Brexit posses challenges for Jersey's financial services

Sunday 06 August 2017

Global ratings firm Standard and Poors says although Jersey’s overall fiscal position is healthy the future is uncertain and is likely to be challenging.

In its most recent report the firm gave the Island one of its highest ratings, but also noted Brexit posses problems.

In the report it notes: “beyond 2017…  we expect economic uncertainty to increase and growth to stagnate. As Brexit negotiations take shape, uncertainty in the U.K.'s financial sector could result in weaker prospects for the corresponding sector in Jersey. Although Jersey's financial sector has a geographically diverse funding base, a large portion of its client base originates from U.K. referrals, which may decline if global banks diversify their European operations away from London.”

Changes to banking laws in the UK could also affect the Island. From January 2019 new ring-fencing rules are coming into force which will limit how the big banks can use their assets. But, the law doesn’t extend to the Crown dependencies.

Standard and Poors says the change might diminish the attractiveness of upstreaming deposits from operations in the Crown dependencies to the group. But that, conversely, “that banking groups may still find upstreaming attractive, for example as a source of funding for their non-ring-fenced operations. The recent implementation of the Bank (Recovery and Resolution) Law 2017 will allow authorities in Jersey to restrict upstreaming activities in times of stress, however we do not believe this mitigates risks within the banking sector.”