Barclays’ offshore banking license set to be withdrawn: Part One

FINANCIAL SERVICES CENTRE AND OFFSHORE BANKING IN GHANA: BARCLAYS BANK GHANA LIMITED EXPERIENCE

The main benefit of Offshore Banking is its attraction for foreign deposits in foreign currencies. Barclays intends to attract large volumes of deposits, which will form the basis of developing more lending solutions to Ghana’s private sector, and will help generate employment and create wealth.

Other benefits that could be derived from an offshore financial service centre are Aircraft Financing and Leasing, Ship Registration, Trust Incorporations, Assets Management, Insurance, Pension Funds, Consultancy Services etc, are all activities that can be conducted in an IFSC.

Looking at the operations of international financial services across the world, we see a very positive impact on the banking environment and the economy in general.

In Mauritius for example, the number of people employed in the Offshore sector is over 1500. Output per employee is assessed as higher than in other sectors. This indicates high productivity and efficiency. It has contributed to the development of knowledge and skills and helped Mauritius to integrate with the world economy. Indirect benefits did include a significant rise in the business of accountants, lawyers, chartered secretaries among others.

Total Offshore Banking Units (OBUs) deposits rose from USD 390 million in 1994 to USD 606 million in 1996 and loans and advances from USD 140 million to USD 159 million. OBUs registered an increase in profits in 1995 of around 57%, and 44% in 1996 to reach USD10 million. Total assets increased by 28% to USD 859 million.

The tourism sector also benefited from international visitors. Other contributions of the sector to GDP is reflected in rental of office space, telecommunication charges and other local expenditures including rent for housing and payment for services e.g. drivers etc

As at now, there are 28,991 offshore companies registered in Mauritius. Annual fees generated by these companies are around USD 15 million. This does not include those generated by Management Companies through services they offer, all of which are remunerated in foreign currency. The direct benefits of an offshore centre are in foreign currency.

Gross revenues for 1997 from the offshore sector amounted to USD 77 million. The value-added generated by three operators was estimated at USD 30 million, representing direct contribution of 0.85 % of GDP or 7.7% of financial services sector GDP. However, the various direct and indirect benefits of the offshore sector were calculated to be 2.5% of GDP, representing 22% of the financial services sector GDP.

A centre like Bermuda, with a population of under 70,000 people, has about 28% of the world’s captive insurance market with 1,491 insurance companies having assets worth over $290 billion. Its banks hold assets worth over $22 billion. Financial services represent 26% of GDP. Cayman Islands houses 312 banks with assets of over $1trillion. Financial services represent 30% of the Islands GDP.

Banks in the British Virgin Island hold assets worth over $2.4 billion. Fees from registration and licensing of offshore companies account for over 50% of total government revenue.

The banking facility provided here today will support the enormous financial activity that is expected with the creation of Ghana’s IFSC.

The IFSC is good news not only for banks but for all other non-bank financial institutions, for example the tax authorities, the Registrar of Companies, the Insurance Board, the Securities Exchange Commission, etc. The legal structures that are set up will attract a lot of offshore companies to do business in this jurisdiction.

What makes a good financial services centre are factors such as good regulatory systems; a good international reputation; a good banking system; a stable political environment; and finally, a strategic geographic position – all of which Ghana also have.