Guernsey’s Commerce and Employment Department has welcomed the publication of a strategic review of the island’s banking sector, commissioned in March 2009, which provides proposals to ensure the sector’s sustainability, as well as drawing on lessons from the economic crisis.
Investigations and interviews were undertaken by a team headed by Lord Hunt of Wirral, Chairman of the Financial Services Division of Beachcroft LLP.
Lord Hunt stated that he found much to encourage him in thinking that Guernsey could expect a major contribution to its economy from banking in years to come; a message that he reiterated when presenting the report:
“The banking sector has made a significant net contribution to the economy of Guernsey. The report shows that the sector directly employs nearly 2,750 people and contributes 17% of all tax revenues and an estimated GBP200m a year to the Guernsey economy,” he revealed.
The independent study highlighted that there were definitely opportunities to be researched and potentially exploited by the Guernsey banking sector, but it warned that the Island could not afford to be complacent.
The report highlighted threats and risks to be mitigated as well as opportunities, both of which must be addressed by the public and private sector in order to remain competitive.
Carla McNulty Bauer, Minister for Commerce and Employment, observed that: “Hunt’s report shows that Guernsey has a strong and diverse banking sector which is crucial to Guernsey’s whole population."
"Many of the proposals are already being addressed and I look forward to continuing to focus our collective attention on the areas highlighted in the report so that Guernsey continues to have a banking sector with an enviable reputation.”
She continued: “The announcement that Guernsey must once again review its corporate tax structure only reinforces the points raised by Hunt. Opportunities and threats will continue and Guernsey has to continue to be dynamic and work hard to maintain competitive advantages in an international arena. This will be a collaborative effort by the public and private sector.”
The report highlights the fact that Guernsey’s success as an attractive place for people to live and do business is inextricably linked with the banking industry.
Lord Hunt suggested in this regard that “the disproportionate contribution from banking makes its success and closely related activities a key driver of Guernsey’s prosperity”.
In addition to providing traditional banking services to the local domestic and business community, it was identified that most Guernsey banks offer core products to all other parts of the finance sector, and that this also adds to Guernsey’s infrastructure and general offering.
Steve Watts, Chairman of the Association of Guernsey Banks (AGB), observed that:
“The Hunt Report has again emphasized that banks are a vital part of the whole Guernsey economy. AGB notes the recommendations contained therein, acknowledges that the banking industry is undergoing change on a global scale and that it is vital for the island to continue to maintain its well established reputation for probity, effective regulation and transparency.”
The deposit-taking sector was scrutinized, and the report concluded that although the risk presented by retail deposits is less than a year ago, risk remained which needed to be considered and managed.
Philip Marr, Director of Banking at the Guernsey Financial services Commission (GFSC), commented: “Hunt’s Report on the current shape of the banking industry in Guernsey and his analysis of the principal business models operating here and the risks inherent in those models will be helpful to all stakeholders involved in the industry. We think it is wholly appropriate to consider whether those are reasonable risks for the island to be taking in the current environment. We have already been addressing those risks, principally about upstreaming, for some time and will continue to do so in the future.”
“Hunt also addresses the challenges facing the sector as a result of regulatory changes brought on by the banking crisis. As always we stand ready to respond to those challenges which impact on banking business in Guernsey.”
The Hunt review is the culmination of significant work both on and off-Island, including a three month consultation period with stakeholders and interviews from Guernsey’s banking sector; formal information and data gathering exercises; and comprehensive canvassing of views of international banking experts.
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