From the Cayman Islands to Mauritius, and from Switzerland to Guernsey, financial hubs have reacted to the UK referendum vote to get out of the European Union.
A few weeks before the Brexit vote, this publication quizzed international financial centres such as Guernsey, the British Virgin Islands, Isle of Man and Gibraltar about what might happen if the UK voted to leave. Several jurisdictions declined to comment or did not respond, while some did so. (To view that feature, see here.) Now that the UK electorate has spoken, triggering political bloodletting and market gyrations, it is time to review how IFCs reacted. This news service welcomes commentary about this topic and readers can email the editor at firstname.lastname@example.org.
Isle of Man
The jurisdiction had its rating outlook cut from stable to negative by international agency Moody’s Investor Services. The treasury minister, Eddie Teare MHK, said the decision to revise the Isle of Man’s credit rating comes as no surprise.
The ratings agency said that in its view the Isle of Man’s creditworthiness is strongly linked to that of the UK. The outlook on the UK’s own credit rating was changed on Monday amid concerns that the referendum result could lead to a deterioration of the UK's economic performance.
Swiss Bankers’ Association
“The decision to exit the EU results in great uncertainty for all companies. This will have negative repercussions, at least for the short-term, in particular for investments. The Swiss banks are well-acquainted with Switzerland’s situation as a non-EU member and have organised themselves accordingly. Following the outcome of this referendum, they will again decide on an individual basis whether or not amendments to their situation are required,” said the SBA.
“The Swiss banks will now closely follow the ensuing discussions between the UK and the EU. After this decision, the UK will have to deal with questions regarding market access to the EU. Switzerland is currently also discussing questions regarding market access with the EU. The future will show, in what way and to what extent the UK and Switzerland have common interests in these discussions.”
Monetary Authority of Singapore
The MAS gave no comment on the wisdom of the vote’s outcome, but commented on its actions in dealing with market effects. It said Singapore’s interbank money markets “continue to function in an orderly manner and its banking system remains sound”.
“The liquidity positions of the major banks in Singapore are healthy, and overall banking system liquidity remains adequate. MAS will provide additional liquidity to the banking system if needed. The trade-weighted Singapore dollar remains within its policy band, notwithstanding heightened volatility in international foreign exchange markets today. MAS stands ready to curb excessive volatility in the Singapore dollar,” it said.
“We have been prepared for the market volatility. MAS had been in close contact over the past weeks with banks in Singapore, foreign central banks and regulators to take preparatory actions to ensure the resilience of our financial system and markets in the event of Brexit. MAS will continue to be vigilant and stay in close contact with fellow central banks and regulators, as uncertainty is likely to persist following the referendum outcome.”
"In our view, it is too early and somewhat premature to assess the actual impact of Britain leaving the EU insofar as the financial services industry is concerned as the actual decision by Britain to withdraw from the EU made in accordance with the UK's constitutional requirements is yet to be taken forward. It is also pertinent to point out that the outcome of the referendum is in itself not a decision by Britain which is in accordance with the inherent constitutional requirements to leave the EU," it said.
"In effect, although the European Referendum Act 2015 provided for the referendum to be held, it did not make the vote binding on the government or anyone else and in reality the Act itself did not address the incidence of the outcome. Ultimately, the British government and parliament must now decide what to do in the light of the referendum results. Going forward, if the required steps are taken forward, I believe that any potential impact will be very much dependent on the model/agreements that will be entered into between the European Union and Britain and how this will regulate the way investment services business between Britain and the EU will be taken forward. This will ultimately possibly impact the business and operational models currently in place but its extent are yet to be determined.
"Consequently, at this juncture, as stated earlier, it is premature to hypothesise on the aftermath of Brexit’s impact on financial services in Malta and Malta’s positioning in this regard. Sure enough, beyond the realms of an eventual non EU membership, Britain will invariably remain highly relevant to our own economy," it added.
Sir Anerood Jugnauth, prime minister of Mauritius, was quoted by media as saying: “Notwithstanding the scenario that will govern the EU/UK trade relations, Mauritius will need to have a bilateral trade agreement with the UK to safeguard its trade interests. In the event UK decides to maintain the EU commitments towards the Member States which have signed the Interim Economic Partnership Agreement, namely Madagascar, Mauritius, Seychelles, Zimbabwe, there may not be any need for a fresh trade agreement. In the eventuality that the UK would wish a change from the current Interim Economic Partnership Agreement model, Mauritius would have to enter into consultations with the UK over a new agreement safeguarding our trade interests.”
Guernsey's chief minister, Deputy Gavin St Pier, was quoted as saying the island is a “safe haven” for financial services following the UK's vote to leave the EU.
The report said a proposition was passed by Guernsey's elected representatives to enable the island's Policy and Resources Committee, which Deputy St Pier leads, to "negotiate with the UK government in order to: protect Guernsey's interests in the UK exit agreement; replace Protocol 3; protect our constitutional relationship with the UK; look at, and take advantage of, new trading relationship opportunities." (Under Protocol 3, Guernsey is part of the Customs Union and within the EU Single Market for the purposes of trade in goods, but is outside the EU in all other respects.)
"Officers are also working closely with the UK government and our Crown Dependency counterparts. The prime minister has also confirmed in his statement to the House of Commons on Monday, that the Crown Dependencies would need to be consulted - and this early recognition of our position is to be welcomed,” St Pier said. "We have much better connections with Whitehall, Westminster, Brussels and other jurisdictions in 2016 than we had in 1972 [the year of the accession of the UK to the EEC]. We have invested in our relationships which will assist us in the coming weeks, months and years," he said. “In what seems like an increasingly unstable world we are, and I am confident will continue to be, seen for what we are: an oasis of stability - a safe haven. We are a safe haven for financial services - in or out of the EU - and we are a safe haven physically for those who want to relocate here - or even just holiday here in peace and quiet."
"It is important that the island's finance sector continues to monitor developments closely, while at the same time recognising that while Protocol 3 makes us part of the Customs Union and within the Single Market for the purposes of trade in goods, for most services, such as financial services, we were already treated as a third country and that position has not changed as a result of Brexit," said Dominic Wheatley, chief executive of Guernsey Finance.
"Jersey’s role as a stable and well-established finance centre should give some much-needed reassurance to investors, their advisors and the asset management community in light of this outcome. Whilst financial markets are seeing a degree volatility, history has shown that Jersey has dealt well with this in the past and will do so again," said Geoff Cook, CEO of Jersey Finance.
"Fundamentally, Jersey’s constitutional relationship with the UK will not be affected by the UK’s decision to leave the EU, and we remain convinced that the UK’s long-term position as a financial services powerhouse will continue. In addition, Jersey is already outside of the EU itself and maintains strong access to European markets through its broad and robust third country agreements. These also remain unaffected. Meanwhile, given the increasingly global outlook of Jersey’s finance industry, spanning Asia, the Middle East and Africa as well as Europe, it is in a strong position. Jersey’s financial services businesses have always demonstrated real tenacity in the face of change, whilst Jersey’s government is on the front foot in representing its interests to the UK and Europe, which will continue to be major partners for Jersey, and this should all give confidence to investors."
British Virgin Islands
The BVI’s government has been quoted as saying it respects the outcome of the UK vote but has so far given few other remarks about specific details of the relationship, other than pointing out that if the UK does leave, negotiations with the EU will take two years and that developments must be monitored closely.
“As the premier global financial hub the Cayman Islands financial services industry will continue to work closely with its clients and countries around the world to resolutely do its part in ensuring the continuing success and stability of the global financial economy," said Jude Scott, Cayman Finance CEO.
"Cayman’s own political and economic stability, its sophisticated and comprehensive legal system and stable and business-focused government means the Cayman Islands is in a strong position to face any change. Our financial services industry is strong and resilient and has weathered global economic and political change well in the past. Short term we will see some volatility in the financial markets however we will continue to monitor the political and economic situation and plan for the long term to ensure we are well prepared for any implications this decision has over the next few years. We reaffirm our strong working relationship with the UK and Europe and our business partners in that region.”