In a vote of confidence, 18 international banks have oversubscribed for the Bank of Bermuda's $500 million syndicated credit facility.

Aggregate commitments for the facility totalled in excess of $850 million.

Mellon Bank, Deutsche Morgan Grenfell, and J.P. Morgan are backing the loan facility -- a first for the bank.

The bank will allocate the $500 million backup facility according to the level of subscription. Other banks involved include the Bank of Nova Scotia, Barclays Bank, Citibank, Credit Lyonnais, and Standard Chartered.

The facility will be used for standby liquidity -- in case the bank needs ready cash -- and is structured as a 364-day revolving credit commitment.

Renewal will be subject to the consent of each lender.

The facility is a committed line of credit which the bank can call on at any time for general corporate use. As reported this week in The Royal Gazette the bank arranged the credit backup as a means of giving it more flexibility in the use of its capital.

Alan Kershaw, the bank's head of treasury, suggested the idea of a credit backup when he came on staff last year.

"It is common practice to have a backup facility in all the big banks,'' he said. "It's the bedrock of liquidity management.'' After researching the issue the bank's management made a presentation to potential subscribers in April this year. The bank's management expected a ten to 20 percent oversubscription, but not on the scale eventually reached.

"It's a sign that the Bank of Bermuda is very well regarded in the marketplace and other banks around the world are keen to do business with us,'' Mr. Kershaw said.

"It may offer opportunities for us to develop relationships and do more business.'' He noted the credit facility was a separate exercise from the bid by the bank to get a listing on the Nasdaq, which requires Parliament to exempt it from Bermuda's requirement that at least 60 percent of the company is owned by Bermudians.

"The 60/40 exemption gives us access to the wider market and access to equity capital,'' Mr. Kershaw said. "The credit facility gives us access to liquidity.'' He said most big banks frequently kept a credit facility to use only in the event that they faced a short term liquidity problem. "It also gives us a little more flexibility in how we can structure the banks investment portfolio,'' he said. "...We see it as being a step on the road to the bank becoming a larger financial institution. This is a sort of badge we can wear.'' As at March 31 the bank had a $428 million capital base and assets of about $10.4 billion. The backup facility will help assure clients of the bank's access to capital needed to protect their assets in case something -- such as a run on deposits -- affected the bank's ability to meet its committments.

ALAN KERSHAW -- "It's the bedrock of liquidity management,'' says bank's head of treasury.