WITH political and economic uncertainty still looming in Hongkong as 1997 approaches, offshore banks are doing a thriving business putting the territory's dollars into safe havens. Most of the world's major international banks have representative offices in Hongkong and their locally-based staff are happy to assist with enquiries about their offshore operations. The principal offshore banking havens include Jersey and Guernsey, in the Channel Islands, the Isle of Man, Gibraltar, Bermuda and the Cayman Islands, the British Virgin Islands (BVI) and other places in the West Indies. All of these centres benefit from sound legal systems based on English common law. They have varying degrees of political independence from Britain, and all enjoy relatively liberal tax regimes. However, it is not just the absence of capital gains tax or interest tax that attracts the attention of individuals and companies based in Hongkong to these offshore centres. Nor is it the banking services they offer, as Hongkong arguably enjoys one ofthe most efficient banking systems in the world. The real attraction of these offshore centres to Hongkong residents is that they offer a relatively stable political environment in which to park their assets. In other words, in an offshore haven, hard-earned funds are well away from Hongkong's political volatility and any monetary or foreign exchange instability that may affect the territory after it reverts to Chinese sovereignty. As a result of the demand for offshore banking services, and the amount of funds involved, the business has become most competitive in recent years with new products coming on stream all the time. As the industry has matured, different offshore centres have developed their own identities and product niches. The Channel Islands and the Isle of Man, of instance, cater mainly to the requirements of British expatriates who still have interests in Britain. As a result, they require retail banking services to help them pay bills in Britain (such as mortgage repayments and school fees). They may also want to have sterling-based pension funds managed there. The most successful offshore centre on the retail side is Jersey. Probably one of the most popular products during the past decade has been the money-market cheque account. This facility allows subscribers to hold their funds in an account that provides all the benefits of a current account while, at the same time, pays gross rates of interest linked to the prevailing rates on the money markets. Gross interest rates vary between the different banks and most will not pay any interest at all if the account falls below a specified minimum - usually GBP2,500. So, it is generally worth shopping around to find the best money-market cheque account to suit a particular individual's requirements. It is also important to bear in mind that none of these offshore centres offers any form of deposit protection schemes for overseas investors. Unlike building societies, banks in the Channel Islands and on the Isle of Man usually are represented by a subsidiary of the parent bank and not as a branch. In an attempt to address the problem, the authorities in Guernsey are in the process of drafting new banking legislation that will give the banks the option to implement a deposit protection scheme, if necessary. But, for practical reasons, any scheme introduced would probably not cover deposits in excess of GBP20,000. At the other side of the Atlantic, Bermuda, Cayman and the BVI have been catering to a different kind of customer. In these offshore centres, the emphasis has been toward the so-called high net worth individuals who need trustee services. Typically, these clients have a pool of at least US$500,000 that they need to protect by setting up a trust. These complex legal set-ups are used in countries that follow an English-style legal system to avoid payment of capital gains tax or death duty. The bank that offers the trustee service is in overall charge of the management of the trust's assets, but it must be managed in line with the depositor's wishes set out in a trust deed. In return for the service, the bank will, typically, charge an annual fee of between 0.6 and 1.0 per cent of the value of the trust. Bermuda has also proved a popular destination for corporate funds from Hongkong, because of the island's sound history, good telecommunications network and its liberal regulatory framework. This means companies doing business in the territory can easily manage their assets in a Bermuda bank account from Hongkong.