In a statement on its website, the building society said the decision followed a “full strategic review” that was launched last year, in light of changes in the regulatory regime in the UK.
“The review considered a number of options, including a potential change in [the Guernsey operation’s] legal status, sale to a third party or an orderly wind-down of its operations,” the building society said.
“Regrettably, after very careful consideration, it has been concluded that a process to wind-down the company’s activities should begin.”
It stressed that all deposits in the Guernsey subsidiary would remain fully supported by the parent company until they are either returned to customers or transferred to an alternative deposit taker of the customers’ choice.
Yorkshire Guernsey Ltd has been present on the island since June 1990, when it became the first UK building society to open a Guernsey subsidiary. It handled offshore accounts, although via telephone and fax rather than over the internet, according to its website, www.ygl.gg.
It is based in St Peter Port and employs 14 people, with around 6,000 customers and balances of approximately £800m.
In a statement, Iain Cornish, Yorkshire Building Society chief executive, said the decision had been taken “with much regret”, but noted that “recent changes to the treatment of offshore deposit-taking subsidiaries now means that it can no longer serve its original role within the Yorkshire Group”.
"We are very conscious of the impact of this decision on our staff at Yorkshire Guernsey, who have supported the business with complete professionalism throughout the review process,” he added.
“We will work closely to support all affected staff members as the business is wound down".
Parent company ‘thriving’
The closing of Yorkshire Guernsey comes at a time when its parent has appeared to be thriving, particularly compared with many of its rivals. In July it announced that it had acquired the last remaining customers of Egg, an ill-fated online banking venture launched by Prudential in the late 1990s and eventually sold to Citigroup in 2007 after expanding rapidly and attracting more than 3m clients at one point.
Earlier in the year it announced its intention to merge with Norwich and Peterborough Building Society (N&P), which is subject to a vote of N&P members and confirmation of the Financial Services Authority.
Last week, the Yorkshire Post reported that Moody’s Investors Service had upgraded the society’s rating by two notches, along with those of certain other UK building societies.
And a statement on Yorkshire Guernsey’s website notes that the subsidiary “has a very healthy balance sheet and extremely strong capital base in its own right”.
However, Guernsey has seen its banking sector struggling in recent years due to a combination of factors, including the fact that savers find the current rates of interest on offer from bank accounts too low.
It also suffered when a subsidiary of Iceland’s Landsbanki collapsed and depositors were left out of pocket in 2008, as the island at that point did not have a depositors’ compensation scheme in place.
One has been added, but it, along with Jersey and the Isle of Man, has continued to offered maximum compensation coverage on individual deposits of just £50,000, compared with £85,000 in the UK and €100,000 in the EU, beginning on 1 Jan 2011.
Bank deposits in Guernsey fell by 5.4% in Guernsey’s 38 licensed banks last year, in what Guernsey director of banking Philip Marr later observed had been a “continued ultra-low interest rate environment”. They rose a scant 1.7% in the first quarter, at the end of which they were still 4.9% below the same point a year earier.
Guernsey banks that surrendered their licences during 2010 included Northern Rock (Guernsey) Ltd, which completed an orderly wind-down plan, and Landsbanki Guernsey Ltd, which the Royal Court of Guernsey last year agreed to allow to liquidate, following its collapse in 2008 and subsequent period in administration. The Guernsey branch of Switzerland’s EFG SA also departed.
In 2009, Ansbacher, the UK bank purchased in 2004 by Qatar National Bank, left both Guernsey and Jersey after 38 years in the Channel Islands, following a decision to refocus the QNB Group’s private banking business out of offices in Doha and Geneva.
A new arrival to Guernsey has been Kleinwort Benson (Channel Islands) Ltd, which hopped to the island in 2010 from neighbourhing Jersey, after it was sold by Commerzbank to RHJ International.
