Tough global economic conditions have taken their toll on Guernsey bank deposits as the island's financial sector's promotional arm, Guernsey Finance, reports a fall of 6.1% (£6.5bn) in the value of bank deposits in the first quarter of the year.
The withdrawals have taken the total value of deposits down to £101bn, which represents a decrease of £11.8bn (10.5%) year on year.
Deputy CEO, Fiona Le Poidevin, spoke of the banking sector’s disappointment at this further decline in the value of deposits. “Some of the fall was due to exchange rate factors but there was also a material drop in volumes as a result of the global trend of banks deleveraging in the face of uncertainties surrounding the Eurozone, capital adequacy pressures and weak economic growth.”
Current exchange analysis confirmed that as sterling strengthened against the US dollar and euro, so it weakened against the Swiss franc, which had a negative effect on the level of deposits expressed in sterling. The overall currency mix shows that the proportion of deposits in sterling is 25.7%, US dollars is 47.2%, euro deposits 19.1% and Swiss franc deposits 3.3%.
Le Poidevin said that under the current conditions, Guernsey expects a continuing low interest rate environment which has already made a significant negative impact on the attractiveness of having funds on deposit in a bank and the sector is bracing itself as investors continue to move their capital into other higher yielding products.
On a more positive note, Le Poidevin confirmed an increasing number of enquiries from banks expressing initial interest in establishing operations on Guernsey. “It is still very early days but it is encouraging news and, of course, comes in the wake of the announcement by HSBC that it will be consolidating its Channel Islands private banking operations in Guernsey.”
Further comfort is drawn from Guernsey’s sheer diversity in its financial industry. “Latest figures show that the value of investment funds being managed or administered in Guernsey was up nearly £9bn in the first three months of the year. Also, during the first four months of the year, there has been net growth of 44 licensed international insurance entities, taking the total number to 731 at the end of April. Therefore, we can see that, in broad terms, Guernsey’s finance industry is performing robustly in what are difficult global economic conditions.”
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