This article was originally published in Country Life Guernsey Edition, May 2007.
Guernsey's numbers are staggering. Banks based in the Island hold more than £92bn worth of deposits; the local fiduciary sector has more than £200bn of assets in trust; the value of investment funds under management and administration is in excess of £130bn; and the gross assets of Guernsey’s international insurance industry is nearly £15bn. Not bad for a 24 square mile Island with a population of 60,000.
Guernsey’s development into the buoyant international finance centre that it is today has its roots in local hero Admiral Lord James de Sausmarez’s – he was with Nelson at Trafalgar – establishment of the Island’s first bank in 1822, which was at about the same time as paddle steamers brought the English gentry across the Channel for holidays of sun, sand and sea. Nowadays links to the UK come in the form of a myriad of air routes where tourists rub shoulders with an increasing influx of business travellers who visit the Island as part of Guernsey’s finance industry, which really started to blossom in 1960s after a clutch of merchant banks opened offices and began what has become one of the largest employers and certainly the most profitable industry on the Island.
It was a case of the right idea at the right time. The people of Guernsey are known locally as ‘donkeys’ for their stubborn disposition but this hardly gives justice to the entrepreneurial spirit that they have shown throughout the centuries. The privateers of the 17th century gave way to the knitting industry and then to the growing of tomatoes, but when European subsidies brought the death knell to agriculture, the Island's fiscal autonomy provided a useful differentiator that the finance industry could exploit, and the Islanders were quick to encourage this new found business opportunity.
In the years that have followed Guernsey has used this resourcefulness to establish itself as a leading international financial services centre. Today, most financial business comes from the UK. Guernsey is only a forty-minute flight away from London and this helps make it the financial jurisdiction of choice for both personal and corporate requirements.
Indeed, the mix of banks, insurance companies, trust practitioners and fund professionals, in addition to a support system of lawyers, accountants and actuaries, allows Guernsey to offer a one-stop shop for a vast range of financial needs – particularly those of private clients who look for effective wealth management over time and want to see their assets preserved for the benefit of the family across a number of generations.
Local companies have developed a specific expertise in this field over several years and they continue to build on it through a strong commitment to training. The Guernsey Financial Services Commission – the statutory body responsible for regulating and supervising the Island's financial businesses – was one of the driving forces behind the launch of the Guernsey Training Agency University Centre, an organisation that commissions specialist trainers across the UK to provide on-Island courses and postgraduate programmes to the local workforce.
But the Commission also plays a critical role in its own right by providing robust yet flexible regulatory standards that have bolstered the reputation of Guernsey's integrity. At a time when doubts are often cast over the ability of ‘offshore’ financial centres to maintain internationally accepted standards, keeping this regulatory balance is particularly important because it reassures prospective clients and wins the support of international agencies – Guernsey recently passed the scrutiny of the International Monetary Fund with flying colours. As a small jurisdiction, we are constantly in the limelight and often seen as one of the weaker links. This is far from the truth – we maintain international standards that many major players merely pay lip service to.
However, perhaps the most significant reason behind the success of Guernsey's finance industry is the fact that it does not rest on its laurels. Innovation keeps Guernsey ahead of the pack. Because they serve an increasingly sophisticated international clientele in a competitive marketplace, local businesses need to be at the forefront of product development and this creative energy has, for example, seen the Island become Europe's leading domicile for captive insurance companies – insurance subsidiaries of parent companies whose line of business is not insurance. In addition, the industry works closely with the Government to ensure that the environment is just right for the finance industry to flourish. And, as the numbers show, it is flourishing very well indeed.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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