Second Quarter 2009 Banking Sector Activity

28th August 2009
​Total deposits held with Guernsey banks at the end of June 2009 decreased in sterling terms by £18.3 billion from the end of March 2009 level of £142.9 billion down to £124.6 billion, representing a 12.8% decrease over the quarter and a 3% decrease over the year. Total assets and liabilities decreased by £20.5 billion to £144.4 billion representing a 12.4% decrease over the quarter although they are still 1.1% higher than the level at the same time a year ago. This quarter’s figures reported in Sterling are all materially affected by the strengthening of Sterling against the major currencies.
One reason for the large fall in deposits was the 22.8% contraction in Swiss fiduciary deposits in the quarter, down from £61.4 billion in March 2009 to £47.4 billion, given the declining attractiveness of this product in a low interest rate environment continuing during 2009. Swiss fiduciary deposits now represent 38.1% of all deposits with 10 banks in Guernsey currently active in this area of business.
The effect of exchange rate movements in the quarter was significant. Sterling recovered considerably against the US Dollar and to a lesser extent against the Euro and Swiss Franc. Deposit business in US Dollars was actually up 3% though deposits in Swiss Francs fell by 16.7%, deposits in Euros fell by 13.4% and deposits in Sterling fell by 4.4% mainly as a result of lower interbank deposits.
The overall currency mix showed some changes in the proportion of deposits in individual currencies with the proportion in Sterling increasing to 23.3% and the US Dollar proportion increasing to 45.3%, although the proportion in Euro deposits fell to 25.5% and the proportion in Swiss Franc deposits fell slightly to 3.1%.
No new banking licences were issued during the second quarter and none were surrendered
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:
“ The Bailiwick saw a significant rise in bank deposits following the crisis of October 2008 as a part of a global flight to safety, but with the financial markets beginning to recover and with the continuation of low global interest rates, it is apparent that adjustments have now been made to the proportion of wealth management portfolios which are held in bank deposits with a consequent downward effect upon the overall deposit base. The reduction was most evident in the lower level of Swiss fiduciary deposits which remain unattractive as a private banking product. However a significant part of this quarter’s reduction in sterling terms was as a direct result of the recovery of the sterling exchange rate against the major currencies after its severe weakening in the wake of the financial crisis last year. ”