I am very pleased to be invited to speak at the annual ICSA Jersey conference. The agenda for your conference covers a number of topics that are not only relevant to your industry but also the future prosperity of Jersey as an International Finance Centre.
I hope to give you an outline this morning of what we, in Government, are doing to ensure Jersey’s future prosperity as an international finance centre so we can continue to experience the quality of life islanders have historically enjoyed. This new Government is continuing to put a particular focus on stimulating jobs and growth through the economy.
Economic growth
It was for this reason that I appointed Senator Philip Ozouf as Assistant Chief Minister with responsibility for Financial Services, Digital, Competition and Innovation. I see these sectors as the main opportunities for significant growth - and I have selected them as key areas for specific focus.
For those of you who know Senator Ozouf it will come as no surprise to you that he has already thrown himself wholeheartedly into the role and with his time focussed on these important areas I believe we can achieve significant benefit for Jersey.
As a team of Ministers our aim is to work together to stimulate the economy and create jobs and growth. To do that we must take full advantage of all the opportunities available whilst tackling any challenges.
Statistics
It is important to start with a clear picture of where the financial services industry is now. The latest Business Tendency Survey makes interesting reading. It contains a number of positive indicators for the finance industry and the economy generally:
- the business activity indicator in the finance industry was positive in the last quarter, and that means business levels are up
- the all-sector business activity indicator was strongly positive, showing a significant increase on the previous quarter and its highest level to date
- all sector business optimism remains positive and in the finance sector both future employment and profitability remain positive
It is also of note that the more recently published Jersey Labour Market figures, published just last week, show that employment is up in the finance industry by around 400 jobs. Some 12,770 people now work the finance industry.
This is further welcome evidence of a more consistent upturn for the finance industry and an indicator of new business being generated. That’s good news for the economy.
While numbers working directly in banking have declined, a trend that has been reflected in western markets generally since the financial crisis, this has been more than balanced locally by the recruitment of more people in the trust, private wealth and legal sectors.
The figures confirm that we have come a long way since the start of the financial crisis in 2008. This has not happened by accident. A lot has been achieved through our own efforts, and much of that is thanks to the hard work of all those in the private sector.
We are climbing out of the recession but, as always in this world, there is much more to do. What I want to be clear on today is that we are well positioned for the next climb.
Strategic planning
Through our strategic priorities the Government is 100% committed to being part of the support team for the next climb that we are all embarking on together. This is an extremely exciting time for the Island.
We have had a period of careful strategic planning. The independent jurisdictional review of Jersey in 2013 identified clear opportunities for quality, well regulated and respected international finance centres (IFC). The review identified emerging global trends and issues in the sector:
- a focus on tax and transparency
- consolidation of existing banking entities
- a continued push towards more supranational and domestic financial regulation
In order to maintain our position as an international financial centre of substance, and substance is the key word, Jersey must meet the demand for IFCs in a modern global economy and address the emerging trends and issues within the sector. McKinsey provided us with several recommendations to follow:
- sustain Jersey’s core business and ensure long term prosperity of Jersey’s financial services
- enhance the business enablers that allow us to stand out as an IFC
- learn to capture adjacent growth with our existing products, services and market
- explore more ambitious opportunities in less familiar business territories by building new capabilities
The Financial Services Policy Framework published by the Government last year builds on the McKinsey recommendations. We as a Government are absolutely committed to delivering the policy framework to provide the economic growth that Jersey needs.
Strategic priorities
Since the election last year we have published our strategic priorities for Jersey and a number of them are particularly relevant to the financial services industry.
Jersey supports enterprise and investment from different markets. This is a key pillar of the historical success of our financial services industry. We are determined to do everything we can to foster an environment which supports growth and expansion of existing businesses and the starting up of new ones.
We are positioning Jersey as the most helpful, welcoming, responsive business environment which encourages enterprise, innovation and competition. One key area in this is to enhance Jersey’s reputation with new target audiences. That includes overseas markets in which we look for new business opportunities for the financial services industry.
This is an area that Senator Ozouf and I are committed to working on together to deliver economic growth for Jersey.
Many of you will be aware of the fantastic job that Jersey Finance do at promoting Jersey’s financial services industry to the world. McKinsey called for a greater focus on the government, industry and regulator working together to ensure the prosperity of financial services.
The relationship between government and Jersey Finance has been further strengthened over the past two years with significant government support now behind Jersey Finance’s marketing activity. Indeed the combination of the Financial Services Unit in my department, working with Senator Sir Philip Bailhache and the External Relations Department, and Jersey Finance, has brought us into a new era for promoting our skills in financial services to the rest of the world.
There is now continued support behind Jersey Finance’s key marketing trips into markets such as the Middle East, Africa and China. There are visits planned for this year with Ministerial support to continue the good government relations formed in the UAE over a number of years,
We are heading to new areas such as Africa, where Senator Ozouf will lead a visit next month covering direct engagement in Nigeria and Kenya which is a first for us. And towards the end of the year I am due to visit India, another government first for Jersey and our finance industry. This trip is designed to enhance the work our representatives are doing on the ground.
These visits rely heavily on support from industry, who attend and demonstrate the reasons to do business in Jersey. I would encourage the industry to continue this support and to be involved in the great work that is being done to promote your industry.
While these new target audiences provide excellent opportunities for the financial services industry in Jersey, with new territories comes new challenges. As many of you will be aware that is particularly so in relation to the regulation that applies when doing business with certain territories that we are now marketing into.
This is why a key priority for the Government is to deliver a high-quality regulatory environment for Jersey by working closely with the Jersey Financial Services Commission (JFSC) and the industry.
Regulation
In recent years we have been experiencing a flight to quality around the world. Jersey’s position as a leader in establishing high quality regulation through the JFSC puts the island in a great position to take advantage of future opportunities.
Some of you will have attended one or more of the events that the JFSC have been involved in this year and heard the phrase used by their Chairman, Lord Eatwell. 'A changing commission for a changing world' sums up what they are trying to achieve.
I am therefore particularly glad to see that the Director General of the JFSC, along with a number of industry experts, is due to speak on a panel at the conference later today discussing 'implementing an effective culture of compliance'.
The relationship that now exists between the government and the regulator is closer than we have ever been. We are fully committed to working in partnership, without, of course, impacting on the independence of the regulator.
The enhanced relationship is timely, as we are seeing the greatest level of change in the regulatory environment from external influences. You will all be familiar with the regulatory change in a variety of areas – we now face AIFMD, MiFID 2, the Fourth Anti-Money Laundering Directive of the EU and a variety of other pressures.
In the context of tax information exchange, we have again seen significant change due to the movement of the international community. The introduction of US FATCA, UK FATCA under the respective IGAs and the move towards the new OECD Common Reporting Standard have all been a challenge for our industry.
I do not want to say too much on this topic as I note that Colin Powell, my Adviser on International Affairs, is due to address you later on.
Financial reporting
I would however highlight one critical factor. We in the government consider we are very well positioned in respect of global regulatory change and the movement internationally on exchange of tax information. Commitment and appropriate resource needs to be dedicated to these areas, and we are confident that we have done this:
- we have enhanced teams in government to deal with the increased workload
- the JFSC have taken action to ensure they are well resourced in this area
- we have stated clearly that Jersey is a jurisdiction that markets itself as having internationally recognised high quality regulation
- we have stated we have no interest accommodating business in the island that promotes abusive tax avoidance
Protecting our reputation is something in which we all have a role to play. The importance of the international element to regulation was brought home to me recently when MONEYVAL, who assess Jersey for international AML/CFT compliance against the recommendations of the Financial Action Task Force, visited the island to conduct an onsite assessment in January.
Along with meeting ministers and members of the insular authorities, the assessors had approximately thirty meetings and met more than a hundred individuals. Many of these industry members were representatives and those meetings were vitally important in achieving the ratings we are aiming for.
I should note that the process of finalising the report from the MONEYVAL assessment will continue over the course of this year. A meeting is scheduled between our insular authorities and the MONEYVAL assessors in Strasbourg in June. Our report is due to be finalised by the MONEYVAL plenary containing all jurisdictions in September.
I am unable, at this stage, to give any indication of the outcome of our report, but the assessment process is one that has involved, and continues to involve, significant industry, regulator and government time. I am grateful to all of you who have been involved and would encourage you to maintain your involvement where required. This is in the best interests of Jersey.
I am firmly of the view that high quality regulatory environments should be, and will be, viewed as an attraction for financial services business. The flight to quality is the future. However, a successful future relies on the industry being able to adapt to such change.
In Jersey we have some of the best compliance professionals in the world with a wealth of experience. We are in a very good place to take advantage of this opportunity and I would encourage this culture to continue. I hope you will expand on this topic in your discussions on implementing an effective culture of compliance later today.
Skilled workforce
The final strategic priority I would like to speak to you about today is the need for a skilled workforce in our finance industry. I recognise the need in Jersey for a skilled workforce aligned to the needs of productivity-led economic growth. There has been significant discussion recently on the skills required for the finance industry, notably in the area of compliance professionals.
The Council of Ministers is committed to reviewing and upgrading the existing skills strategy and this will be done with the finance industry at the forefront of minds. We will also consider the requirements of the compliance industry, which, as I have said, is vital to the future of the financial services industry.
Conclusion
I am optimistic about the future for the finance industry in Jersey. Thanks to years of hard work, Jersey has established many world class financial services institutions, each employing highly skilled and experienced individuals such as yourselves.
We will work hard to maintain this excellence and, as highlighted in our strategic priorities, change and innovate to ensure continued success in the future. When we scan the horizon we can see clearly what Jersey needs:
- a clear economic strategy to which all are fully committed
- a partnership between government, the regulator and the industry - with shared objectives;
- a quality product
- a commitment to business growth and compliance with international standards - to protect the Island’s international reputation and take advantage of the flight to quality
- a willingness to welcome enough skilled staff to maintain a competitive industry
- investment in quality office accommodation
- an ability to make prompt decisions - whether to enact legislation or provide essential infrastructure
I am committed to ensuring we maintain our well-earned reputation as an IFC of genuine substance.
Increasingly business success will come from the quality of the services provided, and the speed of response to market needs, based on a foundation of common standards. I consider that Jersey is well placed on all counts and has a great future ahead of it.
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