Originally published in Business Annual Offshore Guide, April 2011
During the last couple of years the world has been through a major financial crisis. Guernsey has not been completely immune from these pressures but the Island has to a large extent been sheltered from the most severe elements.
Our finance industry is now showing signs of recovery. This is not uniform across the different facets of the industry but in fact its broad-based nature means that while some sectors continue to be more adversely impacted by the economic downturn, others have seen an upswing or identified new prospects.
For example, the value of deposits held by banks in Guernsey fell 4.3% during the final quarter of last year to reach £111 billion at the end of December 2010. The low interest rate environment and the effects of exchange rate movements were the principal contributing factors.
However, the value of funds under management and administration in Guernsey was up 6% in the final quarter of last year. This takes the total to a new record high of more than £257bn at the end of December 2010. It also means that the value of business increased 40% year on year.
From an insurance perspective, it has been a period of consolidating our position as the largest captive insurance domicile in Europe and number four in the world. Despite the maturity of our captive industry and the prevailing soft market conditions, we have continued to see growth in this sector.
The fiduciary sector boasts more than 150 licensed providers who together hold more than £300bn worth of assets in trust and company structures. There is significant infrastructure and expertise in providing a range of wealth management solutions to both corporate and private clients. A niche but developing area for many Guernsey fiduciaries is Qualifying Recognised Overseas Pension Schemes (QROPS).
The fiduciary sector has also been at the forefront of the growing focus on developing new business streams from the emerging markets. Guernsey continues to be extremely active in the UK and European centres – our traditional principal sources of new business – but we also recognise that the 'emerging' markets represent new and increasingly significant pools of both corporate and private wealth.
Guernsey Finance is working with government, industry and the regulator to indentify and maximise the potential opportunities for the various parts of our financial sector in these regions.
Guernsey Finance has not previously actively marketed the jurisdiction to the countries in Latin America but this has now become a new focus in response to industry demand and in particular in the captive insurance sector. The Island already has several Tax Information Exchange Agreements (TIEAs) in the pipeline with South American jurisdictions, including Brazil, Argentina and Mexico and discussions have also begun with Chile and Venezuela.
Guernsey has been active in this marketplace for several years and continues to maintain and develop our profile in this region through the media and attendance at relevant third-party conferences, principally in relation to the investment funds sector. 2010 saw the launch of a suite of Shariah-compliant funds based in Guernsey.
Existing business already in the Island from the region includes the investment company Raven Russia, the investment fund Aurora Russia and a range of funds from Baring Vostok Capital Partners. Guernsey Finance has been working with industry to indentify further opportunities for investment fund and wealth management providers to increase business with Russia and a fact-finding visit to Moscow is planned for the middle of 2011.
A delegation of politicians, officials and business leaders from Guernsey visited Delhi and Mumbai towards the end of 2010 to enhance financial services links between the two jurisdictions. The Island is already gaining a reputation as the new home for Indian focused listings on London's Alternative Investment Market (AIM). In addition, we are also progressing towards signing a TIEA with India.
The Far East
Guernsey-based fiduciaries Nerine Group and Louvre Group have established offices in Hong Kong, law firm Ogier is offering Guernsey legal advice from an office in Hong Kong and Guernsey-headquartered fund administrator International Administration Group (IAG) has also recently opened an office in Hong Kong.
We have had a representative office in Shanghai for more than three years now and the strength of the relationships we have built is highlighted by the fact that towards the end of last year we signed a Memorandum of Understanding (MoU) for exchange and cooperation with the Shanghai Municipal Financial Services Office and a Tax Information Exchange Agreement (TIEA) with the Chinese central government tax authorities.
Guernsey has now signed a total of 22 TIEAs. The Island was within the first wave of territories placed on the OECD 'white list' and our commitment to tax transparency and exchange of information has been endorsed by the OECD's Global Forum in a report published at the start of 2011. Also published early in 2011 were the IMF's evaluation reports which commended Guernsey's high standards of financial regulation, supervision and stability along with its robust criminal justice framework. The Island scored the highest marks of any jurisdiction so far assessed.
Indeed, one of our central messages to key decision makers in these emerging markets is that Guernsey is a leading international finance centre offering a range of financial products and services at the very highest global standards
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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