henry Smith said: "We congratulate Capital G on gaining their banking licence. We may live on a small island, but increased competition is healthy, and is something we have long encouraged and embraced.

"It will give local people greater choice, and is a positive step in the ongoing development of Bermuda's local banking industry," he said.

Capital G Bank said it has no plans - at the moment - of going public, nor does it intend to seek exemption from the 60/40 ownership rule.

In terms of currency, it will stick to US and Bermuda dollars - putting off any move in to foreign currency transactions.

Mr. Gibbons father, Sir David Gibbons, is a former chair of the Bank of N.T. Butterfield (BNTB).

Mr. Gibbons, when asked if the family still holds BNTB shares, said: "The family still does own BNTB shares, as personal holdings. But, the size of the holding is not material in relation to the float of shares out there."

Mr. Gibbons said the size of the family holding has "no management effect".

Speaking further, Mr. Gibbons said: "We don't see ourselves as taking on the banks - which are many more times us, in size."

He concluded: "We are just continuing to do our thing."

The company's status as a bank takes effect immediately.