Fourth Quarter 2008 Banking Sector Activity

​Total deposits held with Guernsey banks at the end of December 2008 increased in sterling terms by £20.7 billion* from the end of September 2008 level of £136.3 billion to reach a new highest figure of £157.0 billion*, representing a 15.2%* increase over the quarter and 31.8%* over the year. Total assets and liabilities increased by £26.9 billion* over the quarter representing a 17.7%* increase to reach the highest level yet at £179.1 billion*. This represents a 35.8%* increase over the year.

 

Changes in the fourth quarter banking figures, which are expressed in sterling terms, were dominated by exchange rate movements. Sterling weakened significantly against all the major trading currencies, declining 18% against the US Dollar, 17% against the Euro and 22% against the Swiss Franc. The impact of this was a large increase in the numbers reported which helped to push deposit and asset figures to record levels, when expressed in sterling. However the story in terms of underlying currencies is varied. Deposit business in US Dollars was down almost 8% and in Swiss Francs down 14% but business in Euro was up 14.5% and sterling business was up some 3%. The overall currency mix showed some changes in the proportion of deposits in individual currencies with Euros increasing significantly to 27.2% but the US Dollar proportion falling to 44.7% and the proportion of Sterling deposits also fell to 22.0%. The proportion of Swiss Franc deposits fell slightly to 3.6%. Although exchange rate factors were also present in the increase in total liabilities there was a material volume increase in other liabilities as a result of group non-capital term debt issues by one large bank.

 

There was a 17.7% increase in Swiss fiduciary deposits in the quarter, up to a peak level of £71.8 billion driven mainly by the exchange rate factor. However there were some mixed indications on volumes. Whilst there was a marked volume increase at one bank there are indications from other banks that the attractiveness of this product is declining as interest rates have decreased to historically low levels particularly the US Dollar and the Euro. Swiss fiduciary deposits now represent 45.7% of all deposits with 11 banks in Guernsey currently active in this area of business.

 

No new banking licences were issued during the fourth quarter but one was surrendered. In July BNP Paribas Securities Services S.A. Guernsey Branch (a direct branch of the French company) was licensed to run in parallel with the Guernsey branch of the Jersey company, BNP Paribas Securities Services Custody Bank Limited, thus allowing a transfer of business to the new branch to take place. This transfer was completed during the quarter and BNP Paribas Securities Services Custody Bank Limited, Guernsey Branch surrendered its licence at the end of December.

 

A table is available here showing the level of the deposits and the number of licensed institutions since 1996.

 

Philip Marr, Director of Banking commented:

 

“Banking figures in the fourth quarter have been pushed higher by the significant weakening of sterling against the major trading currencies. Deposit business in US Dollars and Swiss francs declined in their base currencies in part reflecting the declining attractiveness of Swiss fiduciary deposits at low interest rate levels. However deposit business in Euros and sterling was up in the underlying currencies despite some of the worst market turbulence in memory.” 

 

 * revised 12 March 2009 following one bank's submission of revised data.