London operation. The bank will still have 25 staff in London to run its institutional stockbroking and corporate finance services.

The cuts are due to the bank completely withdrawing from its UK lending and deposit-taking service, an operation which was costing money due to bad loan decisions.

As a result the bank has had to increase its loan loss provisions, the cash it sets aside for potential non-payments. Money is also being set aside over concerns about a potential shakeout in Bermuda's ailing tourism industry.

Bank President and Chief Executive Officer John Tugwell, who has been on the job for two months, said approval was still needed from UK authorities before the cuts in London were made.

"We had got the strategy wrong,'' he said about the decision. "We were lending money in the UK market -- which is fine if you're actually in the UK market -- but we were trying to control it out of Bermuda. What do we really know about real estate in Birmingham or London? No matter how good we are at lending money the answer is very little.'' Mr. Tugwell said he offered the staff being cut "more than the minimum redundancy terms''. He had recently closed the bank's Singapore office and cut the 23 jobs there.

He is also moving to establish his management team. Last week he fired top executives Stephen Kempe, Colin Furr, and Malcolm Brown. Mr. Kempe oversaw business development. Mr. Furr headed the banking division. Mr. Brown headed treasury and capital markets.

Those positions would not be replaced Mr. Tugwell said yesterday. Instead the operational heads of the various sections would report directly to him.

He is also creating the post of chief operating officer. The person for the job will help pull together all of Butterfield's global operations to ensure efficiency and consistency throughout the organisation.

"There will be an operational efficiency both in costs and revenues,'' he said.

He has also pulled six Bermudians, aged between their late 20s and mid-30s, out of their jobs at the bank and formed them into an advisory team reporting directly to him once a week. This strategic management unit has been given the task of looking at all the bank's operations and advising Mr. Tugwell on future strategies.

One of the team, who wrote a paper on the UK operation, has been sent to London, to help implement the cuts there. Another is going to the Far East to study whether the Bank of Butterfield could expand into the region.

Mr. Tugwell said he had also identified 30 younger employees for fast track promotion eventually into the executive ranks. The 30 staff have been informed that regular reports will be made on their progress within their current jobs.

He believes the process will eventually help bring a greater diversity of age, gender and Bermudianisation throughout the top levels of the bank.

"The problems with organisations like this is they tend to work in silos,'' he said. "You get a person who is really good and the boss of the area dosn't want to get them out because they are a mainstay. They end up getting frustrated because they've been there too long. You often lose them...Middle managers all around the world like to keep their good people.

Not too many middle managers are group players when it comes to giving up their best staff for the good of the group. What I've done is made those 30 my personal property. I'm the reporting line.'' Most of these moves are part of Mr. Tugwell's push to improve what he said was the bank's poor cost to efficiency ratio of about 85 percent, a figure arrived at by dividing total income by total cost of operations. He wants to get it around the 65-70 percent mark.

"What we have to do is manage our resource so we focus on the areas which produce the revenue,'' he said. "The problem in the industry is our need to generate revenue faster than we already are. What we do is manage our resources into those areas where we sell more product.'' He is setting targets of cross-referral of the bank's services between various units. He has also formed a committee to develop new services.

"I'd like to do more in the investment area,'' he said. "I'd like to brokerage more insurance products. I'd like to get a bigger share of everybody's wallets both in regards to savings and borrowing.'' As well as London, the bank has offices in Hong Kong, the Cayman Islands and Guernsey. He describes the performance of the remaining London unit, and the Guernsey and Cayman offices as "excellent''. Performance in the Hong Kong office was "OK'', he said. But there the office's value lays in its ability to refer clients to the Bermuda operation.

WIELDING THE AXE -- Bank of Butterfield president and CEO John Tugwell.