News

First Quarter 2010 Banking Sector Activity

28th May 2010

​Total deposits held with Guernsey banks at the end of March 2010 increased in sterling terms by £1.3 billion from the end of December 2009 level of £117.4 billion up to £118.7 billion, representing a 1.1% increase over the quarter but a 17% decrease since the same time a year ago. Total assets and liabilities increased by £2.1 billion to £137.9 billion representing a 1.5% increase over the quarter.

This quarter’s increase in deposits was impacted in sterling terms by the weakening of sterling against the major currencies which served to inflate the figures. This had the effect of disguising the downward trend and continued contraction in Swiss fiduciary deposits. These were down from £41.8 billion in December 2009 to £39.4 billion, reflecting the continuing lack of attractiveness of this product in a low interest rate environment. Swiss fiduciary deposits now represent 33.2% of all deposits with 10 banks in Guernsey currently active in this area of business. Overall “other” deposits increased by £3.7 billion in sterling terms to £79.3 billion which is now higher than pre crisis levels in 2008.

 

The effect of exchange rate movements in the quarter was significant. Sterling weakened against the US Dollar (6.6%) and the Swiss Franc (4.0%) and to a lesser extent against the Euro (0.2%). Looked at in their underlying base currencies deposits in USD declined by 4.6%; deposits in Swiss francs fell by 13.2% and deposits in EUR fell by 1.1%; sterling increased by 0.7%. However this led to some movements in the overall currency mix showing some changes in the proportion of deposits in individual currencies. The proportion of deposits in Sterling decreased slightly to 23.8%, the proportion in Euros fell to 22.8% and US Dollars increased to 46.7%. Swiss Franc deposits decreased to 3.4%.

 

No new banking licences were issued during the first quarter but one was surrendered when the Bank of Scotland plc – Guernsey Branch surrendered its licence in January. As that business was never fully activated following the announcement of the merger of the Lloyds TSB Group and the HBOS Group there was never any impact on the banking deposit statistics.

 

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:

“ While Swiss fiduciary deposits business continued to decline because of the loss of attractiveness to customers in the current low interest environment, there was a generally stable picture across the piece in those banks not engaged in that business. “Other deposits” increased to a level now 5% above that achieved in the pre October 2008 crisis period although these benefited somewhat from Sterling weakening. Deposits in sterling unaffected by exchange rate movements increased slightly for the second quarter in succession.”