Consultation reveals market for new local Guernsey bank may exist among island businesses, residents

A consultation launched in August in Guernsey to determine whether there was sufficient market demand there to establish a new, locally owned and run bank has found enough dissatisfaction with the current level of available services that those behind the consultation say they are progressing their plan to the next level.

“We have decided to push ahead with our proposal to set up a new, Guernsey-owned bank,” Geoff Miller, the Guernsey-based entrepreneur behind the project, told International Investment.

“We have put together an advisory board, and are working with some London-based advisers and one of the Big Four accounting firms, which we can’t name yet but which is putting together the model for the bank; and with Carey Olsen, the law firm here in Guernsey.

“Our next step is to work with the regulators on the practicalities in terms of the business plan, and  as to how best we might fill the existing gaps that our consultation revealed currently exist in Guernsey’s banking market.”

Miller, pictured, is overseeing the project through his newly-launched Guernsey company, Finance for Guernsey, of which he is chief executive.

For now, the proposed start-up bank doesn’t have a name, and the only office, Miller says wryly, “is my MacBook Air”.

‘Experienced difficulties’

Miller says that among the key findings of the recent consultation, which was open to Guernsey residents and businesses only, was that 90% of the fiduciaries, 64% of the other types of businesses surveyed, and 42% of the personal banking clients interviewed said they had “experienced difficulties” in obtaining the banking services they needed from Guernsey’s existing 29 banks.

Fiduciaries are institutions, such as trust companies, that manage money on behalf of individuals, families and corporate clients.

Less than half of the personal banking clients and only a third of business and fiduciary respondents said they were “satisfied with the services” they were getting from their Guernsey banks, the consultation suggested. More than three-quarters of respondents felt that the banking services they were getting could be improved.

Criticisms included a “risk averse” approach on the part of Guernsey’s existing banks; “disproportionate due diligence requirements”, and a “lack of appetite to take on new clients”.

These results were based on 402 consultation responses, of which 300 were from individuals and the remainder were, Miller says, split “roughly equally between Guernsey fiduciaries and businesses, or roughly 50 of each”.

“The problem, especially for the fiduciaries, is that they’re encountering increasing difficulty in opening current accounts for new customers, because there are fewer and fewer Guernsey banks that are interested in taking deposits from such businesses,” he says.

“And the reason they’re not interested in these deposits is because these are offshore structures, and the onshore management perceives these fiduciaries and/or their offshore clients as extremely risky, despite the fact that they [the fiduciaries] are regulated, and will have even done their own extensive client due diligence of any clients before taking them on.

“As a result, we’ve been told, fiduciaries are having to wait four to six months to open a bank account [for a client] with a Guernsey bank, and we’ve also been told of instances of people who have looked to come to Guernsey eventually decided to go to a different jurisdiction because they got fed up waiting to see whether the bank was prepared to open a bank account for them.”

Finance background

Prior to setting out to find out whether there was a market in Guernsey for a new local bank, Miller was involved with a number of financial services companies, including non-executive directorships as well as executive roles, with such companies as Globalworth Real Estate Investments and Hastings Insurance Group. Until last December he was chairman of GLI Finance Ltd, a Guernsey-based, AIM-listed provider of alternative financing for SME companies.

A native Londoner, he settled in Guernsey five years ago after stints in Moscow and Hong Kong, and describes “developing the alternative finance market globally” as his “passion”.

But he says he is fully aware that there is more to launching a new bank in a marketplace like Guernsey than leasing a property and finding a few investors. Carrying out a consultation was an important first step, but much more research and preparation is needed even before there can be talk of branding or storefronts.

After all, Guernsey hasn’t had a locally-owned and run bank since 1975, he says.  As reported,  the number of banks operating on the island at the end of June was 17% fewer than at the same time four years, ago, when there were 35; and 20 years ago, there some 76 licensed banks doing business on the island.

Miller isn’t the first person in Guernsey to comment on the island’s apparently disappearing banks.  Last November,  Guernsey treasury minister Gavin St Pier told a Chamber of Commerce gathering that the States of Guernsey was working on a plan aimed at encouraging the creation of a new “‘savings and loans’-type institution” on the island, in the wake of the withdrawal from the market of a number of commercial lenders. Pier didn’t provide details as to who it was thought might own such a new bank, or run it.

He did, though, note that the reduction in the number of lenders in the Guernsey market, coupled with more restrictive lending policies by banks over the last few years, had created an “economic headwind” for the island, in the form of reduced credit available to its economy.

Miller isn’t alone in his effort to launch a local bank; his Finance For Guernsey team also  includes Jeremy Stubbs, formerly of Brooks Macdonald International, and Marc Krombach, a former colleague of his at GLI — though he has admitted he is the largest investor thus far, citing his passion for the project as the reason.

There are other investors as well, all of whom Miller says are from Guernsey, with no investor holding more than 10% of the start-up’s share capital.

He stresses at this point his determination to keep the project local.

“It’s likely that in the longer term, we may need to broaden the investor base, as a considerable amount of capital will be needed. But at this stage, we want to keep this very much a Guernsey project, funded from and by Guernsey, in order to give people confidence that this is something that is being built for the benefit of the island.

“But at the same time, it’s easier to explain the problems that offshore banking is facing right now to Guernsey investors, than it is to onshore investors, who frankly, may just not find it credible that a trust company might have to wait four to six months to open a bank account for a client.”

To read and download the results of the Finance for Guernsey consultation on the Finance for Guernsey website, click here. 

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