Changes to the offshore finance landscape that are taking place will help secure the future direction of jurisdictions such as Jersey and should send positive signals to the intermediary market
Measures emanating from Brussels, while making demands on the tax structures of jurisdictions, are also adding further to the competitive nature of international finance business. At the same time, centres such as Jersey are evolving and enhancing the quality of the product offering to the international finance community.
At a recent conference in London organised by Jersey Finance and entitled 'Jersey Financial Services in a Changing World', the 230-strong delegates who were primarily professionals from the City of London were surveyed for their views. The vast majority of respondents thought that the conference was likely to, or would definitely, attract more business to Jersey and every single respondent indicated that they would be interested in attending a conference next year.
This positive response to the event was both encouraging for Jersey's finance community and also indicated that there is an extremely high level of interest among senior City professionals at finance houses and law firms, in the increasing opportunities for undertaking business offshore. This, at a time when global financial services and the role of offshore jurisdictions, have been under the political spotlight across the globe.
Despite the difficult conditions that all centres have faced over the past year, Jersey has seen growth across the board ' in bank deposits, investment funds, assets under management and company incorporations. The latest figures from the Jersey Financial Services Commission for the quarter to 31 December 2002, show that bank deposits are still rising by 2.1% against the previous quarter and 5.4% against the same quarter last year. Figures in other sectors also show increases.
At the Jersey Finance London conference, the island's political leaders and finance representatives outlined its future direction and business priorities within the context of this continued success.
Private client wealth management business has been one of the building blocks of the island's success and it remains a core feature of the island's product offering. Despite the dramatic falls in the world's stock markets, there is still evidence of significant global wealth and high net worth clients and their advisers will be seeking expertise on wealth management. Alongside this, we are witnessing more cross-border movement of people, more cross- border transactions and more cross-border asset holdings.
For international clients that fit these categories, the laws and taxes of different countries can often create fiscal tensions and gaps and so there becomes a real need for a third party, benign jurisdiction. Jersey, with its simple but effective fiscal structure, fulfils that role in the international marketplace. Additionally, unlike many other finance centres seeking this business, Jersey's fiduciary activities are fully regulated.
The quality of the regulatory environment has always been an important factor and in an era of enhanced international scrutiny into global financial services, it is extremely important for jurisdictions to achieve the right balance.
In areas such as investment services and trust business, Jersey has frequently led the way with the introduction of measures designed to regulate practitioners and thus help protect the interests of investors. Clients establishing trusts or companies in the island are assured, as a result of legislation, that their trust or company service provider has satisfied stringent regulatory criteria before being granted a licence to operate. This legislation, the Financial Services (Jersey) Law 1998, places the island at the forefront of legislative measures for the global trust industry. The investment management industry is regulated in similar fashion.
In the funds sector, the island has needed to take action to bring its regulatory framework into line with the needs of the market. It is not surprising that changes were required since the funds industry has been a key component of the island's finance industry for nearly 30 years and the original regulations were drawn up primarily to service the retail market.
But as many professional advisers will know, Jersey's strength in the funds industry in recent years has been in its diversity and its ability to harness the skills of experienced practitioners in banking, accountancy, law and administration, and to devise bespoke solutions for institutional clients. It has led to spectacular growth in private equity, securitisation and other institutional fund business.
Some of these innovative structures are being recognised within the industry. Just recently a Jersey structure involving Solvay, the Belgian pharmaceuticals and chemicals group was voted Euromoney's 'Best Structured Finance Deal of 2002.' The deal was arranged by Deutsche Bank which in turn was advised by a Jersey law firm. International Securitisation Report magazine also chose a Jersey-administered structure as its European Deal of the Year. This transaction, involving a Jersey legal adviser, involved the securitisation of residential mortgage loans of up to £13bn originated by Halifax.
To encourage more business of quality, our fund regulations need to be brought into line to reflect the change in focus. The regulator, the Jersey Financial Services Commission, and the industry body, the Jersey Fund Managers Association, have been in consultation on the package of enhancements.
eu tax package
Some professionals will wish to know the route that the British Crown Dependencies will take in respect of the Savings Tax Directive. This measure, part of the EU Tax Package, requires member states to exchange information about interest payments made to EU residents. The EU has agreed however to permit member states if they prefer to introduce a withholding tax in the short term, instead of exchanging information and Luxembourg, Belgium and Austria have taken that option. First Guernsey, then the Isle of man and Jersey confirmed they will also choose the withholding tax option.
Jersey's original position was to support exchange of information on the understanding that all competitors within the EU and outside would do also. However, the decision by three EU member states to take a different course has meant that we had to re-consider what would be in the island's best economic interests. The island has to remain competitive. Before making a final decision, the authorities in Jersey sought the views from the industry on these latest developments.
In the overall picture that is emerging for the leading offshore jurisdictions, it is important not to over emphasise the impact of the move either way. Clearly of more significance for the island is that we are on the verge of reaching an accord with the European Union and at the same time, the UK, over tax measures long term.
The agreement in June also included confirmation of agreement to Jersey's proposals to extend the timescale of the EU's Code of Conduct on harmful tax measures in respect of exempt companies and international business companies and their eventual replacement with a zero tax regime.
The debate over the EU Tax Package has proved that jurisdictions such as Jersey are determined to work hard politically to ensure that its own economic interests are preserved. Jersey is not a member of the European Union and does not have to follow Directives from the EU. However, the island has consistently pursued a policy of constructive engagement with the EU and with the international financial community generally.
This approach is serving Jersey well. It is helping to make the major Western nations more aware of the integrity and probity within quality financial centres and it is bringing greater clarity to the position of offshore jurisdictions within the international finance arena. Such developments can only be of benefit to clients that use these leading jurisdictions in future.
Despite the difficult conditions that all centres have faced over the past 12 months, Jersey has seen growth across the board.
Private client wealth management business has been one of the building blocks of the island's success and it remains a core feature of the island's product offering.
Jurisdictions such as Jersey are determined to work hard politically to ensure that its own economic interests are preserved.
Slow progress in improving diversity
Share purchase deal with assets of £28m
Came into effect in January
Three examples of compensation rule issues
Buying in baskets