Guernsey Banks See Increase in Deposits

by Jason Gorringe, Tax-News.com, London

12 September 2005

Total deposits held with Guernsey banks at the end of June 2005 increased in sterling terms by £449 million from the end of the March 2005 to reach £72.7 billion, an increase of 0.6%, according to the Guernsey Financial Services Commission's second quarter banking activity report.

However, according to the GFSC, there was a more significant increase in total assets and total liabilities which increased by £1,449 million to a level of £78,662 million.

Exchange rate movements were diverse during the quarter - a material weakening of sterling against the US Dollar boosted the figures but there was also a strengthening of sterling against the Euro and the Swiss franc which had a subduing effect. The picture expressed in the underlying currencies was also varied: deposits in Euros showed a slight increase of 0.4% and Swiss francs an increase of 5.6%. However, US dollar deposits were down 3.2% in their underlying currency while sterling deposits were also down by 0.1% in the quarter.

Overall there was a small volume decrease which can be explained by the effects of a bank closure and corporate amalgamations which led to a transfer of funds out of the Bailiwick.

The proportion of total deposits in Euros fell slightly to 22.6% and those in sterling also fell slightly to 35.8%. Meanwhile the US dollar increased its share to 36.5%. Swiss fiduciary deposits were up slightly in sterling terms by 3.6% to stand at £26.5 billion

No new banking licences were issued during the second quarter but three were surrendered. HSH Nordbank (Guernsey) surrendered its banking licence after its business was moved out of the island to another group entity. The Bank of Bermuda (Guernsey) Limited was amalgamated into HSBC Private Bank (Guernsey) Limited. Credit Suisse Guernsey Branch was amalgamated into Credit Suisse First Boston Guernsey Branch.

"The overall picture was encouraging on two counts," observed Philip Marr, Director of Banking

"Firstly, non deposit short term paper continued to increase rapidly in response to the demand for non deposit structured products and this was reflected in the growth of the total assets and liabilities figures. Secondly, there was in effect a new business line represented in the figures with the June launch of BSI Generali Bank (CI) Limited's new treasury business. At the same time, expected corporate events leading to the surrender of three licences and the resultant transfer of deposits and capital out of the Island resulted in this being a subdued quarter," explained Mr Marr.

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