Total deposits held with Guernsey banks at the end of September 2009 decreased in sterling terms by £4.4 billion from the end of June 2009 level of £124.6 billion down to £120.2 billion, representing a 3.5% decrease over the quarter and an 11.8% decrease since the same time a year ago. Total assets and liabilities decreased by £4.6 billion to £139.8 billion representing a 3.2% decrease over the quarter. This quarter's figures reported in sterling terms were all positively impacted by the weakening of sterling against the major currencies.
One reason for the fall in deposits was the contraction in Swiss fiduciary deposits in the quarter, down from £47.4 billion in June 2009 to £44.8 billion, given the continuing lack of attractiveness of this product in a low interest rate environment. Swiss fiduciary deposits now represent 37.3% of all deposits with 10 banks in Guernsey currently active in this area of business. However other interbank deposits in currency were also down in the quarter.
The effect of exchange rate movements in the quarter was significant. Sterling weakened considerably against the Euro (-6.3%) and the Swiss Franc (-7.4%) and to a lesser extent against the US Dollar (-3.0%). Such wide exchange rate movements can mask the movements in deposits and other products in the actual currencies. Looked at in their underlying base currencies deposits in USD fell by 4.4% deposits in EUR fell by 13.6% and deposits in Sterling fell by 6.2%. However deposits in Swiss francs rose by 6.2% albeit from a lower base than the other currencies.
The overall currency mix showed some changes in the proportion of deposits in individual currencies with the proportion in US Dollars increasing to 46.3% and Swiss Franc deposits increasing to 3.6% while the proportion in Euro decreased to 24.4% and Sterling deposits fell to 22.7%.
No new banking licences were issued during the third quarter but one was surrendered. Following a merger by their parent banks in the UK earlier in the year, Scarborough Channel Islands Limited merged with Skipton Guernsey Limited with the combined bank continuing under the new name of Skipton International Limited.
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:
"Deposit volumes in the major currencies fell back in the third quarter driven in large part by a contraction in Swiss fiduciary deposits, a reduction in group inter bank deposits at one large bank and some reduction in liquid cash deposit holdings of Guernsey financial companies as other financial markets have recovered. The very low interest rate environment continues to influence the shape and size of banks' balance sheets as adjustments are made from the peak levels at the end of 2008. There were some signs that deposit levels had begun to stabilise in the last month of the quarter".