Finance in Guernsey

Fiona Le Poidevin from Guernsey Finance takes a look at how the island’s finance industry is facing current challenges, and what it must do to move forward successfully.

What is the current state of the finance industry in Guernsey?

Guernsey’s finance industry is in great shape at present. Fund assets under management and administration reached £257.4bn by 31 December 2010, up an unprecedented 40 per cent year on year. Also, in a recent private equity survey, 61 per cent of respondents favoured Guernsey as their jurisdiction of choice for private equity outsourcing. Guernsey banks are faring well in the difficult current environment, and although exchange rates and interest rates have had an effect on the level of deposits held, fiduciary deposits remain stable.

On the fiduciary side, the draft Foundations law was released in April, and consultation is under way. This means that by early next year, Guernsey’s fiduciary sector will add another string to its bow in the form of Foundations, a concept that is better understood in civil law jurisdictions. This will make the island more appealing to those that may have not used Guernsey in the past to assist with private wealth management.

Also, the insurance sector has made clear its position with regard to Solvency II (see page 32), in that there are no current plans to seek equivalence with the Directive on the basis that it is not a good fit for the captive industry, giving reassurance that it is ‘business as usual’ in Guernsey, which remains Europe’s leading captive domicile.

What do you see as the biggest threats ahead, and how can they be overcome?

My belief is that the primary threats to Guernsey centre around the increased regulatory burden and uncertainty in the current global environment – for example, the AIFM Directive in Europe or the Dodd- Frank Act in the US. I don’t believe that such pressures will abate in the near future.

However, it’s often said that most threats can be turned into opportunities, and Guernsey demonstrates this in the way that it faces such challenges head-on, and at an early stage. The impact of such regulatory changes is thoroughly investigated, working parties are set up quickly and our industry bodies and regulators continue to communicate with the relevant global forums on a timely basis to ensure that we have our say. Moreover we concentrate on the positives and look for the opportunities arising out of such situations.

Our robust yet pragmatic regulation allows us to meet these international standards whilst retaining flexibility, ensuring our regulation is proportional to the risks we are trying to overcome.

Name one strength of Guernsey’s finance industry, and one weakness that needs to be addressed.

I would say that one of Guernsey’s greatest strengths is its adaptability. The last 50 years or so have provided many examples of Guernsey’s great ability to cope with change. Finance in Guernsey In this fast-paced, dynamic world, the willingness to cooperate and maintain transparency when dealing with other jurisdictions is now just as important as the ability to innovate or to find new markets or products to add to our offering. This is ever more important in order to maintain, and indeed enhance, our reputation and our position on the world stage as a leading international finance centre.

In particular, Guernsey has sought out and developed niche markets within existing sectors, and this, I believe, sets it apart from many of its competitors. These factors are what make the island a great place to do business, and they help ensure Guernsey has a bright future.

While the island’s finance industry tends to be very forward-thinking as a whole, we really can’t afford to be complacent about our position. Events of recent years have shown us that you can’t always predict what is around the corner, so we can’t just sit on our laurels and wait for good things to come to us. I think we therefore need to ensure that we don’t fall prey to inaction, and must continue to be vigilant, innovative and proactive at all times in maintaining Guernsey’s position as an international finance centre of choice.

Fiona Le Poidevin is Technical Director and Deputy Chief Executive, Guernsey Finance.

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