Total deposits held with Guernsey banks at the end of September 2008 increased in Sterling terms by £8.2 billion from the end of June 2008 level of £128.1 billion to reach a new highest figure of £136.3 billion, representing a 6.4% increase over the quarter. About a fifth of the increase was volume but four fifths were exchange rate effects. The new level of deposits was 21% up on the level at end September 2007. Total assets and liabilities increased by £9.3 billion, representing a 6.5% increase over the quarter to reach the highest level yet at £152.2 billion.
In the third quarter changes in the banking figures, which are expressed in sterling terms, were dominated by exchange rate movements. In particular, sterling weakened significantly against the US Dollar (declining 10.6%) and to a much lesser extent against the Swiss Franc (1.9%) albeit the movement against the Euro was negligible. The impact of this was a large increase in deposits in sterling terms which, when combined with material volume increases at a few large banks, helped to push deposit figures to record levels when expressed in sterling. The overall currency mix shows some slight changes with the proportion of US Dollars increasing to 45.9% and the proportion of Euro decreasing slightly to 22.7%. Sterling deposits fell to 24.5%, while the proportion of Swiss Franc deposits remained static.
There was a 16.2% increase in Swiss fiduciary deposits in the quarter, up to a peak level of £61.1 billion. This was made up in part by volume increases and in part by the exchange rate impact. Swiss fiduciary deposits now represent 44.8% of all deposits with 11 banks in Guernsey currently active in this area of business.
Two new banking licences were issued during the third quarter and none was surrendered. In July BNP Paribas Securities Services S.A. Guernsey Branch was licensed to run in parallel with BNP Paribas Securities Services Custody Bank Limited, Guernsey Branch, thus allowing a transfer of business to the new branch to take place. Bank of Scotland plc – Guernsey Branch was licensed to take deposits in August but it did not commence operations during the quarter. Mellon Bank (Channel Islands) Limited changed it name during the quarter to The Bank of New York Mellon (CI) Limited to reflect the change of ownership in the USA.
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:
"The unprecedented world wide banking crisis began in the last few weeks of the third quarter and continued into October so only a part of that developing story is therefore reflected in the deposit figures. There was some reorganisation of portfolios by personal and corporate customers as they sought to spread their risk. Those behavioural changes are not apparent in the aggregate figures. At the end of September aggregate figures were significantly affected by the weakening of sterling exchange rates, particularly against the US Dollar, which has had the effect of boosting the US Dollar component in our deposit mix. There was continued strength in Swiss fiduciary deposits, which added to deposit levels in some banks. The end of December figures will provide further information on the impact of the financial crisis along with Government responses to recapitalise the banking sectors in the major developed countries. While market conditions have continued to be difficult banks in Guernsey remain positive about business flows".