Originally Published Global Assets Online, July 2007.
In 2007 Guernsey’s finance industry is continuing from where it left off in 2006 – experiencing substantial growth that is pushing business to record highs. Market conditions are undoubtedly playing their part but primarily these flows are due to an increasing number of key decision makers from around the globe recognising how the Island’s expertise and infrastructure together provide a highly competitive climate in which to conduct finance business.
That said, we recognise that there is ever-more competition due to the growth in the number of international finance centres and that, like ours, their business flows are (by their very nature) inextricably linked to the wider world economy and therefore subject to changes in the levels of global liquidity, where highs and lows tend to be cyclical in nature. Therefore, notwithstanding our current success and to stay ahead of the competition and maximise business whether the global economy is at a ‘peak’ or in a ‘trough’, work is ongoing to further enhance the Island’s already business-friendly environment and promote the jurisdiction internationally as a world-class finance centre. Guernsey is by no means resting on its laurels.
Thriving finance industry
Over the past four decades Guernsey has established itself as a leading international finance centre and the Island continues to build on this position:
- The jurisdiction is still Europe’s leading captive insurance domicile and amongst the top four in the world, with 624 captive entities;
- Guernsey banks continue to reach new record highs for levels of deposits, which by the end of March 2007 had risen to more than £105bn – up 23% year on year;
- The fiduciary sector remains buoyant, with some 140 licensed companies and assets in trust of more than £200bn; and
- Funds under management and administration also continue to hit new highs, reaching in excess of £140bn at the end of March 2007 – an increase of more than 25% on the same time in 2006.
A key component of this success is the attraction provided by Guernsey’s financial services heritage. Activities to, on the one hand, improve the Island’s business-friendly environment and on the other, promote the jurisdiction internationally have also been crucial. Both will be developed further during the remainder of 2007 and through 2008 to ensure that Guernsey is able to maximise business flows in 2007 and beyond, whatever the global economic climate.
This year is the tenth anniversary of Guernsey becoming the first jurisdiction to introduce the Protected Cell Company (PCC) and that legislation was amended again in 2006, providing further flexibility in the application of the structure. The innovative Incorporated Cell Company (ICC) was also speedily introduced last year, adding yet another product to the range on offer in the Island, complementing those in existence, including the PCC.
Additionally in 2006, an amendment was made to Guernsey’s professional funds regime, Qualifying Investor Funds (QIFs). This self-certification regime was introduced early in 2005 to significantly reduce authorisation times for investors meeting the criteria. The definition of an investor was changed during last year to provide extra flexibility. The QIF regime has become an increasingly popular route for the launching of funds, with the Guernsey Financial Services Commission (GFSC) having given consent to 95 by the end March 2007.
There has also been significant interest from fund promoters and sponsors in the Island’s new registered closed-ended funds regime. Indeed, between its introduction on 1 February and the end of June this year, 32 such funds had been given consent by the regulator. The ‘registered fund’ regime streamlines the consent process – making the domicile of funds in the Island simpler and quicker – by shifting the burden of responsibility for reviewing the promoter, the investment manager and the prospectus or admission document from the GFSC to the Guernsey licensed fund administrator. This is a development of the approach taken by the Commission in respect of QIFs and has its origins in the root and branch review of investment sector legislation that was conducted by a working party under the stewardship of leading Guernsey advocate Peter Harwood. A series of recommendations were made to enhance the environment for conducting funds business in the Island, including the categorisation of funds into ‘regulated’ and ‘registered’. The remainder of these changes will come on-stream later in 2007 and into early 2008.
A further working party, led by another Guernsey advocate Rupert Evans, has been reviewing the Trust Law and how it can be updated to benefit the fiduciary sector. The final report recommends extensive amendments to the Trust Law, including abolishing the personal liability of directors in Private Trust Companies (PTCs) as a way to encourage greater use of such entities. In addition, amongst many other changes, there will be the introduction of Foundations and Purpose Trusts. All of this will be implemented during the rest of 2007 and in 2008.
This year the final proposals from a review of the Guernsey Companies Law should also go before the Island’s parliament, The States of Guernsey, while complementary work continues on the modernisation, including automation, of the Company Registry. Similarly, Guernsey’s Intellectual Property (IP) environment is in the midst of being modernised. A dedicated office, solely responsible for its administration and regulation, opened in spring 2006 and a suite of IP-related legislation will continue to be introduced to the market.
2007 also provides the lead-in to a major set of economic and taxation changes in Guernsey. At its June 2006 sitting, the States of Guernsey agreed to a set of economic and taxation changes – the main strands of which will come into effect from 1 January 2008 – that includes as standard a zero rate of corporate tax.
Promoting the jurisdiction
It is precisely these ingredients that make Guernsey a leading international finance centre and it is these that are emphasised in the promotion of the Island as an ideal location in which to conduct finance business. GuernseyFinance – the promotional agency for the Island’s finance industry – has been making giant strides in 2007; significantly raising the profile of the Island as a leading finance centre.
An important element has been the launch at the start of the year of our new brand. It has its roots in the fact that firstly, we are not trying to sell GuernseyFinance but Guernsey and its finance industry and secondly, that as such we need a look that reflects the progressive nature of the industry. The new brand has provided us with a focus and feel to make a much greater impact in the marketplace.
Indeed, in 2007 we have received increased visibility in the international media and there are on-going efforts to cultivate stronger relationships, whether that is offering to contribute articles to trade publications, briefing journalists in their home environments or inviting them to visit Guernsey to see the Island at first-hand and talk face-to-face with local practitioners.
Work to increase awareness of the Guernsey brand has also been boosted by the renewed vigour of industry cooperation, whether disseminating key jurisdictional messages or direct input to our key activities of public relations and events. For example, already in 2007, industry representatives have assisted GuernseyFinance at several third-party insurance, funds and fiduciary conferences and which have taken in a geographical spread that includes, London, Frankfurt, Geneva, Monaco, Cannes and New Orleans.
Promoting these sectors in London is important for Guernsey because the City is a key source of new business and as such the local industry associations – the Guernsey Investment Funds Association (GIFA), the Guernsey Insurance Company Management Association (GICMA) and the Guernsey Association of Trustees (GAT) – together with GuernseyFinance have hosted their own events in London. These conferences provide a great platform for each sector to raise its profile, convey its key messages and showcase its expertise.
GuernseyFinance is also continuing with its work to identify and capitalise on significant new business streams around the world. Eastern Europe, the Middle East and particularly China (specifically Shanghai) and Hong Kong have been earmarked as locations where it would be most beneficial to more actively market Guernsey as an international finance centre. GuernseyFinance last year, with the aim of exploring in further detail the opportunities for the Island’s finance industry and raising the profile of the Guernsey brand, visited Dubai for a private equity conference and made a jurisdictional visit to Hong Kong and Shanghai. In 2007, work has continued on devising a strategy particularly for developing a greater presence and therefore ultimately enhancing business flows in Hong Kong and Shanghai. I can promise you that some exciting developments are in the pipeline.
The right conclusion
Guernsey’s finance industry is thriving. Crucial have been activities to improve the environment for conducting business on the Island and promote the jurisdiction internationally. These streams will be developed further during the remainder of 2007 and through 2008 to ensure that Guernsey, whatever the global economic picture, is maximising business flows. Guernsey is forging ahead into a bright future.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com .
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