Total deposits held with Guernsey banks at the end of March 2007 increased sharply in Sterling terms by £13 billion from the end of the December 2006 level of £92.3 billion to reach a new highest deposit level of £105.3 billion, a 14% increase on the quarter. Total assets and total liabilities increased by some £15.7 billion to reach a new highest level of £116.3 billion.
The first quarter saw an exceptionally large volume increase in deposits from financial institutions at a small number of large banks. In part this was accommodating liquidity from the funds industry which is inherently variable and can fluctuate widely from day to day. Elsewhere a change in the way group business was done in North America had a significant impact locally. Bank finance from this source is likely to be a stable addition to the island’s financial activity. Volume levels in the underlying currencies showed the biggest increases in US Dollars which are up by 34% with Sterling up 12% while Euros and Swiss Francs each declined 7%.
There was a further increase in Swiss fiduciary deposits up 8.5% as a result of increased business at several banks to reach £39.5 billion, an all time high in absolute terms. However given the overall expansion of the total deposit book these deposits now represent 37.5% of all deposits which is lower than the position a year ago when they represented 39.6%. In part this business had been given a boost at the end of 2006 as a result of group restructuring at two banks which increased their involvement in Swiss Fiduciary Deposits. There are currently 13 banks in Guernsey active in this area of business.
In the overall currency mix the proportion of US Dollars increased to 43.4% while deposits in Euro fell to 20.6% and the proportion of Sterling deposits fell marginally to 31.3%. Once again further growth in total liabilities continues to reflect a strong issuance of non-deposit short-term paper which was issued to meet the demand for structured products.
During the quarter no new Banking licences were issued but Landesbank Baden Wurttemberg - Guernsey Branch surrendered its licence so no deposits from that source are reflected in the end of quarter figures we are reporting.
Local inter-bank activity increased to £940million. 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:
“The fortunate coincidence of exceptionally large volume increases in deposits from financial institutions meant that Guernsey was able to withstand the exit of one large bank and at the same time record a significant increase in deposits overall. These events underline the fact that the figures are mainly influenced by the swings and trends in the business done at the large banks and that changes in activity at those banks materially affect the figures quarter by quarter. At the end of March there were 20 large banks, as measured by those with total assets of more than £1 billion. This further supports the observation that although the number of banking licences has been on a declining trend the amount of business done locally is such that there is more business being done by fewer but larger banks.”