Second Quarter 2010 Banking Sector Activity

2nd September 2010
Total deposits held with Guernsey banks at the end of June 2010 decreased in sterling terms by £1.9 billion from the end of March 2010 level of £118.7 billion down to £116.8 billion, representing a 1.6% decrease over the quarter and a 6.2% decrease since the same time a year ago. Total assets and liabilities decreased by £1.6 billion to £136.3 billion representing a 1.1% decrease over the quarter and 5.6% decrease over the year.

Although there was an overall decline in sterling terms no really clear direction emerged for deposits at continuing Guernsey banks in the second quarter.  However we are aware that several banks were contracting their balance sheets ahead of the expected surrender of their licence later in the year.  In addition the few banks which have a significant proportion of deposits in Euro were impacted by the recovery of the sterling exchange rate against the Euro.  The picture for Swiss fiduciary deposits was much more stable with the total down to £39.3billion from £39.4 billion in March with several banks increasing their levels of Swiss fiduciary deposits.  These now represent 33.6% of all deposits with 8 banks in Guernsey currently active in this area of business.  With Swiss fiduciary deposits stable the bulk of the decline was in “other” deposits, down by £1.8 billion in sterling terms to £77.5 billion.

The effect of exchange rate movements in the quarter was varied. Sterling weakened against the US Dollar (0.9%) and the Swiss Franc (1.3%) but it strengthened by 8.9% against the Euro which had a negative effect on the level of deposits expressed in sterling. Looked at in their underlying base currencies, deposits in USD declined by 1.2% and Euros fell by 3.4%.  However Swiss Francs rose by 17% on the back of its attraction as a haven currency, and deposits in Sterling increased by 1.7%. This led to some movement in the overall currency mix showing some changes in the proportion of deposits in individual currencies.  The proportion of deposits in Sterling increased to 24.7%, US Dollars increased to 47.4% and Swiss Franc deposits increased to 4% but the proportion in Euros fell to 20.6%.

No new banking licences were issued during the first quarter but one was surrendered when Ansbacher (Channel Islands) Limited – Guernsey Branch surrendered its licence in April. This bank had signalled that it was in orderly wind down mode several quarters previously after its Qatar based parent failed to find a buyer for the Channel Islands and other businesses.  Its closing had no material impact on the figures in this quarter.

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:

“It was not possible to discern any obvious trends from the second quarter banking deposit figures.  Overall the figures were down but that was probably driven by the transfer off island of funds by banks expected to surrender later in the year.  For continuing banks there was a mixture of banks reporting increased deposit levels and some reporting lower levels.  Those with a material amount of Euro-denominated business were impacted in Sterling terms as a result of the recovery of the Sterling exchange rate against the Euro.  After several quarters of significant decline Swiss Fiduciary deposit levels were much more stable.  It was notable that deposits in Sterling also increased for the third quarter in succession. ”