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Jersey Weathering Financial Storm

by Robert Lee,, London

28 October 2008

Jersey Finance, the jurisdiction's investment promotion body, has assured financial businesses in Jersey and elsewhere that despite the global economic turmoil the Island is in a stronger position than many other international financial centres.

According to a statement, released after an online question and answer session with the media last week, Jersey's banks have experienced "very low exposure" to risk assets such as the toxic debt which has created liquidity issues for some banks around the world.

Jersey is expected to weather the banking storm relatively unscathed because most of its banks are branches and subsidiaries of those banks that are being supported by governments in the UK, US, EU and elsewhere. Jersey's banks currently perform above the minimum requirements for the risk asset ratio (RAR) of 8% laid down by the Basel banking convention, and many banks are averaging 50% above this level.

"Jersey is part of the solution for many of these parent banks because their Jersey operations are effectively providers of much needed liquidity (from cash deposits)," the statement explained.

"Jersey is in a strong position as a provider of very significant and important liquidity to banking groups which is fundamental to their continuing commercial operations. Jersey’s strong system of regulation, the long-standing nature of business in the Island and the deep pool of financial services talent the Island can draw upon further reinforce this strong position."

Jersey Finance also confirmed that Jersey had no interests in Icelandic Banks and no Icelandic banks were licensed to do business in Jersey.

Despite the lack of confidence in the banking sector globally, the report says Jersey has still retained "significant inflows of funds." No comments were made into the extent of withdrawals but Jersey Finance insists "the finance industry has continued to operate as usual."

The statement added that all Jersey residents’ deposits will be guaranteed in the unlikely event that a bank based in Jersey were to fail; the full amount would be guaranteed from October 10, 2008. The guarantee is subject to final approval of the States following any bank failure.

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