By Fiona le Poidevin,
Guernsey Finance
The financial crisis, which
initially came to a head some three or more years ago, has proved
to be a “game changer” for international financial
centres.
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The pre-2008 world of
sustained growth is now long forgotten as we experience a continued
Western economic downturn. As a leading international finance
centre, Guernsey cannot be completely immune from these worldwide
issues.
However, we have been able to
absorb some of the most severe impacts due in no small part to our
50-year heritage in providing a wide range of financial products
and services, including insurance, investment funds, fiduciary
administration and banking.
Banking in Guernsey was
purely domestic and largely conducted by the major British high
street clearing banks until the mid-1960s when a clutch of merchant
banks established subsidiary operations on the island to relay the
benefits of offshore banking to their international
clients.
Since then, international
banking groups with head offices in Switzerland, Europe, the US and
the UK, among other locations, have established subsidiaries on the
island.
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By GlobalDataToday, there are 37 licensed
banks in Guernsey holding more than £114bn ($180bn) of deposits.
The sector provides products ranging from retail banking and
savings through international wealth management to institutional
business and specialist lending. Importantly, it services the other
financial services sectors on Guernsey.
Historically, a significant
client base has been the retail deposit taking market comprising
principally UK expatriates who find offshore a convenient way to
organise their financial affairs, and UK residents choosing these
accounts due to the preferential interest rates. However, the
financial crisis has not only brought about a low interest rate
environment but also a change in regulatory requirements for the
banks, which together have removed much of the marginal benefits
and consequently there has been a marked contraction in this
marketplace.
The post-crisis environment
has also triggered greater scrutiny of tax havens or offshore
centres. However, in Guernsey, we not only believe but also have
considerable evidence that the island stands up to independent
scrutiny:
- Guernsey agreed to enact
measures equivalent to the EU Savings Tax Directive from July 2005,
and in 2011 we moved to automatic exchange of
information. - In 2009, a UK government
review carried out by Michael Foot, reported that the Crown
Dependencies of Guernsey, Jersey and the Isle of Man were within
the very top tier of international finance centres. - Guernsey has signed tax
information exchange agreements (TIEAs) with 34 jurisdictions, and
our leadership in this area has been consistently recognised by
international agencies such as the OECD, its Global Forum on
Transparency and Exchange of Information for Tax Purposes and the
Financial Stability Board. - Furthermore, in January
2011, the IMF published a series of evaluation reports which
commended Guernsey’s high standards of financial regulation,
supervision and stability along with our robust criminal justice
framework.
In addition, during 2009,
Guernsey commissioned Lord Hunt to undertake a review of the
island’s banking sector. One of his key recommendations was that
Guernsey should look to concentrate on attracting higher added
value business in the form of private banking. In particular, this
is complementary to Guernsey’s long-standing fiduciary sector and
its ability to service the needs of high net worth
individuals.
There are more than 150 fully
licensed corporate fiduciaries in the island ranging from large,
multinational organisations to independent, boutique operations.
Together, they hold more than £350bn-worth of client wealth and
assets. Guernsey has an experience and expertise in utilising trust
and company structures but it is also set to expand the product
range by bringing foundations on-stream during 2012.
The game may have changed but
Guernsey’s adaptability, flexibility and innovation means that it
remains very well placed to maintain its position as a leading
international finance centre.
Fiona Le Poidevin is
deputy chief executive at Guernsey Finance – the promotional agency
for the island’s finance industry.
