Bermuda has been proactive in preparing to cope with major problems in its economy says the author of a major review of British offshore financial centres.

Financial expert Michael Foot yesterday released an interim report into the UK study of regulation, taxation, financial crisis management and international co-operation in nine of its offshore centres.

It shed little light on how Bermuda is faring.

Mr. Foot said many countries have found their laws and institutions ill-prepared to cope with major shocks, such as the collapse of Lehman Brothers or the failure of the main Icelandic banks.

The review is discussing how financial centres can cope with the failure of a major firm or provide emergency financial support.

Mr. Foot wrote: "Bermuda has, for example, increased its debt ceiling beyond its immediate needs to give the option of a strategic response to any problems in the financial sector that pose a systemic threat or risks to Bermuda's economy."

He noted Gibraltar provides compensation for depositors consistent with European Union requirements while the Isle of Man has a bank deposit protection scheme and Guernsey has recently moved to get one.

But he added: "The other financial centres covered by this review do not currently have 'safety nets' in place, but some are actively considering whether to introduce them.

"Should they do so, the most likely focus would be on deposit protection."

The 32-page interim report said the most immediate issue facing the financial centres is how to best deal with the downturn in financial services business - particularly if it becomes prolonged.

In some cases, the financial services industry is the largest employer and generator of Gross Domestic Product (GDP) in the jurisdiction, noted Mr. Foot.

The report shows that financial services contribute 41 percent of Bermuda's GDP - of the nine territories under the British microscope only Jersey has a bigger financial services sector in terms of GDP.

Mr. Foot noted that the regulatory regimes in the financial centres have received broadly favourable reviews from the International Monetary Fund and there is a willingness to match developing international standards.

But he added that concerted action to implement new standards will put pressure on regulatory resources.

"My review will explore whether more could be done to share technical expertise with the financial centres and to support their efforts in other ways to meet high standards."

Mr. Foot wrote that all of the financial centres have committed to the internationally-agreed standards on the exchange of tax information developed by the Organisation for Economic Co-operation and Development (OECD).

"However, the progress report published by the OECD on April 2, 2009 following the G20 summit shows that a number of the financial centres have more to do to implement the international standard.

"More broadly, the growing focus on tax avoidance and the emergence of national initiatives such as the US Stop Tax Haven Abuse Bill will continue to shape international opinion in the short to medium term.

"Each centre will need to take this into account in balancing the real or perceived competitive advantages of current tax regimes with the need to generate sufficient revenue to support its domestic economy."

Mr. Foot's final report is due at the end of the year.