As the Square Mile enters uncharted Brexit territory, the Channel Islands can offer the strong and stable environment it’s looking for to keep the wheels of business turning. Dominic Wheatley (pictured right), CEO of Guernsey Finance, and Joe Moynihan (pictured below), CEO of Jersey Finance, share their views. This article was published in Businesslife's 2019 City Edition
The City is no stranger to uncertainty. From the Big Bang of deregulation in the 1980s to the great financial crisis of the 2000s, its institutions and professionals have successfully navigated their way through uncharted territory. Today, that territory is Brexit.
With few clues about what the UK’s trading position with Europe will be once it leaves the European Union (EU) – and prospects of a ‘no deal’ very much back on the table – the City is understandably looking around for alternatives to a direct trading relationship with the EU.
The Channel Islands are an obvious partner to turn to. Regardless of how Brexit plays out, the UK’s relationship with Jersey and Guernsey won’t change from a regulatory or market access perspective for financial services. Neither will the islands’ existing third country status within the EU.
This means we can continue to offer the City a stable business environment in which there are existing trading platforms into the EU. For example, within the funds industry, our national private placement regimes offer tried and tested ways in which UK-based fund managers can continue to access European investors via the Channel Islands rather than risk setting up funds in the UK, where the future for trading is more uncertain.
Questions have also been raised about whether the City can retain its leading position as a global centre of finance in a post-Brexit world. We believe it can, and our own business environments – which complement the City – can only help to broaden its appeal to international business and strengthen its competitiveness on the global stage.
Indeed, it was the former Lord Mayor of London, Sir Alan Yarrow, who some years ago described the Channel Islands as ‘the City offshore’. His words encapsulate our symbiotic relationship with the City and the role we play as a key partner in its positioning as a major global financial centre.
As an example of this, a significant amount of the UK’s inward investment is channelled through Jersey and Guernsey and, increasingly, the business being done on the islands is more global.
Much of the capital inflows that we are seeing from the Middle East, the Far East and Africa are eventually invested in the UK. We are seeing capital flow in the other direction, too. A significant amount of the funds we raise for the alternative asset space comes from the UK for onward investment into other regions.
So we have a very important role to play in working with the City to attract and be part of international business. That’s borne out by research from TheCityUK, which puts the islands in the top 10 import and export markets for the City of London and UK financial services.
Perfect partner
Why are the Channel Islands such strong partners to have on board? In addition to the stable government – and stable and easily understood tax systems – that both islands enjoy, we boast three other important strengths: our people, our judiciary and our regulation.
The financial services knowledge and expertise that we have across the islands is consistently acknowledged and understood by the City, and is evident in the way City professionals regularly refer business to us and place their most important clients in our hands.
As islands, our expertise overlaps in some areas of financial services and we have complementary skill sets in others. For example, Guernsey has become Europe’s leading jurisdiction for captive insurance, while Jersey is home to the largest Society of Trust and Estate Practitioners chapter in the world, indicating the degree of its expertise in the trust sector.
However, what is common to both islands is our passion for the professionalism of our financial services industry.
To this end, we place a huge emphasis on continuous training and development. This accumulation of expertise over the past 50 to 60 years has given us an extremely strong pool of experienced professionals to take on non-executive director and trustee roles, ensuring high standards of governance across our financial services sector.
It also means we have built up a significant amount of legal expertise. This, alongside our independent judiciary, gives international investors confidence that, in the event of problems, they are guaranteed fair treatment. This helps to create a stable environment in which large international financial transactions can take place.
Regulatory strength
The real strength of the partnership between the City and the Channel Islands, however, lies in the high-quality regulation that exists across Jersey and Guernsey and the degree of comfort that the City gains from the strong working relationship that regulators across all three jurisdictions have.
We understand that, from a global investors’ perspective, there is only one place to be – at the top end of the quality spectrum. Some 15 to 20 years ago, we started investing in the quality of our regulatory environment for the long term.
This has no doubt cost us business, but our governments have been very clear in their demands for a high-quality and compliant financial services industry that can attract the premium global brands that don’t want to be associated with jurisdictions under the regulatory spotlight.
As part of this long-term investment, we have built up extraordinary expertise in responding to challenges that arise – such as tax evasion and terrorist financing.
We understand, respect and are enthusiastic disciples of global initiatives to tackle these problems. The FBI recently acknowledged the very significant strengths of our anti-money laundering regimes and, earlier this year, the EU placed Jersey and Guernsey on its whitelist of cooperative jurisdictions because of the way we were able to clearly demonstrate the economic substance of our financial services industry and other business conducted across the islands.
Both islands have a history of adapting to meet changing international standards. As those standards change, the islands will ensure we can show equivalence with those standards in line with our strategic policy of the highest quality of corporate governance and compliance.
Supportive majority
Clearly, we have much to offer the City as it moves into uncharted Brexit territory. We value the strong relationships that we already have with businesses and representative bodies across the Square Mile, and we will continue to engage with them and be ready and available to provide the expertise and support that they require to serve their customers.
As the UK looks to strengthen ties with markets beyond the EU, we are keen to offer help where we can by drawing on the interests and relationships that our jurisdictions have already built up with other regions around the world.
There are plenty of people in the City who understand and value what the Channel Islands do and we always welcome the backing we receive from the vocal minority. We would be delighted to see the supportive majority join these voices as we prepare to enter the post-Brexit era.
Dominic Wheatley and Joe Moynihan were in conversation with Eila Madden, Editor-in-Chief of Businesslife.