ence
offshore centres,
cing the loss of some
in hard-won trust
feverish economic backdrop,
such unparalleled
events have conspired to
damage the already fragile
reputation of offshore
centres. In late October
the pressure was increased
when the UK Chancellor,
Alistair Darling, promised
to “take a long,
hard look” at
the relationship
between the
UK and Isle of
Man, suggesting
its status
as a Crown
Dependency,
whose financial services
industry was able to compete
favourably with the
UK’s by virtue of lower
taxes, could be reviewed.
The Isle of Man subsequently
sought assurances
from the UK that its
constitutional position was
safe – and was given
them. But the PBR
announcement has once
again set nerves jangling
in offshore centres and is
bound to lead to further
negative headlines and
unwelcome scrutiny.
l Safe havens
Had the islands
been able to follow
Ireland’s lead, or
that of the UK
with Northern
Rock, and guarantee
100% of deposits,
Guernsey and
the Isle of Man may
even have been able
to emerge from the situation
with enhanced
reputations.
The reality is
that investors
will now seek
safer havens
for their cash.
Bryan Low,
managing
director of offshorefinancialconsultancy
firm Acuity
Consultants,
says: “I think
the sector worst affected
by this is the offshore
deposit takers. Before, you
had people chasing rates,
looking to squeeze out that
extra few basis points for
their money. Now they are
not worried about rate so
much, they want to know
their money is safe, and to
them onshore is probably
safer than offshore.”
The crisis has thrown
up further questions about
Guernsey bank deposits
Date Sterling Non-sterling Total bank
(£bn) (£bn) deposits (£bn)
30 Sep ’06 28.8 60.5 89.3
31 Dec ’06 29.4 63 92.4
31 Mar ’07 32.9 72.4 105.3
30 Jun ’07 34 74.1 108.1
30 Sep ’07 33.1 79.6 112.7
31 Dec ’07 33.3 85.9 119.2
31 Mar ’08 33.2 96.3 129.5
30 Jun ’08 33.8 94.3 128.1
Source: Guernsey Finance
the role of insurance companies
and financial advisers,
the former with regard
to the clarity of their literature
and latter for failing to
realise offshore bond policyholders’
money was not
safe if a bank went bust.
“The insurance firms
should have been warning
people,” says Tony
Shah, associate director of
the international division
of London-based adviser
Christchurch Investment
Management.
“They were quite happy
to take money in this way
and open accounts, but it
was not made clear in their
documentation that should
a bank collapse investors
were not covered.”
But he readily admits it
is the role of advisers to
determine such matters on
behalf of their clients. he
predicts some intermediaries
may find themselves in
court as a result.
“Advisers should have
been more challenging and
not assume that having the
money with an insurer
would mean clients are
protected. They should
have taken more care and I
think some will face some
sort of litigation,” he adds.
l Pragmatic approach
Unfortunately for the offshore
sector, the banking
crisis and newly announced
probe by the UK has
DECEMBER 2008 [www.international-adviser.com] INTERNATIONAL ADVISER
analysis
come after it has spent
years trying to build the
trust of international bodies
such as the IMF and the
OECD.
Guernsey, Jersey and the
Isle of Man do not, unlike
Switzerland for example,
view banking secrecy as
a sacred cow to be preserved
at all costs. In many
cases, they have adopted
an increasingly pragmatic
approach to international
regulation to gain greater
acceptance.
An example of this is
that the Isle of Man has
been praised for its willingness
to sign tax treaties. In
addition, this year it maintained
its highly prized
AAA rating from Standard
& Poor’s.
l In from the cold
But Acuity’s Low says
whatever the outcome
for savers in the Icelandic
banks, international financial
centres will have to
work harder than ever to
ensure offshore is not once
again a dirty word.
He adds: “The whole
situation undermines people’s
trust and reminds
them of that old connotation
that offshore is somehow
dodgy.
“That is an unfortunate
side-effect, because no one
has tricked anyone, but it
is sadly the way this has
played out.”
KEY POINTS
The collapse of the Icelandic
banks will have repercussions
for the offshore banking and
life sectors.
Savers and insurance
policyholders stand to
lose millions.
The role of advisers has
also been queried amid
suggestions they did not
read the small print of
insurance contracts.
19
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