Total deposits held with Guernsey banks at the end of December 2010 decreased in sterling terms by £5.0 billion from the end of September 2010 level of £116.0 billion down to £111.0 billion.  This represents a 4.3% decrease over the quarter and a 5.4% decrease since the same time a year ago.  Total assets and liabilities decreased to a lesser extent, falling by £4.0 billion to £134.1 billion representing a 2.9% decrease over the quarter.  However that level is only 1.2% below the level a year ago.  

Swiss fiduciary deposits fell (a further £2 billion) to £37.4 billion in December as underlying customers felt more inclined to move out of cash and take on securities and these now represent 33.7% of all deposits with 7 banks in Guernsey currently active in this area of business.  Corporate and interbank deposits were lower across a range of banks. There was continued issuance of non deposit paper by banks in the fourth quarter to assist parental funding thereby keeping the total liabilities figure more stable.

The effects of exchange rate movements in the quarter was all in the same direction. Sterling weakened against the US Dollar by 2.2% and also weakened against the Euro by 0.1% and more sharply against the Swiss Franc by 6.0%, thereby having an overall positive effect on the level of deposits expressed in sterling but this was outweighed by the decrease in the volume of deposits. Looked at in their underlying base currencies, deposits in USD decreased by 6.4%, Euros decreased by 8.4% and deposits in Swiss Francs decreased by 15.2% while deposits in sterling actually increased by 0.9%. This led to some movement in the overall currency mix:   the proportion of deposits in Sterling increased to 25.4% but Euros decreased to 19.7% and that in Swiss Franc deposits decreased to 4.1% while the proportion of deposits in US Dollars decreased slightly to 47.3%.

No new banking licences were issued during the fourth quarter but two were surrendered. Northern Rock (Guernsey) Limited surrendered its licence on completion of its orderly wind down plan. Landsbanki Guernsey Limited (In Administration) surrendered its licence following the Royal Court’s agreement of its application to proceed to liquidation.

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:

“After a period of stability Swiss fiduciary deposits resumed their downward trend driven by their lack of attractiveness as a product in the continued ultra low interest rate environment.  Some further contraction in corporate and interbank deposits pushed total deposits down to £111 billion at the year end some 5 per cent below the end 2009 figure.  With low interest rates and global deleveraging it is difficult to avoid a scenario of contracting deposit levels.  However continued issuance of non deposit paper has supported the total liabilities and total assets figures which were only 1% down on the level a year ago.”