Guernsey Bank Deposits Ease Though Investments Rise In 2nd Q

by Jason Gorringe, Tax-News.com, London

04 September 2003

The latest economic data released by the Guernsey Financial Services Commission have revealed that the level of bank deposits decreased slightly in the second quarter of 2003, whilst the total amount of money under management in the island increased.

Total deposits held with Guernsey banks at the end of June 2003 decreased in sterling terms by GBP2.2bn from the end of the March 2003 level of GBP74.2bn to GBP72.0bn. Total assets and total liabilities decreased by a lesser figure in the second quarter in sterling terms, falling by GBP1.8bn to GBP75.2bn as some one-off and technical increases in other liabilities offset the decline in deposits.

Meanwhile, funds under management increased by GBP1.9bn (5.5%) to GBP36.1bn. Almost all of this increase was attributable to growth in open-ended funds, whose value increased by GBP1.9bn (11.3%) to GBP18.4bn. The value of closed-end funds remained static at GBP17.7bn. During the quarter, there was also significant growth in the number of non-Guernsey schemes receiving administration or custody services; the value of these funds increased by GBP1.2bn (12.6%) to GBP10.4bn.

Director of Banking, Philip Marr, commented: "The strengthening of sterling particularly against the US Dollar had a significant effect in reducing the level of deposits but there were also lower volume effects in the quarter. It would appear that the prevailing low level of interest rates internationally is beginning to have an effect on deposits, notably in Swiss Francs and US Dollars. There are signs that investors faced with such historically low interest rates are choosing to switch away from deposits into other investment outlets".

There was a net 3% decrease in deposits in sterling terms but a large part of the decrease reflects exchange rate movements and the net effect of stronger sterling. After exchange rate effects have been removed the volume of US Dollars, Euros and Swiss Francs was down, although the underlying deposit volume in sterling was higher. The amount of Swiss fiduciary deposits declined in Sterling terms to stand at GBP30.2bn representing 42% of the total. Within the quarter the steepest decline was in Swiss Franc deposits including fiduciary deposits. We understand Swiss Franc interest rates are now so low as to make fiduciary deposits in that currency barely attractive.

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