FSC Report Shows Testing Times For Guernsey Banking Sector

by Jason Gorringe, Tax-News.com, London

14 May 2003

The annual report on the banking sector by the Financial Services Commission (FSC) showed many Guernsey banks suffered losses last year amid difficult and volatile market conditions. However, the report's author, FSC director of banking Philip Marr, announced that more drastic losses were prevented by the employment of prudent cost management strategies in the sector.

Many of the Island's banks underwent restructuring programmes last year in response to falling revenues in the sector. According to the Guernsey Press and Star, the more high profile examples included Barclays group and Bank Hofmann (Guernsey) which both gave up their licences and transferred business to other group companies. FleetBoston (Guernsey) also surrendered its licence last year, and over the year, the total number of banks based in the jurisdiction fell from 71 to 67.

This has inevitably impacted on the amount of money held in the Island's banks, which was down 7% by the end of 2002 to £71.9 billion from £77.2 billion the previous year. Over 40% of this money was of Swiss origin, according to the GP.

Marr also summarised a number of policy initiatives that took place in 2002 particularly on the regulatory front. These included a banking code of practice that will take effect from summer 2003, which the FSC director explained "will form the foundation for work by the FSC’s banking division to review how banks manage their risks as part of their corporate-governance responsibilities."

Additionally, the FSC report detailed 68 formal meetings between the Commission and financial institutions, and 139 general meetings concerned with strategy, personnel and restructuring issues.

The Commission also discovered several internet 'banks' claiming to be licensed in Guernsey. However, an investigation was conducted in concert with other commissions, and these sites were found to be bogus and were forced to close down.

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