Guernsey: Guernsey- Thriving In The ‘Goldilocks Zone'

Last Updated: 14 January 2016
Article by William Mason

Most Read Contributor in Guernsey, September 2016

IFC Economic Report editor, Ciara Fitzpatrick, spoke to Guernsey Regulator, William Mason about the difficulties for IFCs in keeping up with regulatory changes sweeping the international finance industry and how Guernsey maintains it competitive edge in an ever changing professional landscape.

Keeping ahead of the torrent of international financial regulation flooding the globe in recent years while maintaining a successful financial centre is undoubtedly a complex task.

For Guernsey's Regulator, William Mason, it has entailed creating good quality regulation without overegging it or, in his words, finding the Goldilocks zone of regulation – a regime that is neither too hot, nor too cold but just right.

The financial services sector has been fundamental to Guernsey's economic growth over the last few decades; the driving force behind this success has been the jurisdiction's competitive edge,

Guernsey's unwillingness to stand still and let another IFC take its leading global position.

For Mr Mason, who has been Director General of the Guernsey Financial Services Commission (GFSC) since 2013, there is no question about the need for a high standard of regulation - as he explains, from a regulatory perspective, it will always be more cost effective and less damaging to stop bad businesses starting up on the island in the first place than to manage or close them down. The incentive to attract high quality business is already there. And the competition that exists between international finance centres helps to ensure the high standards of regulation are met.

Guernsey's reputation as a well-regulated financial centre has been established for many years but what gives the GFSC that competitive edge is its ability to combine top tier regulation with an approachable and reassuring style. Being smaller than the onshore centres, Guernsey is able to hold on to traditional methods of dealing with the individual business to create a bespoke approach to maintaining the existing high standards on the island. The motto the regulator takes is 'bring a coffee, not a lawyer', let's sit down and work this out together.

Uniquely positioned in Europe but outside the Union, Guernsey is able to independently grow and adapt to developments in the global financial industry. It can also take a more flexible position when considering regulatory options. Take Solvency II, as Mr Mason explains:

"Guernsey not being part of the EU would have meant we had to ask for equivalency to Solvency II and we decided not to go through that quite intensive equivalency process. The decision was based on proportionality. I sit on the IAIS ExCo (International Association of Insurance Supervisors), where I represent small jurisdictions. We are putting our energies into producing insurance capital standards for global use rather than a merely European use.

"So what have we done in Guernsey instead? We have the risk based solvency capital standard that we introduced in the last 12 months and we will carry on updating that if needs be to match the IAIS' international capital standards"

As Mr Mason continued: "Guernsey's insurance sector is focused on the international arena, not exclusively on the Eurozone economy, which made Solvency II an unnecessary excess of regulatory pressure for the jurisdiction."

The flip side of this is the EU's Alternative Investment Fund Managers Directive (AIFMD) where Guernsey made the decision to seek equivalence. Being a leading fund domicile, it made sense for the jurisdiction to seek full equivalence to the EU AIFMD, the decision was made based on the needs of the sector as opposed to being swept along in the tidal wave of indiscriminate regulatory demands.

In September Guernsey was recommended by the European Securities and Markets Authority ESMA) for the AIFMD third country passport. The figures that came out of the ESMA recommendation revealed that Guernsey is the third largest non-EU fund domicile behind only the US and Cayman for the number of non-EU AIFs and non-EU AIFMs marketing in the EU member states as of March 2015.

Guernsey's response to the AIFMD had been to introduce a dual regulatory regime through which it is possible to continue to distribute Guernsey funds into both EU and non-EU countries. Guernsey's opt-in equivalent regime, which has been in place since January 2014, is appropriate for funds requiring full AIFMD compliance, allowing use of the EU's National Private Placement regimes.

As Mr Mason stressed: "We put a lot of effort and energy into that as a Commission and we were delighted that ESMA recommended us for a third country passport and it is good recognition of our regulatory strength."

The question arises, however, is there a danger of the compliance burden becoming too much, becoming 'unfair' for smaller financial centres, like Guernsey, institutions or individuals?

Mr Mason feels 'unfair' may be over stating it, however, the administrative burden, he says, is much higher than it used to be, which makes some clients less economically viable than they once were. Take, for example, a US citizen of modest means who once was able to get banking quite cheaply but who now has become an expensive proposition because of the compliance burden the US is prepared to pass on to foreign regulators and service providers alike in the shape of FATCA.

The waves of regulation that were generated by the financial crisis obviously raised concerns as to the debilitating effect of too much regulation. Mr Mason refers to the "sand in the machine" with regard to the stymieing effect of too much regulation. He feels strongly about not putting impediments in the way of international trade – freeing up international trade will, he says, enable the world's increasing population to sustain itself. And we thus arrive at the importance of international standard setters keeping international regulatory standards in the 'Goldilocks zone' – with the porridge of regulation being neither too hot nor too cold but being just right for the situation it is dealing with.

But are there difficulties in making the so called 'regulatory porridge' just right for all? Can regulation work as effectively in Guernsey or Cayman as it does in London or New York? Mr Mason acknowledges that yes, some issues, specifically technical ones, may arise as to the interpretation of regulation for smaller jurisdictions but does he buy into the notion that one size of regulation cannot fit all? Not entirely.

"I think you need proportionate implementation. If you are not trading billions or trillions of dollars of FX you perhaps need a slightly lower key implementation of the market's regime than you do if you are the City of London – where you have a different set of issues to worry about. If you are going to have international trade it is quite helpful to have standards that everyone knows about - everybody's bank is capitalised to Basel III and therefore should be equally resistant to failing. And I am certainly a supporter of the international capital standards, which the IAIS is developing for the insurance sector.

"The challenge is, of course, to make sure that regulation is proportionate – you don't want to damage economic growth by setting standards that are too austere."

And what about those vocal critics of the business being conducted in IFCs? Mr Mason quotes Matthew 7.3 to me:

"Why do you see the speck that is in your brother's eye and not notice the log that is in your own eye?"

Maybe it is time the critics checked that their own houses are in order before jumping on the bandwagon that offshore bashing has become.

As Mr Mason sees it – politicians or commentators in struggling economies find it difficult to implement reforms that will encourage economic growth in their own jurisdictions and it is often much easier for them to "throw bricks" at other economies that are doing better than their own than deal with the problems they have.

The facts lend themselves to this statement - the IMF, on their last visit to Guernsey, acknowledged the very high standards of anti-money laundering regulation in place and HMRC raised very little through their tax disclosure agreement with Guernsey, indicating that the notion that there are billions of pounds sheltering in Guernsey is an exaggeration.

Mr Mason believes overriding the traditional negative stance towards IFCs will be difficult because many people simply do not understand what it is they do, where they fit into the "machine of global trade".

"But we have to ask them to be empirical and evidence-based because the evidence is that we [in Guernsey] have a very tight, tough regulatory regime, we cooperate with international law enforcement and we take tough action on those who do not play by the rules.

"The mantle that is sometimes put on us of non-cooperation is palpably false and the notion that we are allowing people to do something they should not be doing is also false. But you have some politicians, academics from economies that are very wedded to high taxes, which are suffering from very low growth and high levels of unemployment who don't really feel intellectually inclined to revisit their own country's economic model. It is much easier to throw stones at more successful models such as our own relatively free market, relatively low tax model."

Meanwhile, developments continue apace in Guernsey. PRISM is in use across all regulated sectors, a platform also used by the ECB and Central Bank of Ireland which provides risk based supervision. The GFSC is also working on developing online returns that will integrate seamlessly with the PRISM system to allow straight-through processing for the checking of data, all with the aim of freeing up the regulator to do the important stuff – oversee and maintain an efficient, successful and well-regulated financial centre.

Guernsey continues to adopt international protocols on money laundering and conclude tax treaties in order to maintain its reputation as a compliant jurisdiction, while the jurisdiction's regulatory flexibility allows it to remain steadfastly in the 'Goldilocks zone', much to the satisfaction of its regulator who feels this is key to the island staying ahead of the competition. "We are politically stable; we have low levels of national debt – which makes Guernsey, honestly, quite unusual and quite a good place to invest. There are still relatively few jurisdictions around the world that have that combination of things going for it."

"Yes... you could say we are pretty positive about the future."

An original version of this article was published in IFC Economic Report, December 2015.

For more information about Guernsey's finance industry please visit

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.