The First National City Bank
First National City Bank (now known as Citibank) established a presence in Jersey in 1969, making history as the very first United States bank to open an office on the island. This piece is from the late 1960s. Operating today under its modern name, Citibank N.A. (Jersey Branch), the institution maintains its long-standing presence on the island.
"Jersey Illustrated" talks to G. B. Finneran, Managing Director, First National City Bank (Channel Islands) Limited.
Q. Can you tell us why your Bank came to Jersey?
A. In answering your question, I sup-pose I should point out that our Bank is a wholly owned subsidiary of First National City Bank of New York. With assets of f11 thousand million, our parent company operates through branches and affiliates in some 84 countries. In so doing the Bank identified the need to provide additional services for our high net worth clients around the world; and after studying the advantages offered by many of the other low tax area countries, it was decided that Jersey would best suit our requirements.
Q. What are the main advantages offered by Jersey?
A. Foremost, of course, is Jersey's political and economic stability — ad-vantages not found in many of the lower tax areas although their tax structures are often more favourable than here. Tax is not to be dismissed, however, as the absence of Estate and Death duties in Jersey are essential to our holding many of our non-resident accounts. While income tax at 20% and no capital gains tax are important to the resident investor, they are not major considerations in our operation.
In addition to the other factors, Jersey offers communications facilities to the U.K. and Europe which enable us to keep on top of the Sterling and
Eurocurrency markets. Other low tax areas such as Malta, Gibraltar and Bermuda must operate with time lags which mean that they are forced to quote exchange a deposit rates which are a day old. Thus their quotations must allow for time lag and are there-far less competitive. Accordingly many cut out their own local institution and place their money in Jersey.
Q. What proportion of your business is non resident?
A. As I've said, our object in coming to Jersey was not to carve up the same financial pie with the other twenty-five or so financial institutions in the Island. The business we have generated to date is approximately 80% non-Jersey business. And out of that 80%, a significant proportion is foreign currency business. I would estimate that all in all, our Bank here is approximately 60% a foreign currency bank and 40% a Sterling bank.
Q. What about the future of finance in Jersey?
A. I think finance is the growth industry of the Island. If you look at the other industry groupings which exist, farming, tourism and light manufacturing, they are all limited by the physical confines of Jersey. You have an 8 by 5 mile Island whose infra-structure can only support x number of people. If you try to increase industry, agriculture and tourism, you eventually reach a situation of diminishing returns. But in the financial industry the world is your market. You are only really limited by the ability of your accounting machines to put the numbers down on paper as the number of personnel engaged is not directly proportionate to your assets or profits. We are continuously evaluating the business we do to see how we can increase productivity and profitability without increasing demands for additional staff.
Q. Does the United States welcome the prospect of Britain going into Europe?
A. To answer your question I would be expressing a personal judgement since I do not believe the U.S. government has ventured an opinion on the subject. I generally attempt to remain apolitical, particularly as a guest in a particular country. But each country and government has a right and probably duty to act on its economic or any other best interest. Parliament has taken the decision to join .the EEC and I, not that it matters, think it is the right one for the U.K.
Q. If we do not get the terms we want for entry into the Common Market, does this mean that a lot of financial institutions will leave Jersey?
A. This must depend on the legal details which finally emerge. If the high net-worth or wealthy residents decide to leave the Island for fiscal reasons, then I suppose that some of the Institutions, which depend more than we do on this type of business, might have to scale down their operations. But I would not expect any of them to leave altogether.
Q. On a rather different subject, can you tell us something about the present problems of the international monetary system and, in particular, why we do not have fixed exchange rates at this time?
A. To date, the nations of the world have felt fixed exchange rates were needed to have trade go on without the uncertainty as to whether there might be profit or loss at the end of the day for the exporter. With the rates floating as they are now, many traders have been seriously affected. We have seen this in particular in the Japanese shipping industry which has found itself with millions of dollars worth of shipbuilding contracts denominated in U.S. Dollars which, when sold for Yen at completion, will yield fewer Yen and mean a possible loss for the builder.
The reason for the present floating of major currencies is that countries like people have different propensities for producing, spending, saving etc. The simple fact is that the U.S. has been living beyond its means over the last decade and, therefore, the Dollar became overvalued to the other major currencies. At the other end of the spectrum, the Japanese Yen whose value was set shortly after the war has become considerably undervalued. Thus the balance of payments results of the major countries of the world went into disequilibrium and the floating has been designed to permit the currencies to find their natural level.
First National City Bank (now known as Citibank) established a presence in Jersey in 1969, making history as the very first United States bank to open an office on the island. This piece is from the late 1960s. Operating today under its modern name, Citibank N.A. (Jersey Branch), the institution maintains its long-standing presence on the island.
"Jersey Illustrated" talks to G. B. Finneran, Managing Director, First National City Bank (Channel Islands) Limited.
Q. Can you tell us why your Bank came to Jersey?
A. In answering your question, I sup-pose I should point out that our Bank is a wholly owned subsidiary of First National City Bank of New York. With assets of f11 thousand million, our parent company operates through branches and affiliates in some 84 countries. In so doing the Bank identified the need to provide additional services for our high net worth clients around the world; and after studying the advantages offered by many of the other low tax area countries, it was decided that Jersey would best suit our requirements.
Q. What are the main advantages offered by Jersey?
A. Foremost, of course, is Jersey's political and economic stability — ad-vantages not found in many of the lower tax areas although their tax structures are often more favourable than here. Tax is not to be dismissed, however, as the absence of Estate and Death duties in Jersey are essential to our holding many of our non-resident accounts. While income tax at 20% and no capital gains tax are important to the resident investor, they are not major considerations in our operation.
In addition to the other factors, Jersey offers communications facilities to the U.K. and Europe which enable us to keep on top of the Sterling and
Eurocurrency markets. Other low tax areas such as Malta, Gibraltar and Bermuda must operate with time lags which mean that they are forced to quote exchange a deposit rates which are a day old. Thus their quotations must allow for time lag and are there-far less competitive. Accordingly many cut out their own local institution and place their money in Jersey.
Q. What proportion of your business is non resident?
A. As I've said, our object in coming to Jersey was not to carve up the same financial pie with the other twenty-five or so financial institutions in the Island. The business we have generated to date is approximately 80% non-Jersey business. And out of that 80%, a significant proportion is foreign currency business. I would estimate that all in all, our Bank here is approximately 60% a foreign currency bank and 40% a Sterling bank.
Q. What about the future of finance in Jersey?
A. I think finance is the growth industry of the Island. If you look at the other industry groupings which exist, farming, tourism and light manufacturing, they are all limited by the physical confines of Jersey. You have an 8 by 5 mile Island whose infra-structure can only support x number of people. If you try to increase industry, agriculture and tourism, you eventually reach a situation of diminishing returns. But in the financial industry the world is your market. You are only really limited by the ability of your accounting machines to put the numbers down on paper as the number of personnel engaged is not directly proportionate to your assets or profits. We are continuously evaluating the business we do to see how we can increase productivity and profitability without increasing demands for additional staff.
Q. Does the United States welcome the prospect of Britain going into Europe?
A. To answer your question I would be expressing a personal judgement since I do not believe the U.S. government has ventured an opinion on the subject. I generally attempt to remain apolitical, particularly as a guest in a particular country. But each country and government has a right and probably duty to act on its economic or any other best interest. Parliament has taken the decision to join .the EEC and I, not that it matters, think it is the right one for the U.K.
Q. If we do not get the terms we want for entry into the Common Market, does this mean that a lot of financial institutions will leave Jersey?
A. This must depend on the legal details which finally emerge. If the high net-worth or wealthy residents decide to leave the Island for fiscal reasons, then I suppose that some of the Institutions, which depend more than we do on this type of business, might have to scale down their operations. But I would not expect any of them to leave altogether.
Q. On a rather different subject, can you tell us something about the present problems of the international monetary system and, in particular, why we do not have fixed exchange rates at this time?
A. To date, the nations of the world have felt fixed exchange rates were needed to have trade go on without the uncertainty as to whether there might be profit or loss at the end of the day for the exporter. With the rates floating as they are now, many traders have been seriously affected. We have seen this in particular in the Japanese shipping industry which has found itself with millions of dollars worth of shipbuilding contracts denominated in U.S. Dollars which, when sold for Yen at completion, will yield fewer Yen and mean a possible loss for the builder.
The reason for the present floating of major currencies is that countries like people have different propensities for producing, spending, saving etc. The simple fact is that the U.S. has been living beyond its means over the last decade and, therefore, the Dollar became overvalued to the other major currencies. At the other end of the spectrum, the Japanese Yen whose value was set shortly after the war has become considerably undervalued. Thus the balance of payments results of the major countries of the world went into disequilibrium and the floating has been designed to permit the currencies to find their natural level.