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CV19 Focus: What next for Banking, Trusts and Funds?

CV19 Focus: What next for Banking, Trusts and Funds?

Friday 05 June 2020

CV19 Focus: What next for Banking, Trusts and Funds?


The effect of the covid-19 pandemic on Jersey's economy has been short, so far, and sharp.

In a series of features, Express is focussing in on the different parts of our economy for an in-depth look at what the next six months might bring, as the island tries to recover its economy.

Yesterday, Jersey Finance CEO Joe Moynihan gave an overview of the effect on financial services.

Today we look in more depth at three key sectors within that industry: banking, funds and trusts. 

You can read all the features in full in this month's edition of Connect Magazine, here. 

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Banking  -  Anoop Ghai, President, Jersey Bankers' Association

"Many are asking what will the ‘new normal’ look like, recognising that covid -19 has not only re-written business plans, but will have changed  many aspects of life, including banking, forever. 

At a micro level, just the switch to business continuity plans, by all banks and financial service companies, at the end of March means well over 90% of the entire workforce, work from home. This has been managed remarkably well, with not only services being maintained, but in meeting the very significant call on banks to support businesses and personal customers with additional funding either directly or via government schemes and loan forbearance.  When the pandemic recedes, and vaccines come online, perhaps later this year, many predict home working, online banking, mobile banking, video meetings both client and business, electronic documentation and all other innovation seen, will be largely retained. Perhaps not this year, but gradually this will have an impact on required office space, transport, a reduced infrastructure that supported the previous operating models and even greater acceleration of digitalisation. Banks (and others) will want to maximise the benefits all these may bring.

Perhaps more certain, at a macro-economic level, is that locally we will not avoid the now widely predicted recession that most developed countries are entering. Our banking sector is made up of branches and subsidiaries of large international and UK banks. They are now provisioning for the huge losses that closing manufacturing, air transport, the auto-industry, tourism etc, will have meant for their corporate customers and the onward impact on personal customers. Preparing for this has already seen, for example, regulators instructing banks to suspend dividend payments and an easing on some capital ratios. Locally most areas of the business and service sectors have been locked down either in full, or in part. The actions by government and banks to support the island community with very significant funding and forbearance will have averted the worst-case scenarios but the economy will shrink.

On a brighter note, Jersey’s strong international reputation as a stable and well - ordered financial centre has seen some inward investment by international clients, and this bodes well for the sector for the future, particularly as confidence in markets does eventually return.

It is hard to see anything other than significantly reduced profitability for those banks supporting the Jersey economy directly over the next 6 to eighteen months, and this will impact on the future tax-take for the island. That said, banks are well capitalised and prepared to withstand the inevitable economic downturn. They will continue to be able to support Jersey’s community as we gradually ease out of lockdown under the government’s guidance, and help finance the road to recovery.

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Funds - Tim Morgan, Chair, Jersey Funds Association

"The first part of 2020 has been an extraordinary experience for any business involved in fund structuring. For Jersey, as for any leading centre, the Covid-19 pandemic has thrown up a host of challenges around testing the ability to continue to structure, service and transact across fund related business. 

However, what has been interesting, and positive, has been the extent to which the pandemic has tested a number of qualities that Jersey’s funds industry has been focusing on for some years. The question will be how businesses in Jersey are able to see opportunity in how they deal with the fast-evolving environment. 

Jersey came to the start of 2020 from a position of strength. Our industry had reported a strong performance over 2019, with the value of assets administered here reaching new record highs of £346bn, with private equity in particular being the stand-out performer.

Getting to this position is no accident.  We shouldn’t underestimate just how positive the outcome of Jersey's work around key issues such as Brexit and substance have been, or just how significant the recognition Jersey received from the EU in 2019 was for our industry.

What really stands out from 2020 so far is that, even in these unprecedented circumstances, our industry remains focused on honing its vision to provide the perfect ecosystem for cross border alternative funds. 

As an industry, we are clear that maintaining growth requires a commitment to innovation, talent, engagement and differentiation through service quality, ease of doing business and stability. Those are qualities that will be vital in the coming months as we look to support economic recovery, but that will also provide managers and investors with confidence in the long-term too.

In respect of technology, for instance, a recent industry survey indicated a clear trend, with over 56% of respondents saying that they had employed automated technology over the past year, including, for example, enhancing onboarding procedures for new clients through online portals.

Over the period since lockdown, there have been important procedural clarifications from e.g. the JFSC and the Jersey companies registry, which have adopted fully electronic filing, which has been seamless; from Revenue Jersey, which has provided timely communication around the application of the economic substance rules; and from a legal perspective where existing law around issues such as electronic powers of attorney have been invaluable in streamlining some very significant fundraisings. 

This is whilst also focusing on the needs of an industry that is increasingly engaging on sustainability, green finance and ESG – areas that will be exacerbated by Covid-19. We’ve also seen asset managers continuing to commit to relocating to and establishing a presence in Jersey, a huge positive in light of the economic substance rules introduced last year, whilst the number of managers making use of private placement through Jersey and into the EU reflects the high regard in which Jersey is held for straightforward, seamless market access.

The fact that practitioners are confident that Jersey can maintain this growth trajectory against what continues to be a challenging global environment is hugely encouraging. In recent weeks, for instance, Jersey has played a pivotal role in bringing some notable funds to market – the $4.5bn CVC Partners Asia Pacific Fund and two Index Ventures funds with combined value of  $2bn, for instance. Jersey’s involvement is a resounding vote of confidence.

With the long-term global prospects for alternatives – Jersey’s sweet spot - looking robust, and with our proposition firmly built on service quality and high standards, our ambitious industry is on a good path both to help investors navigate the challenges on the horizon and ultimately improve on the success we saw in 2019."

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Trusts  - Lorraine Wheeler, President of the Jersey Association of Trust Companies

"Over the last two months of Lockdown in Jersey, businesses in the trust industry have been focusing on their business continuity plans to achieve continuity and stability in our businesses, in order to continue to provide high-quality service to our clients.  Our attention is now firmly on the future even though every day working from home feels like a re-run of Groundhog Day.

The financial services industry in Jersey is fortunate to have fared better than most over the last few months, with the majority of staff being able to work from home.  Excellent relationships with Jersey Finance, JFSC and government has meant that most practical concerns have been addressed. But what does the future look like for us?

Jersey’s trust industry will have to continue to nimbly adapt to change by building on its excellent reputation as a fiduciary services centre.  Over the last few decades, the source of our new business has diversified from being largely in the UK, to servicing clients from around the globe.  Jersey Finance, the envy of international finance centres around the world, has been instrumental in laying the groundwork in far flung regions such as the Middle East, Africa, US and Asia. Many of our existing and potential high-net-worth clients are displaying heightened concerns around the risk of civil unrest and political instability in their home countries, and are seeking a safe jurisdiction to settle their family wealth.  This is a huge opportunity for Jersey. 

From dealing with Muslim families who wish to structure their international wealth, to avoid forced heirship applications to benefit female relatives, to dealing with concerns over the transfer of wealth to the next generation, the opportunities for Jersey, with its excellent legal framework, is very attractive to families who have previously had no exposure to fiduciary structuring, and to families who wish to set up a family office to manage their family wealth.

And what about the threats to our Industry?  In a world where Jersey is still seen by the general public – particularly in the UK - as a ‘tax haven,’ more must be done to educate journalists and individuals alike as to the workings of our industry and the important role it plays as a safe haven, rather than a tax haven.  Many onshore jurisdictions are bringing in legislation around the holding of assets abroad, and the introduction of tax implications around so doing, and it is imperative that families hand over their wealth to caring, professional trustees with a track record of understanding the requirements and wishes of global families, and have the qualifications and experience to preserve and enhance wealth in this ever-changing global landscape.

We believe that there will always be a requirement for succession planning, and that Jersey, with its excellent reputation and stable political and robust regulatory environment, will be the jurisdiction of choice for families who wish to be serviced by fiduciary practitioners with the ‘know-how’ to deal with complex structuring and build lasting relationships."

On Monday - the view from Hospitality. 

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