I hope that the many thoughts and opinions of our guest contributors will help in understanding why Jersey has been such an attractive jurisdiction of choice to international investors for so many years.
The appeal of political and economic stability has always been a constant alongside the inherent skills within the jurisdiction’s workforce, which has for many years numbered more than 13,500. The strength of our regulation, our ability to cooperate with the authorities in other nations and our resilience during periods of change or upheaval, all play their part in why Jersey is where it is today.
While the 60-year mark is unquestionably a milestone, when you look back, it is possible to identify a whole series of ‘mini’ milestones in our evolution. They started in 1961, when the beginnings of the modern finance industry were established following legislative changes that encouraged international banking and the first merchant bank to set up an office in the jurisdiction to provide services to international clients that year.
While the industry’s prime focus in the early years was the provision of international banking services to expatriates, as these expanded the opportunity arose for Jersey to also be regarded as a safe and stable location for trust services. By 1970 the amount of deposits in Island banks were numbered in the millions.
I doubt those finance industry pioneers decades ago would have anticipated that by 2021 there would be 30,000 trusts administered in Jersey with assets exceeding £600 billion* while banking deposits would have surpassed the £127 billion mark.
In 1984, more legislation followed when the statutory trust law was introduced, a truly groundbreaking legislative development which was so effective that it became the blueprint for legislative development in other locations. Innovation continued with the introduction of a comprehensive supervisory system for trust business in 2000.
One of the features that has kept Jersey at the forefront of global finance has been its ability to adapt to meet market requirements. It did so again in 2004 when the introduction of a streamlined regulatory system for funds, already a key pillar of our offering, broadened our appeal and was essentially the catalyst for Jersey to attract increasing amounts of alternative funds business, especially in the private equity and real estate markets, a trend that has never deviated.
Today we have record levels of alternative funds business which regularly increases every quarter and at the time of going to press was above £430 billion*.
Another feature of this period was the global expansion of financial services in emerging markets, which required further investment in time and resources by Jersey to meet the increasing global demand for the services in which we specialised.
About this time also, in 2001 when competition between international finance centres (IFCs) was intensifying, Jersey Finance was established to act as the promotional body for the industry in Jersey and defend its reputation. Within a year, we had undertaken our first conference to showcase our services in London and with the wealth markets in the East making great strides, we began to enhance our international footprint to support our industry’s growth. Since those times, while not neglecting the City of London, which remains our most important strategic partner, Jersey Finance has led a series of visits to key markets and expanded our presence through a network of overseas offices in the Gulf, the Far East and the US.
Product innovation continued apace and in more recent times, the Jersey Private Fund has further streamlined our offering to the global funds community. Trust regulations were enhanced on a number of occasions to meet client needs and foundations were added to the statute. This, alongside the Charities (Jersey) Law 2014, which was subsequently expanded in 2018, has encouraged and supported philanthropic endeavours among international investors.
There have been many challenges on our journey, not least the requirement to educate many Western governments and influencers about the value that jurisdictions such as Jersey bring to economies and to counter the entirely inaccurate claim that leading offshore locations were being used for tax evasion or avoidance and were a drain on major Western economies.
To do so, we embarked on a series of independent studies that challenged that assertion and backed up the value of our contribution to global markets through an analysis of the work we do. The most telling research was when we demonstrated that Jersey provided £0.5 trillion of inward investment into the UK and supported around 250,000 British jobs, while similar research showed the value of Jersey’s contribution to the EU also**. Further studies have followed to illustrate Jersey’s positive contribution through its banking, wealth management and funds expertise.
Global standard setters have also been regular visitors to our shores, assessing our regulatory and legislative armoury and producing reports endorsing our efforts. The IMF, OECD and EU have all endorsed Jersey’s credentials as a top IFC. Perhaps the most significant independent endorsements of the quality of our regulation were delivered in 2016 by MONEYVAL (a Council of Europe body) and from ECOFIN, the EU Finance Ministers, in 2019, where we were included among cooperative jurisdictions – key milestones in our efforts to be appreciated for the quality and probity of our jurisdiction.
The industry’s resilience has been especially demonstrated by our response to the horrendous COVID-19 epidemic, which at the time of writing, continues to have its impact on communities around the globe. Technology enhancements were successfully introduced across the jurisdiction to ensure that we, as an industry, could continue to effectively provide high levels of service, expertise and delivery. Our Jersey Finance team adapted their output so that we could run a series of highly successful ‘virtual’ events during the course of 2020 and into 2021 as we navigated this uncertain period with everyone else.
One certainty is that, despite the recent dramatic events, the industry will not stand still and we expect further evolution of our service offering. For example, the OECD – with the likely support of the G20 – is proposing to introduce a new minimum global corporate tax rate. Jersey’s government has signed up to these proposals which are directed at the tax affairs of multinationals and high-tech giants which are not a significant feature of Jersey’s business model, where the industry focus has been consistently on providing banking, funds and private wealth services.
Nevertheless, if an agreement is reached on this globally, we are well placed to adapt again, enabling us to continue to offer the stable, well-regulated and innovative commercial environment that attracts cross-border investment, the driver of our industry’s success for six decades.
THEMES TO EXPLORE
One noticeable outcome from the pandemic has been that environmental, social and governance (ESG) matters have come into sharper focus. Already a priority within the financial markets, the move to embrace ESG principles has accelerated and, as a result, the international investment community are changing their strategies to reflect these priorities.
This year Jersey launched a new sustainable finance strategy designed to ensure we can position ourselves as a leading sustainable IFC. There is more written on this theme later in this special edition of Jersey ~ First for Finance.
In fact, many of the themes and developments that I have touched upon here will be covered in more depth in the pages that follow as we review and outline the unique tapestry that has come together through the decades to deliver the Jersey finance industry that we know today. In addition to a collection of influential contributors on different aspects of the industry and special introductions from the Lord Mayor of the City of London, the Right Honourable William Russell; Air Chief Marshal, Sir Stephen Dalton, GCB, ADC, Jersey’s Lieutenant Governor; our Chief Minister, Senator John Le Fondre and External Relations and Financial Services Minister, Senator Ian Gorst, we asked leading industry figures for their personal reflections on the success of the first 60 years and their views on the challenges and opportunities ahead for our jurisdiction.
On behalf of Jersey Finance, I would like to thank all the contributors who have made this edition possible. I hope you can find the time to explore some of these articles, which, while reflecting on the success of those 60 years, will look at what the future might hold in more detail in the knowledge that Jersey remains well-placed to be the jurisdiction of choice for international investors and their advisers in the years ahead, as we continue to work hard to remain competitive, innovative and maintain high standards.
*Figures from the Jersey Financial Services Commission
** Capital Economics research