At the end of March 2011, banking deposits stood at £112.8bn (€139.6bn, $178.4bn) but decreased to £101.8bn at the end of March this year – a fall of 10.5%. During the first quarter of this year, deposits fell by £6.5bn, or 6.1%.
According to Guernsey Finance, the promotional body for the island’s finance industry, part of the recent decline in the value of deposits can be attributed to exchange rate factors, however the body conceded that there had also been a “material drop in volumes”.
Fiona Le Poidevin, deputy chief executive of Guernsey Finance, said: “It is disappointing to see this further decline in the value of deposits held by banks in Guernsey. Some of the fall was due to exchange rate factors but there was also a material drop in volumes as a result of the global trend of banks deleveraging in the face of uncertainties surrounding the Eurozone, capital adequacy pressures and weak economic growth.
“Due to current conditions, we continue to experience an unprecedented low interest rate environment which has a significant negative impact on the attractiveness of having funds on deposit in a bank and as such, investors are moving capital into other higher yielding products.”
Le Poidevin however, said “on a more positive note” there have recently been a higher number of inquiries from banks expressing an initial interest in establishing operations in Guernsey, although she did not specify which banks.
The chief executive also highlighted the recent decision by HSBC to consolidate its Channel Island operations into Guernsey, with the closure of its Jersey private banking office.
At the end of last month, Guernsey released figures showing its fund industry had grown by almost £9bn in the first quarter of this year, almost recouping the £10bn lost from its fund industry in the last quarter of 2011.
At the end of the quarter the total net asset value of investment funds under management and administration in the jurisdiction was £270bn.
Meanwhile, near-neighbour Jersey, today announced that its fund industry grew by £6.8bn to £196.3bn during the first quarter of this year, with 1,412 funds registered – the highest number since 2009.