International credit rating agency Standard & Poor's has lowered its sovereign ratings for the Isle of Man and Guernsey to AA+.
The downgrade reflects the recent revision of S&P's sovereign rating methodology
that places heavier weight on a sovereign's own external vulnerabilities and
monetary flexibility, even when that sovereign largely uses the currency of a
larger sovereign and has limited external data, such as balance-of-payment
and international investment position data.
In both cases, S&P points out that the offshore financial sector will remain the main engine of growth and identifies a favorable macroeconomic policy mix of the use of
British pound sterling and fiscal surpluses, as well as tax and regulatory
regimes conducive to attracting and retaining global financial institutions.
However, S&P points out that having an economy focused on financial services, leaves the centres more vulnerable to external shocks should the offshore financial sector lose business to competitors, without offsetting economic and fiscal
Charles Parkinson, Guernsey’s Treasury & Resources Minister, said the report illustrates that Guernsey’s strong and stable economic and fiscal position has not changed despite the continuing global economic downturn and reinforces last week’s Financial Stability Board report that put Guernsey in the top tier of jurisdictions that contribute to global financial stability.
“The latest reports on a number of jurisdictions come as a result of Standard & Poor’s changing aspects of their technical scoring methodology for assessing risk. For smaller jurisdictions, the new technical scoring methodology does not work in our favour, and yet we have been given a high grade score of AA+, the highest rating that is achievable for us against the new methodology.
“While this is one useful and supportive measure of our stability, it is important to point out that it remains academic as we have not issued any debt. The revised methodology and revised rating will not have an impact on our economic competitiveness or ability to attract business to Guernsey, and so in very simple terms it changes nothing. However it does highlight our commitment to transparency and to independent external assessment,” he said.
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