Bermuda's functioning as an international financial centre is to be examined on behalf of the British Government.UK Chancellor of the Exchequer, or finance minister, Alistair Darling announced in his Pre-Budget Report on Monday that Britain will commission an independent review of all its territories that serve as financial centres.

The review will focus on areas such as regulation and international co-operation, as well as financial crisis management and fiscal arrangements.

Finance Minister Paula Cox said last night that detailed terms of reference of the review had not yet been provided.

She expressed confidence that the Island's regulation met global standards, while its banks and insurers were well capitalised and transparent.

In his report, Mr. Darling said the review had been prompted by the world financial crisis.

"The recent financial turbulence has highlighted potential problems with Overseas Territories and Crown Dependencies, such as the Isle of Man and Channel Islands.

"They attract banking customers with lower taxes - without contributing to the UK Exchequer. But at times of stress, depositors need to know who will compensate them.

"The British taxpayer cannot be expected to be the guarantor of last resort. So I have asked for a review of these regulatory arrangements, which will report to me in the spring."

Mr. Darling stressed: "The review will not consider changes to the UK's constitutional relationship. It will work with the crown dependencies and overseas territories to identify current and future opportunities, risks and mitigation strategies."

Territories likely to be reviewed include the British Virgin Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Montserrat, and the Turks and Caicos Islands.

Minister Cox said: "In the wake of the recent G 20 meeting concerning the troubled global economic and financial system it is understandable that the UK would want to better understand the role of its Crown Dependencies and Overseas Territories in the global financial system. Bermuda is a well regulated, co-operative and transparent jurisdiction. The International Monetary Fund recently assessed Bermuda's supervisory regime for banking, insurance, trust business and investment business as being largely compliant with international standards.

"The terms of reference of the proposed review have not been articulated at this point and it is my understanding that the review will begin with the Crown Dependencies and will then extend to Overseas Territories as appropriate."In Bermuda, public authorities have assessed the vulnerabilities associated with the prevailing economic and financial conditions and have been proactive in addressing them.

"Our banking sector is well capitalised, the insurance sector has companies with strong balance sheets that generally have withstood the erosion of asset values in the poor investment climate and have absorbed the payment of claims arising from this year's storm season.

"Bermuda plays a crucial role in the global economy and our supervisory and regulatory regimes are aligned with the required global standards."