Fiona Le Poidevin, Deputy Chief Executive of Guernsey
Finance, explores how the financial crisis has initiated a new era
for international finance centres, such as Guernsey.
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.
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
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.
Today, 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
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
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
Many people are baffled by trusts, the purpose of which they don't fully comprehend. Some even regard them with suspicion, as tools of of opaque tax evasion strategies of a type favoured by wealthy individuals.
We were recently instructed by a Bank in relation to a regulatory matter. The Bank had made a suspicious activity report to the Financial Investigation Unit ("FIU") due to their concerns about the potential source of funds in an account.
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