Government senators yesterday criticised the decisions they claimed led to Butterfield Bank having to raise millions of dollars in mostly foreign capital to avert financial crisis.

The bank announced on Tuesday that investors, including private equity giant Carlyle Group, the Canadian Imperial Bank of Commerce and Bermuda Government Pension Funds, had provided $550 million in exchange for shares.

Shareholders were not given the chance to vote on the transaction. Meanwhile, Butterfield declared a net loss of more than $200 million for last year and temporarily suspended all dividend payments on common shares.

The news came less than a year after Government and Butterfield Bank struck a historic deal to bolster the bank's capital base by $200 million to allow it to withstand the economic downturn. Senator Marc Bean told the Upper Chamber during yesterday's motion to adjourn debate that the bank had taken risks which were now coming back to haunt it.

He said Government put up $200 million in the best interests of the Country and the bank then purchased risky derivatives. But a Butterfield spokesman said last night: "The problematic assets that we are clearing from our balance sheet were purchased prior to mid-2007, well before the bank's $200 million government-guaranteed preference share raise in June 2009.

"That capital was raised from private investors and government funding was not required. Butterfield has fully honoured its commitments with respect to those shares, paying over $7 million in dividends to preference shareholders in 2009."

Sen. Bean likened the bank's activities to a gambler who goes to Las Vegas and loses money, comes home and borrows money, and then goes back to Vegas.

He said: "Some people are still going out and taking foolish risks. What is that about? I really would like to know. Yes, the shareholders should be extremely upset."

Fellow PLP Senator Walton Brown said Butterfield got into difficulties because of the behaviour of its management looking for short-term profits. He said there had been almost a "whispering campaign" in the community over the last few months about alleged problems at the bank. "We need to get beyond the kind of rampant risk taking that we have seen," he said, adding that the Island's economy depended heavily on the local bank.

"We need to find ways to further diversify our economy," he said. "Greed should not be the operating principle under which financial institutions work."

Opposition Senate leader Michael Dunkley, a Butterfield shareholder, said the $550 million buyout raised serious questions. "I think the bank has treated its shareholders very poorly," he said.

The UBP politician asked why Bermuda Government Pensions Funds were part of the deal and urged the Finance Minister to clarify the position.

"There are countless thousands of Bermudians who are looking at the fund and still hoping it's very safe and secure for when they get their draw down on it. Bermudians want to know that their investment is safe."

Senate vice president Walwyn Hughes said: "It's not the sort of thing that most pension funds would get involved in. It is something that Government should make a comment on."

Government Senate Leader David Burch said he was astounded at Sen. Dunkley's remarks. "You are talking about your institution and your people's institution, not just as a shareholder. These are your people that messed this up."

The Home Affairs Minister said Bermuda was not exempt from the worldwide financial crisis and that it might benefit the Island in the long-run. "In some respects this is going to be good for us."

He said the crisis stemmed from "greed and, in most instances, unbridled greed".