We all jealously guard our client relationships, and therefore the thought of an offshore subsidiary to a potential competitor may not at first be a compelling idea. However, the ease with which an administered bank can be established and the savings in costs when compared to a stand-alone bank has made the concept attractive to a growing number of institutions.
With near full employment and considerable pressure on the Island's resources, the idea of an administered bank was welcomed in 1987 when Banque Paribas Suisse sought permission to establish a branch and subsidiary in Guernsey and have them administered by Ansbacher rather than recruiting their own personnel and acquiring premises.
The number of administered banks has grown to 28 compared to 47 banks which have a stand alone presence and demonstrates the success of the concept over the last decade. The deposits held by administered banks total £14.8 billion representing 35% of all deposits in Guernsey banks.
A bank wishing to apply to establish an administered operation on the Island will discover that the process is straight-forward and can be completed in a relatively short period. It will also be surprised at the savings which can be made in operating costs by not having its own premises and not having to recruit or employ personnel. An added benefit can be the experience in offshore business which the administering bank can provide to the new operation.
In providing this service the administering bank is able to leverage the use of its information systems and premises whilst achieving more efficient use of personnel and expertise. As with all relationships, trust is a crucial element of the arrangement and the administering bank observes and is contracted to maintain the strictest confidentiality about business which it administers.
Some banks have chosen to establish an administered bank in the first instance, and dependent upon the development of its business have subsequently elected to establish a stand alone presence. An example is Woolwich Guernsey Limited which for the first 6 years of operation was an administered bank but has become stand alone this year. Not all administered banks will require the same level of administration with some banks retaining responsibility for client relationships and outsourcing only transaction processing. This flexibility is part of the attraction of the administered bank concept.
The Financial Services Commission which regulates banking in Guernsey makes it very clear that they supervise administered banks in precisely the same manner as banks with a stand alone presence and have no specific policies which apply only to administered banks.
It is fair to say that not all administered banks are managed by an unconnected institution. For example in the last year the concept has been adopted by Deutsche Bank and ING Bank which have established presences on the Island which are administered by group companies.
There are now a number of institutions on the Island that have developed specific expertise in providing bank services. Many of these institutions have a history of providing administrative services to fund managers and the administration of an offshore bank has been seen as an extension of these services. Managing other financial companies such as trust companies or captive insurance companies will often result from the initial relationship.
The concept of an administered bank is viewed on the Island as being extremely successful and an excellent method of ensuring that resources are utilised to their maximum extent. It has enabled the Island to grow and broaden the range of banks represented on the Island at a time when personnel resources especially have been scarce. It is anticipated that administered banks will continue to be the focus for the expansion of the Island's banking sector.
This article provides a general outline on the subject at the time of writing. It is not intended to be exhaustive nor to provide legal advice in relation to any particular situation and should not be acted on or relied upon without taking specific advice.