GUERNSEY secured valuable support from the UK Treasury when officials assured Policy Council representatives that it would support the States in representations with the Icelandic Government over Landsbanki Guernsey.
That is good news for the stricken investors, for it should go some way to reassuring them that money deposited with the institution that has been ‘upstreamed’ to an associate or parent bank and that properly belonged to the local branch now has a better chance of being returned.
And that should boost their hopes of getting at least some of their funds back.
The real news on that point may emerge tomorrow, when the administrator is expected to release his first significant comment since the bank applied to go into administration earlier this month.
But perhaps the most significant development at the Monday meeting, at least from a PR perspective, was the Treasury acknowledgment that the so-called tax havens of Guernsey, Jersey and the Isle of Man are good for the UK.
The unattributed comments released yesterday by the Policy Council make it clear that Treasury officials – and, by proxy, their political masters – recognise that island-based branches and subsidiaries of the UK banks concerned make a very substantial contribution to the respective parent’s cash liquidity through upstreaming.
‘This benefits the UK banking system and, by extension, the UK Government,’ said the council.
While this acknowledgment of Guernsey’s benefit to the City of London as a substantial trading partner has emerged before, the timing of this latest confirmation is very useful.
Sentiment in the UK has been turning against the offshore centres and former BBC regional political editor Bruce Parker, a Guernseyman who writes for this newspaper and lives in Hampshire, has become increasingly concerned about the growing negativity from opinion formers aimed at the dependencies.
GuernseyFinance and others regularly work to counter unhelpful stereotyping of the island’s financial activities and it certainly has its work cut out now.
It has just been handed some valuable ammunition and must make the best of it.
Article posted on 16th October, 2008 - 2.50pm
2 Article Comments
The comment writer says “The unattributed comments released yesterday by the Policy Council make it clear that Treasury officials – and, by proxy, their political masters – recognise that island-based branches and subsidiaries of the UK banks concerned make a very substantial contribution to the respective parent’s cash liquidity through upstreaming”
In contratc to this the GFSC Consulation document that featured so much in last week’s Press is nowhere nearly as enamoured with upstreaming. This is what they say
“In order to provide greater protection for retail depositors it is proposed to reduce parental upstreaming to a maximum of 85% of total assets. The Commission may impose additional requirements based on the level of
perceived risk associated with the parent banks”
Nor quite so good after all!!!!!.
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It’s a bit of a no-brainer to suggest that parent banks enjoy the luxury of extra liquidity provided by offshore cash-sinks. However, the “unattributed comment” from the UK Treasury (according to the PC) that “by proxy” it helps the UK government seems a bit spun.
No doubt the more liquidity from the UK based bank there is, then the more business can be done using the existing models, and so the economy benefits, but how much of that is due to tax haven logic? If there were no tax havens maybe ALL the deposits could be made in the UK, the depositors would pay tax, the levels of upstreaming wouldn’t exist and the UK gov would gain more.
As it is now the there is truth to the statement, but as it is ‘unattributable’ judgement should be reserved that the Treasury official has vested interests. As always.
The argument to standardise global tax regimes as per the TJN does stand up to scrutiny. Those opposed work in the Industry.
It’s a bit like the turkey voting for Christmas.
What would it mean for Guernsey? Probably a departure of most of the services that are making a few people rich, that are pushing up house and living prices and dropping of overall disposable income. Not exactly appealing, but maybe more true to an honest pay for an honest day’s work.
I think it is good we have able people discussing the Landsbanki mistake with superior authorities, but it really highlights that the idea of Guernsey being independent is a pipe dream. Whilst we give privileges to subsidiary arms of international corporations we cannot extend that to local protection.
We can’t have our cake and eat it as has been shown.
Hopefully those depositors in LG will get more, eventually, than the 30%.
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