The warning from the Guernsey Financial Services Commission comes as the regulator said it needed additional resources to meet the continuing development of those international standards.
‘The Bailiwick, as an international financial services centre, is dependent on overseas clients being able and willing to do business here.
‘The acceptability to those clients and the governments of the countries in which they live of using the Bailiwick is dependent to a large degree on how we apply international standards,’ said GFSC director-general William Mason in the commission’s latest annual report.
While some standards were open to degrees of interpretation, Mr Mason said they needed a necessary level of understanding, resources and resolve to successfully and proportionately implement them – and demonstrate how they had been put into action.
Noting an upcoming assessment by an international body – Moneyval – in 2023/2024, the GFSC director-general said acceptance that international standards were those which Guernsey had to work to was needed if ‘Bailiwick businesses are to retain and enhance their access to the clients in other jurisdictions on whom they depend’.
It was an ‘extremely difficult task’ in treading the right path in balancing the prosperity of the Bailiwick and its businesses with the proportionate implementation of requirements handed down by international regulatory standard setters.
‘I have become increasingly concerned that there is a presumption in some quarters that no matter how much criticism is directed at the commission, nor how tight our resourcing is, the Bailiwick will always sail through the various assessments undertaken by international inspectors with our financial services sector consequently prospering,’ said Mr Mason.
‘It requires a sufficient quantity of very capable and motivated commission officers with sufficient resources at their disposal to regulate our large, prosperous and diffuse financial services sector.’
Amid ‘regulatory inflation’ sparked by endlessly evolving international standards, Mr Mason expressed concern about how ‘thinly spread’ the GFSC was.
Meanwhile, Jersey and UK regulatory counterparts had put up fees by significant amounts to fund increased budgets.
Bermuda, a similar sized island to Guernsey but with fewer people in its finance sector, had nearly 100 more staff to fulfil similar functions.
He welcomed the States’ decision to allow fees to rise by 2.1% for 2021 following two years of frozen fees, all while the commission’s costs increased.
‘Over the past eight years we have kept our cost increases to 2.4% on average whilst putting up our fees by an average of just 1.2%.
‘We have run a budget only slightly in deficit for the last two years by making serious economies in terms of our investment in new systems and not offering our staff a pay rise in 2020.
‘We suffered a staff wastage rate of 18.5% in 2020, which was too high for comfort. We don’t need to pay our staff generously but we do need to be able to offer appropriate pay and, fond though I am of the slogan “less is more”, there are natural limits in how much ground you can expect staff to cover competently without becoming burnt out.’
Mr Mason concluded: ‘Going forward, we have significant reservations about how sustainable the current levels of resourcing are given the demands placed upon us. We are very lean, albeit still fit at present.’