By Joe Moynihan President of the Jersey Bankers Association Managing Director, AIB Bank (CI) Limited
Jersey has an excellent reputation in the banking industry with 45 banking license holders, including branches and subsidiaries of some of the world's leading banks.
These banks come from the United Kingdom, Europe, the United States, Canada, South Africa and the Gulf. Banks are attracted to Jersey thanks to its political and economic stability and its legal and regulatory environment. With a history of providing banking services to clients all over the world for almost 50 years, Jersey is truly one of the world's top international finance centres.
As banks and their clients expand their businesses internationally, there is a requirement to provide services from jurisdictions that can facilitate efficient international financial services in a tax neutral environment, which simplifies investments for non residents. Jersey is such a location.
Jersey banking services have been catering for the needs of 'internationally mobile' individuals for many years. Products and services have been specifically designed for this client base. As private wealth has increased generally over the years and individuals have relocated and/or sought to invest in other jurisdictions, the banking industry has adapted to meet those needs. The use of offshore investment vehicles such as hedge funds and private equity have placed further demands on Jersey banks, who have responded with increasingly sophisticated products and services.
For Chinese banks seeking to expand their businesses globally to assist their clients, the opportunities provided by Jersey should not be ignored. As clients relocate, or businesses invest into new jurisdictions, there are many ways in which a Jersey presence can assist in terms of retaining clients and in identifying further growth opportunities.
Setting up in Jersey
Under Jersey regulations only banks in the world's top 500 or banks of systemic importance in their country of origin are allowed to operate from the island. Should a bank wish to consider setting up an operation in Jersey, there are a number of options available;
- It is possible to set up a wholly owned subsidiary in Jersey. This option has been used by many banks and involves setting up a Jersey company, requiring capital. This would normally involve acquisition of premises, staff etc.
- Another option is to set up a Jersey branch of the parent bank. The branch does not have the same level of corporate governance overhead and does not require capital. This would usually entail a physical presence with staff, premises etc.
- Jersey based businesses are used for joint ventures, collaborations and partnerships. It would be possible for a Chinese bank to enter into an arrangement whereby clients are introduced and become clients of another Jersey bank, in order to 'test' the market. Should the Chinese bank then decide to set up an operation, clients would be invited to transfer accounts to the bank.
- Jersey regulations also provide facilities for banks to operate as 'managed banks'. This means that an existing Jersey bank acts as 'manager' of the Jersey bank/branch, taking responsibility for the operation. This arrangement is often suitable for 'start up' situations and may result in conversion to full bank arrangements in the future if required.
Chinese banks considering opportunities in Jersey should contact Jersey Finance to arrange introductions to the Jersey regulator and meetings with other professionals in the industry. The Jersey Bankers Association, which supports the strong and diverse banking industry, would also be happy to assist.
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.