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Information and public services for the Island of Jersey

L'înformâtion et les sèrvices publyis pouor I'Île dé Jèrri

Treasury Minister's speech to parliamentary meeting

10 November 2010

I would like to thank the IFC Forum for organising this valuable event and inviting me to speak today on the subject of the G20 and its implications for Jersey. 
The challenge ahead

As we look forward to France’s chairmanship of the G20 and the upcoming summit in Seoul, we welcome the opportunity to engage further on the need for high quality regulation and economic cooperation. We also recognise the challenges that are likely to emerge.

Since the financial crisis of 2008, the G20 has become increasingly focused on so-called non-cooperative jurisdictions. This focus has led to the introduction of a comprehensive peer review process to identify the extent to which jurisdictions are committed to and compliant with relevant international standards. The declaration that followed June’s G20 Summit in Toronto stated “We are addressing non-cooperative jurisdictions based on comprehensive, consistent, and transparent assessment with respect to tax havens, the fight against money laundering and terrorist financing and the adherence to prudential standards."

The solution not the source

Offshore centres were not the source of the financial crisis but they are seen, by the G20, as having a contribution to make to the solution, particularly in respect of the need for greater transparency. Whilst challenging, the new demands placed on International Finance Centres are also welcome opportunities. One result of G20 scrutiny is that islands like Jersey have been faced with a barrage of assessments by international bodies including:

  • IMF covering Anti-Money Laundering and financial supervision
  • Financial Stability Board covering financial supervision
  • Global Forum on Transparency and Exchange of Information for Tax Purposes of which Jersey is a vice-chair

HM Treasury also initiated the Foot review covering their dependent and overseas territories, which reported in December 2008. 

While these assessments are burdensome in terms of the demands placed on government resources, they can serve to dispel myths about poor regulation. In the case of Jersey, the results of such assessments have been extremely supportive of the reputation of the Island as an international finance centre committed to and compliant with all relevant international standards.

Jersey was recently assessed by the IMF and the report found that the Island met the financial regulatory and anti-money laundering standards better than most if not all EU and OECD member countries. Jersey had 15 compliant or largely compliant ratings out of the 16 core Financial Action Task Force recommendations and 44 such ratings for the 49 overall recommendations.

The Global Forum has also assessed Jersey and a report should be published in the first half of 2011. The results are expected to further reinforce other independent assessments of compliance with international tax standards that led to the Island’s inclusion in the original OECD 'white list' of compliant jurisdictions.

The Financial Stability Board is addressing jurisdictions’ compliance on financial regulation, and based on the IMF report Jersey has been identified as a jurisdiction meeting the international standards to a sufficient level not to warrant any further review by the board.

Bolstering the Island's reputation

This independent verification of Jersey’s regulatory framework has, in a very real sense, bolstered the Island’s reputation as a well regulated finance centre. Indeed, the advantages of enhanced scrutiny extend beyond approval for Jersey’s regulatory arrangements, and towards a better understanding of the function that the Island’s financial services industry serves in the global economy.

Offshore centre - the facts

Historically, International Finance centres have been accused of being a drain on some of the large economies they service, whereas in fact they are beneficial.

A good example of these benefits lies in the complementary relationship that exists between Jersey and the City of London. The Island offers services that appeal to the foreign clients of the city and a great deal of business is introduced through city law firms and other agencies. In return, the funds attracted to the Island from all over the world are up-streamed to head offices in the city thereby helping to fill the liquidity gap for many London-based banks and provide funds for investment. 

In his review of the Crown Dependencies and Overseas Territories, Michael Foot found that “Together, the Crown Dependencies provided net financing to UK banks of $332.5 billion in the second quarter of… 2009.” Beyond this lies a synergy between the interests of the city and of Jersey as they seek to target business in emerging markets.

Developing relationships

Like London and the UK in general, Jersey has been working to develop relationships with the key emerging economies like Russia and China. The ambassadors from both countries have recently visited the Island and during the Lord Mayor’s visit earlier this year we stressed the need for Jersey and London to work together in emerging markets.

Justice Select Committee

Given the strong alignment between the overseas trade policies of the UK and Jersey on financial services, Jersey Finance has been coordinating with City UK in opening up emerging markets. This alignment of trade policies is particularly helpful when taking forward the positive recommendations of the recent Justice Select Committee report on the UK’s relationship with the Crown Dependencies.

Sir Alan Beith’s committee endorsed the move towards the Islands acting for themselves overseas and it is reassuring to know that, going forward, the British Isles retain a common purpose in pursuing trade with emerging markets.

Jersey - working to international standards

So, whilst some of the rhetoric surrounding the G20’s focus on International Finance Centres can be less than helpful, the independent assessments that stemmed from it generate a greater understanding of offshore jurisdictions and their important role in the global financial system. Jersey has undoubtedly benefited from this process.

The Island decided early on in its development that the long term future lay in being recognised as being cooperative, transparent and well regulated with a strict adherence to international standards. The distinction that is being drawn between open and transparent jurisdictions and those that are non-cooperative means that Jersey is now well placed to benefit from a flight to quality as business aims to associate itself with jurisdictions that have international acceptance and work to international standards.

Looking forward

As we look forward to the French taking the reigns of the G20, we call for a continued focus on the need for consistent application of international standards. International Finance Centres must be assessed transparently and on a level playing field with G20, EU and OECD member countries.

When President Sarkozy addresses this area of the agenda we hope that he does so with the spirit of France’s founding principle of égalité alongside an embrace of the very British value of fair play. If this principle is applied to all nations then we can change misconceptions of International Finance Centres and develop an environment that is entirely open, transparent and centred on consistently applied international standards.


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