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STEP April 2014

Geoff CookCEO Jersey Finance CEO, Jersey Finance

Identified need to review Jersey’s banking model due to ICB

Why Review?

recommendations, Basel III, OTC regulation, and subsidiarisationBanking fed into many business streams so it was considered necessary to complete a review in a wider jurisdictional context

Emphasised known threats to funds platform from market access issues – Identified costs of compliance in trust arena and historic focus on tax planning as issues

Capital Markets development potential framed by tax neutrality

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Review Objectives

Create transparency on current status of Jersey as financial centre Create transparency on current status of Jersey as financial centre, benchmark with comparable financial centres

Understand potential implications of changing global, European, and UK regulation and other discontinuities

Identify potential opportunities and strategic options Jersey can pursue to maintain and improve its competitivenessp p p

Agree on preferred options and strategy, define long term vision

Define set of implementation actions

Key Learnings from Global Research

Global Trade will drive increased cross border capital

flows

Accretion of wealth in Growthmarkets provides attractive

opportunities for Jersey

Jersey’s non tax factors supportan attractive proposition

The Jersey IFC has a sustainable future but must adapt to rapid

changes in competition, regulation and technology

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Key Learnings from other Successful IFCs

There are no silver bullets Need to protect existing businesses while diversifying to

new markets

Enhancing ‘enablers’ is the most important lever, not specific

growth initiatives

Effective co-operation and strong alignment among key

stakeholders is essential

Overview of Strategic Review Process

110+ Jersey stakeholders

40 external gatekeeper interviews

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Activity

21 initiatives identified

9allocated to

Jersey Finance

Confidential work streams commenced

Initiatives Identified to Execute Strategy

S i P b i h f h Sustain core Protect current businesses that generate most of the tax revenues and employment

Enhance enablers Enhance the environment in which the Jersey finance industry operates

Capture adjacent growth

Support existing businesses to capture adjacent product, service or geographical markets

Reposition and build new capabilities

Support industry participants’ efforts to diversify into adjacent territories and build new capabilities

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Initiatives Identified to Execute Strategy

S i ICB AIFMD T liSustain core ICB, AIFMD, Tax neutrality

Enhance enablers Centralisation of Finance interface, Policy Framework, Sound Business Practice Committee

Capture adjacent growth

Market development

Reposition and build new capabilities

Types of:Foundations, LLPs, Private Placement, international pensions, new markets

World Economic Outlook

3.1

4.9

3.0

4.73.7

5.1

3.9

5.4

2 3

World Emerging Markets and DevelopingAdvancedSource: International Monetary Fund

1.4 1.32.2 2.3

2012 2013 2014 2015

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World Economic Outlook

UPSIDE

Global Trade

RISK

Political Uncertainty

Mega Trends

+Trade

= +Wealth

Worldwide income per person up 60% - last 10 years

Middle Class from 1.8bn now to over 3bn by 2025

Need for Infrastructure = Developed and developing

$50trn – 2030

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Trade grows faster than the sums of its parts

Global trade as a % of global GDP and world trade in goods and services, $ trillion

World Wealth Levels 2013

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Total Global Wealth 2000-2013, by Region

The Global Wealth Pyramid

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The Apex of the Pyramid

Growth of high net worth households’ wealthPFA1 of HNW households with PFA over > $1m

1 PFA: Personal Financial Assets

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America’s Unfunded Pension Liability

$574 Billion

Not Just Detroit's Problem: American Cities And Counties’ Unfunded Pension Liability Totals $574 BillionAnnual pension benefits * promised by US states, as % of forecast tax revenues † Annual pension benefits promised by US states, as % of forecast tax revenues

Year pension-fund assets run out ‡

2030 2022 2027 2026 2023 2025 2023 2022 2019 2024 2039 2039 2018 2020 2030 2022

* Falling due in five years after pension assets run out. † Assuming 2008 revenues grow by 3% a year. ‡ Assuming 8% annual return on assets reinvested in full. Source: Joshua Rauh

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Global Investable Assets will Increase to $100trn by 2020

Growth in Alternatives driven by Institutions, SWFs and HNWIs

9.3%

CAGR

28.5%

3.8%

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‘Asset managers must both create positive social impact and deliver the clear message that they are

a force for good, to investors and policymakers’

‘Reputation, regulation and transparency’

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The Value of Jersey to the UK

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Evidence BasedAdvocacy

Jerseys Value to BritainMoving Money

Financial Crisis the Genesis of Increased Regulation

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Regulation will Continue to Feature

Systemic Risk Crisis Management and Recovery & Resolution

Planning OTC Derivatives

Capital Requirements Liquidity

Accounting Standards Taxes

Compensation Securitisation

Credit Rating Agencies Alternates Funds

Short Sales Commodities

Transparency - Emerging Trends

Base erosion and profit shifting

Greater tax transparency

TIEAsExchange of

information regarding

International reach

TIEAs

Trend towards automatic exchange

of information

Replacing withholding tax with full

information exchange

information regarding client identity

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International Recognition

• G20: One of the first IFC’s to be “White Listed”;

• TIEA network: 35 and growing;

• OECD: Vice President, Peer Review Group;

• IMF: ‘Gold Star’ Report, one of the highest Financial Sector Assessment Programme (FSAP) ratings;

• HM Treasury: Excellent Review (Foot Report)• HM Treasury: Excellent Review (Foot Report).

• G8 Action Plan

• OECD Multilateral &EAP

• G20 CRS

International Accolades

AA+

No. 1 ranking OFC in the Global Financial Centres Index Standard & Poor’s

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Overseas Markets

Overseas Markets

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Overseas Markets

New London BDM – Feb Inward Investment• Foreign Banks

Grow market share in traditional markets - ongoing

Full time dedicated resource throughout 2014• Expanded visit and event

Overseas Markets

g• Alternative Investment

Managers

Shanghai Launchpad Office – Q1

pprogramme

Complete market research and move to active visit programme from Q2

Embed – ongoing

Additional presence in GCC – H1• Improved regional coverage• Significant focus on KSA and DIFC

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Greater China

• Economic growth slowing to target rate of 7.5%

• Anti-corruption drive has serious intent

– “Catching tigers, swatting flies”

• Role of the Shanghai FTZ

• Internationalisation of RMB

• Focus across all 4 pillars

• Establishing JFL ‘Launch Pad’ in Shanghai H1 2014

India

• Uncertain environment over last 2 years now giving way to optimism• Uncertain environment over last 2 years, now giving way to optimism

– GAAR, treaties and defensive measures

• Indian elections

• 2.89%

• Corruption remains a systemic issue

• JFL focus on banking private wealth • JFL focus on banking, private wealth and asset management flow

• Steady flow of referrals

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GCC

• $1.6trn (assets of GCC SWFs at end of 2012)$ ( )

• Variance in AML standards

• The global meeting point that is Dubai

• Development of regional IFCs

• JFL focus on banking, private wealth,funds and Islamic Finance

GCC

• Additional hire underway to give deeper focus on DIFC and Saudi Additional hire underway to give deeper focus on DIFC and Saudi Arabia

• More time to be spent outside UAE, notably in Kuwait and Qatar

• Private wealth flows remain strong

• SWF activity is buoyant but could be replicated more widely

• Banking sector is highly liquid and expansive

• Member activity in the region is the highest of our overseas markets

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Russia• De-offshoring

Prime Central London BuyersNationality

• Regional uncertainty

• Importance of London

• Oligarch era vs 1st generation entrepreneurial wealth

• Corruption and obfuscation –Magnitsky

UK 51%

Non-UK 49%

• Absence of TIEA or governmental dialogue

Non-UK

Africa

• 3 priority countries

• SA as a hub

• Mainly private wealth for Kenya and Nigeria

• Looking at PE flows

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Brazil

• Economy slowing significantly 0.9% growth 2012y g g y 9 g• Protests in June 2013• High living costs, poor public services, greed and corruption of

politicians• Risks arising from commodities based

economy• JFL focus on banking, private

wealth and possibly fundswealth and possibly funds

London• Global structuring hubg• Foreign banks• Alternative investment managers• Key trade association links

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Summary

• High growth + near term benefit– GCC; Africa; Russia

• High growth + long term play– China; India

• Home patch

• Visible, tri-partite support for overseas strategy

Jersey Finance

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Industry

Jersey Financial

Jersey Finance

Jersey Financial Services

Commission States of Jersey

Jersey’s value to Britain

Strategic Projects Jersey’s value to

developing countries

Virtual currenciesSecuritisationsCapital ControlsInsurance / reinsuranceAlternative banking – P2P lending + other ideas arising

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Technical

Improve technical offering

Efficiency of legislative

process

Consultations

Working groups

Communication

Online

Content

Updates

Support business development Innovation

ExpertiseStrategies

Technical

Working Groups• International

Pensions

• Companies Regulations

• Trusts Law

• Limited P t hi L

Projects• Capital Markets – ensure market access for our corporate

lawyers

• Alternative Finance/Shadow Banking – Utilisation of existing expertise and capacity for alternative credit flows

• Commodities – Develop the reputation of Jersey as a hosting centre for the commodities sector

I t ti l ‘t f ti ’ D l th t ti Partnerships Law

• Foundations Law

• Outsourcing

• JRIGs

• International ‘treasury function’ – Develop the reputation of Jersey as a gateway for international payments

• International Regulatory Compliance – Ensure industry involvement in changes effective in advance of IMF and MONEYVAL announcements

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Marketing

EventsEvents Integration with BD, PR and Digital

Digital & CRM Digital & CRM

EventsEvents

Media RelationsMedia Relations

Expanded events programme

Database development and integration Enhance social media output

Strengthen relationships with key mediaIncrease media partnerships at events

PRPR

Education Education Increase engagement with ‘Life in Finance’ programme

Advance the Jersey reputation Research led proactive communications

PR

Advertising Value Equivalent (AVE) - 2013 Sentiment of Media Coverage - 2013

£106

,821

£178

,626

£247

,533

£147

,255

£161

,760

£180

,588

£201

,108

£96,

141

£128

,841

£180

,957

£214

,635

£107

,850

£50,000

£100,000

£150,000

£200,000

£250,000Monthly Target Average = £83,333

Neutral / factual

13%

Negative2%

£ £ £

£0Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Positive85%

Regionally-focused market research

Reputation building and protection

Research-led activity Positive messages and proactive responses

Integrated events and PR plans

PR Activity

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Private Wealth - After period of consolidation, entering growth phase

Banking - Stable, interest rates, diversification, new entrants

Funds - Real Estate, Private Equity taking off, capacity and

We are well placed to capture the upside in the emerging recovery

Capital Markets - Renewed listings activity, M + A, IPO and debt work

q y g , p yskills

Inherent strengths have enduring appeal:

Future and sustainability

• Political and fiscal stability

• Sound regulation

• Transparency

• Broad and deep expertise

• Respected judicial systemRespected judicial system

• Leading Trust, Company and Funds Law

• Investing in future capability

• Global centre providing a gateway to Europe

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April 2014

Geoff Cook

CEO, Jersey Finance