THE Caribbean took off as a financial region in the 1960s as wealthy investors from Europe and the United States sought ways to avoid tax-hungry authorities via the creation of personal trusts. The main financial centres in the Caribbean include the Cayman Islands, the Bahamas and the British Virgin Islands (BVI). But other, smaller, islands such as Barbados, Antigua and Montserrat have also been trying to grab some of the limelight in recentyears. To a large extent, it is the Cayman Islands that have benefitted most from new offshore banking activities. It is estimated that Grand Cayman plays host to no fewer than 550 international banks, including 45 of the 50 largest banks in the world. Only about 70 of these actually have a physical presence in the Cayman Islands. They include familiar names such as Barclays Bank, the Royal Bank of Canada, and the Bank of Nova Scotia. But unlike their cousins in the Channel Islands, which offer a broad range of retail services, banks in the Cayman Islands differ in that they tend to target their services at so-called high net worth individuals. Barclays Bank in Grand Cayman, for instance, requires minimum deposits of US$10,000, C$10,000 or GBP10,000 for gross interest time deposits. For other currencies, an equivalent of US$250,000 is needed. ''They go for a different niche,'' said one locally-based banker. ''Banks in the Channel Islands principally provide services for expatriates living in the Middle East or the Far East. Cayman Island banks are there to serve wealthy individuals living in the West.'' One of the most popular products offered by offshore banks in the Caribbean is the formation of personal trusts. Typically, trusts appeal to investors who have at least US$250,000, which they need to have administered by an independent trustee to avoid paying capital gains tax and death duty. In addition to levying a fee for setting up the trust, the banks will charge a yearly management fee of between 0.6 and 1.0 per cent of the value of the trust. The British Virgin Islands, meanwhile, has specialised in offering a different type of investment vehicle known as international business companies. It is believed there are now more than 30,000 international business companies registered in the BVI. They generally appeal to wealthy individuals with at least US$500,000 to protect. Apart from tax advantages, these companies provide a degree of confidentiality as there is no need to report a list of shareholders' names to a central authority. In addition, there is no requirement to keep a register of directors. International business companies in the BVI cost about US$1,000 to set up and US$800 a year to run. But despite the relatively large number of banks with representative offices or branches in the Caribbean, would-be depositors still need to exercise vigilance when choosing an institution to take care of their hard-earned cash. Often it is worth settling for a well established, blue-chip bank that pays slightly less-than-average yields just for peace of mind. This was certainly the lesson learned by depositors of the Bank of Credit and Commerce International (BCCI) in the Cayman Islands, who were left with nothing when the bank collapsed amid a worldwide fraud scandal in 1991. The BCCI saga did, at least, persuade the Cayman authorities to tighten up their regulatory framework, however. Under new banking regulations, licences now are issued only to banks that have a well-established and supervised banking presence elsewhere. There are now also tighter restrictions on Cayman-incorporated banks seeking to establish branches or subsidiaries overseas.