Although bank deposits declined by 3.3% in the fourth quarter of 2010, they fell by only 2.1% when measured over the 12 months to the end of December, the statistics, compiled by the Jersey Financial Services Commission (JFSC) show.

It was a 12-month period during which the number of regulated banks operating in Jersey fell to 45 from 47, as such banks as Kleinwort Benson and Alpha Bank Jersey surrendered their licences, and slightly fewer had their applications approved. 

As reported, Kleinwort Benson was obliged to migrate its Channel Island operation to Guernsey following its sale to Belgium-based RHJ International by Commerzbank, as it no longer met Jersey’s requirement that it be a global “Top 500” bank in terms of size.

Unregulated funds targeted

Jersey has sought to encourage the development of the unregulated funds industry – a category that includes hedge funds and other entities that typically offer higher returns to investors in exchange for greater risk – since 2008, when legislation aimed at encouraging the industry’s growth on the island was approved. 

Under Jersey’s unregulated fund regime, funds may be established in Jersey without requiring the approval of Jersey’s regulators.

According to the JFSC data, alternative asset classes in Jersey posted a 2.1% growth in collective NAV to £134.9bn from £132bn in the fourth quarter and 13.3% growth, from £119bn, over the year.

The net asset value of private equity funds grew by 8.6% or £2.9bn to £36.3bn in the quarter and 45.3% over the year, while the NAV of Jersey’s hedge funds decreased by £1.6bn to £51.35bn in the quarter, but was slightly ahead of year-end 2009 when it stood at £51.2bn.

Geoff Cook, chief executive of Jersey Finance, noted that the number of regulated funds also grew, by 2.3%, during 2010, while the net asset value of funds under administration grew by 3.2% in the last quarter of 2010, to £184.7bn, and by 11.6% from the end of 2009.

“This new business growth is driven by the alternative asset classes, and demonstrates Jersey’s status as a first choice centre for alternative funds,” Cook added.

He noted that Jersey’s investment management sector also posted growth in 2010, with the NAV of total assets under investment management growing by 8.7%.

Few surprises in bank data

At the end of December, Jersey’s total deposits stood at £161.6bn, compared with £167.2bn at the end of the third quarter and £165.2bn at the end of 2009 – which in turn had marked the end of a torrid 12 months during which the island’s banks saw their collective deposits plunge 19.8% from the end of 2008, as the global financial crisis played out.

There were no such dramatic changes or surprises in today’s banking numbers. Jersey and UK depositors continued to be the dominant client group of Jersey’s banks,followed by non-EU Europeans – who accounted for 19.8% of deposits at year end, down only slightly from a year earlier – and Middle Eastern clients, with an 11.8% share, up from 10.7% at the end of 2009. 

Far Eastern depositors were 5.9% of the total, compared with 3.5% a year ago and 5.3% at the end of 2005.

One possible surprise in the data, at least for those who believe non-American banks are fast dumping American clients ahead of the January 2013 implementation of FATCA, the new US law requiring non US banks and other foreign financial institutions with American clients to report to the IRS, is that the percentage of North Americans with money in Jersey banks at the end of December – 6.2% – was little changed from a year earlier, when it stood at 6.1%.

That said, however, North Americans (a category which also includes an unknown percentage of Canadian depositors) accounted for 11.5% of depositors at the end of 2005. FATCA was signed into law in March 2010. 

‘Pleased’

As he has previously, Jersey Finance’s Cook emphasised how “extremely pleased” Jersey officials were by the way the EU’s Alternative Investment Fund Management Directive vote last November went. He said it gave Jersey’s funds industry needed “certainty” in addition to spelling out the terms under which it may market its products into Europe. 

Cook also stressed – again not for the first time – how important attracting new business is to Jersey, both from the UK and Europe as well as China, India, the Middle East and Russia.

 Source: Jersey Financial Services Commission