Their total balance sheet is about £130 billion, including about £96 billion of customer deposits (see Figure 1). Some deposits are lent on to customers of Jersey banks themselves but the vast majority is lent on to group entities – so Jersey is an important source of liquidity for the banking industry elsewhere.
|Assets (£ bn)||Liabilities (£ bn)|
|Loans to group||94||Customer deposits||96|
|Other loans||24||Bank deposits||16|
|Investments||9||Senior debt issued||10|
|Other assets||3||Other liabilities and equity||8|
The customers of Jersey banks are generally retail and high net worth clients from Jersey, the UK and UK expatriates, plus trusts and funds administered in Jersey by fiduciary firms and people based in third countries but with international needs.
As well as taking deposits, banks provide investment advice and other wealth management services.
Although total finance sector employment in Jersey has been rising in recent years, consolidation in the banking industry has continued, with total jobs now down to 4,220, making the sector slightly smaller than trust and company administration.
Corporate tax paid by banks − and income tax paid by bank employees − is a valuable element of the entire tax revenue of the Jersey government.
It is now a decade since the financial crisis of 2008. During those 10 years, the banking industry worldwide has undergone continuous transformation, specialising by business line, geographical focus and customer group, whilst radically increasing the amount of capital held in relation to the amount of business undertaken. As part of this trend, the Jersey industry has also consolidated, with the number of banking licences falling from 48 in 2007 but relatively stable levels of customer deposits. This compares favourably with a number of competing jurisdictions.
Although the number of people employed in the industry overall has shrunk, there has been steady growth in the number and authority of compliance and risk professionals. In a recent survey conducted by Jersey Finance, member firms – including banks – reported the greatest difficulty in recruitment in this specific discipline. While the Jersey banking industry takes almost no market risk − and limited credit risk − the nature of the jurisdiction and the size of the deposit base mean that it pays close attention to money laundering and other risks associated with deposit-taking and payments.
The Jersey industry plays an important role in combating international financial crime – including tax evasion. In a climate of clear consensus between the industry, government and the regulator, Jersey was an early adopter of common reporting standards, which mean that member countries will automatically receive information about bank accounts – and other financial vehicles – owned by their taxpayers in other member countries. No bank wants to find that it has inadvertently handled tainted funds.
Looking forward, the industry will continue to evolve, driven by four fundamental forces.
One, global banks will continue to reassess their individual global footprints and this will drive continued consolidation of international financial centres. Two, regulatory standards and the expectations of the international community will continue to grow. The time and effort banks need to expend to meet such expectations – all bureaucratic and none adding value to individual customers – is huge and banks will respond by continued drives for process efficiency, depending in particular on automation.
Three, legislation to separate, partially or completely, utility banking – payments and simple deposit and loan activity – from complex, international, wholesale or investment banking, will affect the market for international deposits. Finally, the entire banking industry is rapidly applying new technology to products and processes: as profitability gradually recovers and more money is available for capital investment, it is reasonable to expect the pace of change to accelerate.
Jersey benefits from close cooperation between the financial services industry – in the case of banking, through the Jersey Bankers’ Association and Jersey Finance – the government and the regulator. It has a history of adapting quickly to a changing environment and reacting quickly to new market opportunities and pressures. Neither the pace of change in the industry environment, nor the rate of industry evolution, seem likely to reduce in the foreseeable future.
Tom Hill, President, Jersey Bankers Association (JBA).
Tom is CEO of UBS in Jersey and has worked in the banking industry for nearly 30 years, in London, Tokyo, Zurich and in Jersey.
At various points in his career he has been voted a top investment analyst by institutional investors in multiple categories, managed large global functions and been advisor to the senior management of UBS on corporate communications, investor relations, business strategy and development.