Offshore 2 Offshore

* Guernsey Fourth quarter 2007 Banking Sector Activity







Total deposits held with Guernsey banks at the end of December 2007 increased in Sterling terms by £6.5 billion from the end of the September 2007 level of £112.7 billion to reach a new highest deposit level of £119.2 billion. This was a 5.8% increase on the quarter and also represented a 29% increase in deposits over the year. Total assets and total liabilities increased by slightly less than deposits in the quarter because of a decline in other liabilities, nevertheless there was still a £6.4 billion (5%) increase to a new highest level of £133.1 billion, and this level represented a 32.2% increase on the year.

The first quarter had seen a major volume increase in deposits from financial institutions at a small number of large banks but the second quarter showed a resumption of more normal growth rates with business growth coming from a range of banks. The third quarter growth rate quickened further with net new deposit business coming principally from financial institutions in Guernsey, banks elsewhere, corporate customers and particularly from Swiss fiduciary deposits. The fourth quarter continued the upward trend with strong increases in Swiss fiduciary deposits and other inter-bank business as well as solid increases in corporate business.

A 10.5% increase in Swiss fiduciary deposits in the quarter reflected increased attractiveness of this business in uncertain market conditions and business increased strongly at several banks with the total for these deposits reaching £49.3 billion, an all time high. These deposits now represent 41.4% of all deposits with 12 banks in Guernsey active in this area of business at the year end.

Sterling weakened against all the major currencies and this served to inflate foreign currency deposits when expressed in pounds. At the same time there was strong volume growth in US Dollar, Euro and Swiss Franc business in their underlying currencies which added to the positive exchange rate effect of the weaker Sterling. Sterling business itself also increased but to a lesser extent. The overall currency mix shows some slight changes with the proportion of US Dollars increasing to 44.6% and Euros increasing to 21.1%, while the proportion of sterling deposits fell to 28.0%.

There were no new Banking Licences issued during the fourth quarter but three licences were surrendered. BSI Generali Bank (CI) Limited surrendered its Banking licence after the BSI group decided to cease private banking and treasury services in Guernsey. Clariden Leu (Guernsey) Limited also surrendered its Banking Licence and the business was transferred to other parts of the Credit Suisse group here. First Active Bank Channel Islands Limited, Guernsey Branch surrendered its licence after the original subsidiary bank, itself owned by Ulster Bank and hence part of the RBS Group, migrated to Jersey and then amalgamated there with the Royal Bank of Scotland International Limited. The Guernsey Branch of RBSI then received the transferred deposits.

Local inter-bank activity increased to £1,277 million. A table is available here showing the level of the deposits and the number of licensed institutions since 1980.

Philip Marr, Director of Banking commented:

"A weaker pound which boosted the figures in Sterling terms and strong volume increases in foreign currency business pushed the total deposit figures to their highest levels at the year end to £119.2 billion. Along with solid growth in corporate business the main driver was the increased Swiss fiduciary deposit business which demonstrated their attraction to private clients in periods of uncertain market conditions. The year-on-year increase in total deposits was impressive at 29% particularly given the net loss of three licensed banks during the year. While the foundation for the growth in deposit figures had been set by the substantial increase in the first quarter of 2007 nevertheless the figures have held up well in the second half in the more fragile money market conditions since the onset of the so-called credit crunch”.