Fourth Quarter 2009 Banking Sector Activity

3rd March 2010
​Total deposits held with Guernsey banks at the end of December 2009 decreased in sterling terms by £2.8 billion from the end of September 2009 level of £120.2 billion down to £117.4 billion, representing a 2.3% decrease over the quarter and a 25.2% decrease since the same time a year ago. Total assets and liabilities decreased by £4.0 billion to £135.8 billion representing a 2.9% decrease over the quarter. Some of this quarter’s decrease in figures reported in sterling terms was as a result of the strengthening of sterling against the major currencies.
The main reason for the fall in deposits was the continued contraction in Swiss fiduciary deposits in the quarter, down from £44.8 billion in September 2009 to £41.8 billion, given the continuing lack of attractiveness of this product in a low interest rate environment. Swiss fiduciary deposits now represent 35.6% of all deposits with 10 banks in Guernsey currently active in this area of business. Overall other deposits increased slightly in sterling terms.
The effect of exchange rate movements in the quarter was significant. Sterling strengthened against the Euro (2.4%) and to a lesser extent the Swiss Franc (0.7%) and the US Dollar (0.7%). Looked at in their underlying base currencies deposits in USD fell by 1.8%; deposits in EUR fell by 5.0% but deposits in Sterling increased by 2.9% and Swiss francs rose 2.2%. This led to some differences in the overall currency mix showing some changes in the proportion of deposits in individual currencies. The proportion in Sterling deposits increased to 23.9% and Swiss Franc deposits increased to 3.8%. However US Dollars were stable at 46.3% while the proportion in Euro decreased to 23.3%.
No new banking licences were issued during the fourth quarter but one was surrendered. The National Bank of Greece S.A – Guernsey Branch surrendered its licence in December.
A table is attached here showing the level of the deposits and the number of licensed institutions since 1996.
Philip Marr, Director of Banking commented:
“Whilst the aggregate deposit figures have come down significantly since a year earlier that largely reflects the exceptional nature of the flight to quality which pushed the figures up to their peak levels at the end of 2008. Gradually those record deposit levels have given way throughout 2009 to more sustainable lower levels. Not surprisingly Swiss Fiduciary deposits have continued to decline in the context of the historically very low interest rate environment. However, other deposit levels have stabilised and showed a slight increase this quarter.”