Tracy Garrad, CEO, HSBC Channel Islands and Isle of Man, gives her view on what might happen this year in banking
As we enter 2018, what’s the general health of banking in the islands?
The financial crisis had a substantial impact on the banking industry and had implications for the industry here in the Channel Islands. However, a decade on since the crisis hit, the consensus is that we’re on a steady growth trajectory in the islands, with much greater confidence in the sector’s future.
The recent increase, and forecast increases, in base rates across different currencies, for example, will help improve bank business models and could help restore the sector’s fortunes locally.
The banking sector is having to evolve, too, in line with market and regulatory demands, and this is largely reflected in the concerted effort banks are making in terms of recruitment and job creation, which is allowing a more diverse talent pool and skill set to be attracted to the islands.
There’s now also a real appreciation of the need for the banking industry to do the right thing, demonstrate their understanding of local markets and deliver much better decision-making. We’re seeing that in practice already in the islands, and that will help instil a much greater sense of pride in the sector in the coming months.
In the next 12 months, what do you think will be the biggest challenge(s)?
The obvious challenge remains the fallout of Brexit, but actually we’re well placed in the islands to maintain good trade links with the UK and EU.
For me, sourcing talent to meet growth objectives within the industry is likely to be just as much of a challenge. There’s still an element of residual distrust after the financial crisis, so 2018 will see banks focused on communicating that they’re open for business, offer reliable products, follow strict regulatory frameworks and, crucially, that they provide excellent career opportunities.
Particularly with the industry evolving and embracing technology more and more, recruitment remains a struggle across the islands. This will be a priority in the coming year.
Elsewhere, the uncertainty surrounding the implementation of a demanding and evolving regulatory agenda certainly poses a significant challenge too, and compliance is putting a huge demand on banks’ capital and time commitments.
The new General Data Protection Regulation (GDPR), for instance, will provide a particular challenge for banks and their customers, as will meeting the challenge of cyber security, where the sophistication, time and effort invested by perpetrators continues to increase. Financial institutions must maintain vigilance and defences, while trying hard not to make the customer experience cumbersome and difficult.
And where will the greatest opportunity lie?
An obvious opportunity lies in the ringfencing process, which is being rolled out across all UK banks. Ringfencing essentially gives banks here the opportunity to develop products and services more tailored to the needs of islanders.
It’s an opportunity to really galvanise relationships with the local market and build trust in the community. In line with other geographies, new technologies will present opportunities to enrich the customer journey and drive efficiency.
Is there one thing that will dominate in the banking sector this year?
In a word, Brexit. It will definitely dominate 2018. With all eyes on 29 March 2019, the negotiations around Brexit will be crucial to the banking sector, and the islands could benefit or suffer, depending on the final trade agreements reached.
What’s certain is that international connectivity will become increasingly important, particularly post-Brexit. Just as Jersey and Guernsey are increasingly reaching out to do business around the world, there will be opportunities for banks in the islands to help connect clients and provide services internationally.
It’s likely that the intense scrutiny of offshore centres will continue. Banking institutions and other financial sectors will no doubt need to commit real time and resources to telling the positive story of what our industry does here to correct misconceptions beyond our own shores.
Anything else you’d like to say about the sector?
Another factor that’s increasingly shaping the banking sector is the rise of fintech and the public demand for better technology to make banking easier, quicker and safer. With cyber crime a growing threat, banks must be increasingly vigilant and agile, adapting and investing in systems to keep customers safe.
It’s a new challenge, but also an opportunity – banks will have important decisions to make in 2018 on how they embrace technological change.
Overall, banks in the islands have been through enormous change in recent years, but in 2018 we should see more positivity around their role as the backbone to financial activity in the islands, the contribution they make to the islands’ economies, and the part they and their employees play in community initiatives.