Isle of Man sees further fall in bank deposits as banking biz contraction continues

Deposits in Isle of Man deposit-taking institutions fell by 12.36%, or by £5.14bn, in the year to the end of June, as a years-long contraction of the banking industry there continued.

The data showed that total  deposits at the end of June, net of local inter-bank placings, stood at £36.44bn, down by 8.3% in the previous three-month period.

Foreign currency deposits, mainly in US dollars and euros, accounted for 41.75% of the total, or £15.21bn, down slightly from three months earlier, when they accounted for almost 44% of the total. The end-of-June data would have been influenced, the Isle of Man Financial Services Authority noted, by exchange rate movements, for example, a 4% increase in the strength of the pound against the dollar and a 2.56% decline relative to the euro.

No reason was given for the fall in deposits in a routine statement published this morning on the IoM FSA’s website. 

Isle of Man officials didn’t immediately reply to requests for comment on the data.

As reported,  the Dublin-based parent of one of the island’s remaining handful of banks, Permanent Bank International, announced in May that it was being wound down, in spite of efforts by a Guernsey-based company, Select Finance Investments, to acquire the operation.

Select Finance was set up by three entrepreneurs to establish locally-owned banking institutions in jurisdictions like the Isle of Man and Guernsey, which have seen an exodus of banks in recent years.

Also earlier this year,  Nationwide International, the Isle of Man-based offshore arm of the UK’s Nationwide retail banking group Nationwide, announced it would close, and as of 30 June, has officially shut its doors, according to its website. The bank was said to be popular with expatriates, particularly those who struggled to obtain bank accounts in the overseas countries in which they currently live.

The Isle of Man isn’t alone in struggling to keep its banking institutions from closing up shop. As International Investment noted in a special report last June, international banks have been terminating their correspondent banking relationships and quietly closing their doors everywhere from the Cayman Islands and Barbados to Gibraltar, Guernsey and the Isle of Man.

The industry’s contraction has been due to a number of factors, including the 2008 financial crisis and “credit crunch”, as well as publicity following a series of highly-publicised cases over the past seven or eight years, in which banking industry whistleblowers went public with what appeared to be large-scale, systematic tax evasion by certain high-net-worth individuals.

Most recently, increasing regulations, coupled with  historically low and even negative interest rates, have hit banks’ profitability, forcing many multi-national institutions to let go of their least profitable operations.

In its statement today, the Isle of Man FSA noted that its latest deposit data included intra-group borrowing that “is not capital in nature”.  It also pointed out that its new Alternative Banking Regime came into force on 1 August 2016.

As reported here last year,   this new regime was brought in to provide two additional types of banking licence on the island,  in order to encourage new banks to open on the island and to otherwise help to support its banking needs.

In today’s statement, the IoM FSA noted that as of 30 June, no so-called Class 1(2) licences, which the Alternative Banking Regime provides for, have yet been issued. This type of licence is for “non-retail/restricted deposit-taking” institutions.

The data today included only deposits held in Class 1(1) institutions, which are retail/non-restricted deposit-takers.

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