The accounts of the Guernsey Financial Services Commission were debated in the July 2013 States meeting. It became quite a heated debate, with the outcome being a successful amendment that resulted in the States reviewing how it will be funded in the future.
Sir, Last year I stood up and queried aspects of the GFSC accounts and was soon after phoned up by the secretary to the then DG summoning me to a meeting.
Not sure what the reaction will be to my comments today by the new DG, but I hope he will listen and realise that I am not a lone voice either in this Assembly or outside in what I have to say.
As someone who has spent around 20 years in the financial services industry, I believe it is important that we have strong regulation. Now more than ever before, when the spotlight is on our financial services industry, we need to be able to show Guernsey is a top class reputable International Finance Centre.
However, regulation has to be proportionate. These accounts show it costs over £1m a month to regulate our financial services. Whilst acknowledging the value of the industry to the Island, this is an eye watering amount and there is nothing to indicate in these accounts that an attempt is being made to reverse the inexorable rise in staff numbers and expenditure .
I attended a presentation given to Deputies last week by the GFSC where, understandably costs were raised and I have to say I was not entirely comforted by what I heard there either. It did seem to me that there was a feeling of we will just ask for 2% now but I felt that this would be at the expense of bigger rises in 2 or 3 years’ time. I do hope that costs are going to be controlled and in a long term sustainable way. We can’t afford for Guernsey to become a more expensive place to do business.
It is often thought by those not in the industry that financial services means big banks and institutions. However, this is not the case. In the fiduciary services sector, a business I know well, the GFSC accounts themselves show that of the 151 licensed fiduciaries, 69 are privately, locally owned, 26 are lawyers and accountants with only 39 being larger international companies. There is also an even split between those with turnover above and below £1m and we find that 118 fiduciaries employ less than 25 staff with just 33 employing over 25.
So the fiduciary services sector is comprised of predominantly small local businesses. They do not have bottomless pockets and are having to compete in a global marketplace against jurisdictions with a cheaper cost base. An inflationary rise in fiduciary licence fees to fund a regulator is not acceptable. Neither are staggered increases such that fees flatten off followed by a hike in fees a couple of years later.
I therefore welcome the comments of Policy Council in their covering report expressing concerns as to the increased costs as well as those of GIBA, who have made it very clear in their letter to all members yesterday that they share those concerns. The Commission has a new mission statement – integrity, proportionality, professional excellence – winning for the Bailiwick. I just hope that they do something about costs before we find we have already lost.
At the meeting last week, the concept of risk assessing all licencees was raised and that this would be achieved through their new Sentinel computer system. This makes complete sense to me and was a view echoed by GIBA in their letter. I would like to see, once this has been bedded down, and was something that was discussed at the meeting, a more sophisticated fee structure that takes a licensees risk profile into account rather than just turnover. But, again, I believe this should be against a background of a static fee base overall.
Despite all this talk about increased expenditure I would like to draw Members attention to the auditors remuneration as shown in the income expenditure account. The Public Accounts Committee has taken an proactive role in the appointment of the auditors to the GFSC this year, which included negotiating the level of remuneration. I would hope that Members will be pleased that, while we are dealing with small figure compared to the overall level of expenditure, the Public Accounts Committee’s active involvement has resulted in a reduction in the level of auditors remuneration this year. It goes to show you really can reduce your costs if you try.