Guernsey Sets New Bank Deposit Record

by Amanda Banks, Tax-News.com, London

21 February 2007

Total deposits held with Guernsey banks at the end of December 2006 increased in sterling terms by GBP2.98 billion from the end-September 2006 level of GBP89.37 billion to reach a new record deposit level of GBP92.35 billion, a 3.3% increase on the quarter and a 14.4% increase on the year. Total assets and total liabilities increased by GBP3.14 billion to reach a new record level of GBP100.58 billion.

The fourth quarter saw large volume increases in deposits from financial institutions both overseas and from within Guernsey. These large increases in volume outweighed a negative exchange rate effect caused by the continued strengthening of sterling against the major currencies. Indeed volume levels in the underlying currencies all moved upwards with strong increases in US Dollars (up 6.3%), Euros (up 9.1%) and Swiss Francs (up 13.5%) with sterling showing a more modest but solid increase of 2.7%.

A major driver in the institutional growth was the 6.8% increase in Swiss fiduciary deposits to GBP36.4 billion - an all time high - so that these deposits represented 39.4% of all deposits at the quarter end. Increases in interest rates in the second half of last year improved the attractiveness of this product line in the most popular currencies, US Dollars, Euro and Swiss Francs. Group restructuring at two banks resulted in more Swiss fiduciary deposits being directed to Guernsey.

In the overall currency mix, the proportion of Euro deposits increased to 25.2% although US Dollar deposits fell slightly to 37.2% and the proportion of Sterling deposits fell marginally to 31.8%. Additional growth in total liabilities in part reflects a strong issuance of non-deposit short-term paper, which was issued to meet the demand for structured products.

During the quarter, no new Banking licences were issued, but EFG Eurobank Ergasias International (CI) Limited surrendered its licence because its original role as a specialist shipping finance provider was no longer viable after its parent bank was merged into a much larger group.

Local inter-bank activity fell to GBP872million.

Philip Marr, Director of Banking commented:

“The fourth quarter figures are very encouraging. Total assets and total liabilities surpassed the GBP100billion mark for the first time underpinned by strong growth in institutional deposits and the continued demand for structured products. Whilst I would add a note of caution about the loss of corporate deposits in early 2007 I would point to the notable feature this quarter that Swiss fiduciary deposits resumed their popularity reaching their highest ever level as second half interest rate increases renewed their attraction as a product line."

"At the same time two more groups concentrated their Swiss fiduciary deposits in Guernsey. Overall, strong volume increases in deposits outweighed the depressing effect of the appreciating Sterling exchange rate on our figures. Indeed all the main currency segments, US Dollars, Euro, Swiss Franc and also Sterling achieved increased levels in their underlying currencies.”

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