Offshore Financial Services in the Caribbean 2004: Industry Report

Offshore Financial Services in the Caribbean 2004

Product Type: Market Research Report
Published by: Datamonitor
Published: September 2004
Product Code: R313-7090

Description

Introduction
Sizes, segments (retail v institutional) and forecasts (to 2006) the offshore deposits and mutual funds markets in the Bahamas, British Virgin Islands and Cayman Islands. Provides competitor insight on customer preferences, issues, trends and competitive dynamics based on a large scale B2B survey of the main players.

Scope
Combines industry opinion with Datamonitor's proprietary databases to analyze offshore deposit and mutual funds in the Bahamas, BVI and Cayman Islands
Datamonitor's Offshore Market Leaders Survey 2004 canvassed the opinion of 23 senior executives on the key issues facing the Caribbean market
Datamonitor's Offshore Database 2004 sizes and segments the offshore deposit and mutual funds industry in each of the jurisdictions covered
Forecasts of each market are provided by Datamonitor's Global Offshore Database, providing an independent view on each jurisdiction to 2006
Highlights
In terms of total offshore assets, the Cayman Islands is over twice the size of the Bahamas and British Virgin Islands combined. Each, however, has registered steady growth since 1999 at compound annual rates of 12.9%, 5.6% and 19.9% respectively.

Incumbent providers in the Cayman Islands and British Virgin Islands expect the EU Savings Directive to have a detrimental effect on business. By contrast, Bahamian providers see it as a positive driver, given, in the words of one executive "wealth and managers of wealth will be driven to the Bahamas as a result of its effects".

Scotiabank and FirstCaribbean are considered the biggest competitors in offshore deposits by their peers, although no-one stands out as being particularly innovative. Within mutual funds, UBS and FirstCaribbean are considered the biggest competitors, with UBS perceived by its peers as being the most innovative competitor.

Reasons to Purchase
Quantify the potential of your sector using our offshore deposits and funds market sizing and segmentation
Assess the future of your market with our forecasts to 2006
Design your marketing and product innovations around our source of deposits and funds data and survey results

Table of Contents

TABLE OF CONTENTS

CHAPTER 1 INTRODUCTION 10

What is this report about? 10

Who is the target reader? 10

How to use this report? 10

CHAPTER 2 MARKET CONTEXT 12

Introduction 12

The offshore deposits and mutual funds market, 1999-2003 12

Market size, 1999-2003 12

Retail vs institutional deposits and mutual funds, 2003 13

Market growth in the Bahamas, 1999-2003 14

Market growth in the British Virgin Islands, 2000-2003 16

Market growth in the Cayman Islands, 2001-2003 18

Regulation and taxation 20

Bahamas 21

British Virgin Islands 22

Cayman Islands 22

The Patriot Act 24

European Savings Tax Directive 26

Data tables 34

CHAPTER 3 CUSTOMER FOCUS 38

Introduction 38

Source of offshore deposits and funds, 2003 38

Average customer wealth of Caribbean offshore competitors 41

Features demanded by offshore clients in the Caribbean 42

Data tables 44

CHAPTER 4 COMPETITIVE DYNAMICS 47

Introduction 47

The main players in Caribbean offshore financial services 47

The Caribbean’s most innovative offshore providers 49

Caribbean locations of major competitors 50

Competitor profiles 51

UBS 51

Credit Suisse 52

Pictet & Cie 54

FirstCaribbean International Bank Ltd 55

Scotiabank 57

Royal Bank of Canada 60

Data tables 63

CHAPTER 5 THE FUTURE DECODED 64

Introduction 64

Future threats and opportunities 64

Biggest threats to Caribbean offshore financial services 64

Best opportunities in Caribbean offshore financial services 66

Most likely to gain market share 68

The Caribbean offshore deposits and mutual funds market, 2004-6 70

Market growth, 2004-6 70

Likely changes to geographic source of business 74

Data tables 77

CHAPTER 6 APPENDIX 80

Definitions 80

Research methodology 81

Offshore data 81

Forecast methodology 82

Offshore Market Leaders Survey 83

Further reading 84

Datamonitor Global Wealth Service SPP: Reports 84

Datamonitor Global Wealth Service SPP: Insight Reports 84

Datamonitor Global Wealth Service SPP: Competitor Tracking 84

Datamonitor Savings & Investments SPP Reports 85

SPP writing team 85

LIST OF TABLES

Table 1: Authorized list of British Virgin Islands banking institutions, September 2004 17

Table 2: Key personal taxation rates in Caribbean jurisdictions 20

Table 3: Policy response towards the EU Savings Tax Directive adopted by Caribbean jurisdictions, September 2004 29

Table 4: Deposits and investment funds held in the Bahamas by type of client, 1999-2003 34

Table 5: Deposits and investment funds held in the British Virgin Islands by type of client, 1999-2003 35

Table 6: Deposits and investment funds held in the Cayman Islands by type of client, 1999-2003 35

Table 7: What effect do you think the Patriot Act will have on your jurisdiction? 36

Table 8: What impact do you think the EU Savings Tax Directive will have on your jurisdiction? 36

Table 9: Have you formally communicated the EU Savings Tax Directive and its implication to your clients? 37

Table 10: If you have not yet, do you plan to do this formally? 37

Table 11: Are specialized products being developed in your jurisdiction to mitigate the EU Savings Tax Directive? 37

Table 12: What would you say is the average wealth of your offshore customer base? 44

Table 13: What are the three most important features that your [local/expatriate/corporate] customers look for when choosing you as their financial services provider? 45

Table 14: Geographic source of offshore deposits by Caribbean jurisdiction, 2003 45

Table 15: Geographic source of offshore mutual funds by Caribbean jurisdiction, 2003 46

Table 16: Caribbean locations of leading offshore competitors, July 2004 51

Table 17: UBS Wealth Management, 2001-2003 52

Table 18: Credit Suisse Private Banking, 2001-2003 54

Table 19: Pictet & Cie, 2001-2003 55

Table 20: FirstCaribbean International Bank Ltd 2001-2003 57

Table 21: Scotiabank Wealth Management, 2001-2003 59

Table 22: Scotiabank International total operating income by region, 2001-2003 60

Table 23: Royal Bank of Canada Investments, 2001-2003 62

Table 24: Number of times companies were named by their competitors as being the largest deposit or mutual fund provider in their jurisdiction 63

Table 25: Offshore competitors viewed by their peers as being best placed to gain market share over the next two years 70

Table 26: What will be the biggest threat to revenues in your jurisdiction in the next two years? 77

Table 27: What will make it hardest for competitors in your jurisdiction to gain more offshore clients in the next two years? 77

Table 28: Thinking about opportunities in the [Bahamas/British Virgin Islands/Cayman Islands] offshore market, what will be the best way to increase revenues in the next two years? 78

Table 29: What will be the best way to gain more offshore clients in [Bahamas/British Virgin Islands/Cayman Islands] in the next two years? 78

Table 30: Forecast size of Caribbean offshore deposits market 2003-6f 79

Table 31: Forecast size of Caribbean offshore mutual funds market 2003-6f 79

LIST OF FIGURES

Figure 1: In terms of total offshore assets, the Cayman Islands is over twice the size of the Bahamas and British Virgin Islands combined 13

Figure 2: Institutional business dominates the offshore financial services industry in Caribbean jurisdictions, 2003 14

Figure 3: After a downturn in 2002, demand for Bahamian-based offshore products returned in 2003 16

Figure 4: Offshore business in the British Virgin Islands is dominated by the institutional funds sector, 2000-2003 18

Figure 5: Offshore business in the Cayman Islands continues to grow at a steady pace across all sectors, 2001-03 20

Figure 6: The Patriot Act is expected to have an adverse effect on the Caribbean offshore market 26

Figure 7: The attitude of Caribbean offshore providers towards the EU Savings Tax Directive is dictated by their jurisdiction 29

Figure 8: Approximately 30% of Caribbean offshore financial services providers have no intention of formally communicating the EU Savings Tax Directive and its implications to their clients 32

Figure 9: Around one in five offshore financial services providers in the Caribbean admit to developing specialized products to mitigate the impact of the EU Savings Tax Directive 33

Figure 10: US and South America are key markets for offshore providers in the Bahamas 39

Figure 11: Offshore funds in the British Virgin Islands typically originate from the US and UK 40

Figure 12: South America, Asia-Pacific and US provide greatest source of business for offshore providers in the Cayman Islands 41

Figure 13: The average customer wealth of Caribbean offshore financial services providers typically exceeds US$1m 42

Figure 14: Customer service, coupled with competitive rates and a strong brand are key in attracting local, expatriate and corporate customers 43

Figure 15: Scotiabank and FirstCaribbean are considered by their competitors to be the leading providers of offshore deposits in the Caribbean 48

Figure 16: Caribbean offshore mutual fund providers consider UBS and FirstCaribbean to be the largest competitors in the region 49

Figure 17: A brief history of FirstCaribbean International Bank, July 2001 - July 2004 56

Figure 18: Revenues in the Caribbean offshore market are most under threat from regulatory change 65

Figure 19: The impact of EU Savings Tax Directive and increasing competitive pressure from onshore products pose greatest threat to new acquisition of offshore clients 66

Figure 20: Greater focus on hedge funds and trust services are seen as offering the best way of increasing offshore revenues 67

Figure 21: Partnerships with intermediaries are vital to secure offshore new business growth 68

Figure 22: Offshore deposits are expected to grow steadily in the Cayman Islands and Bahamas 72

Figure 23: Cayman Islands and Bahamas are forecast to see strong growth in mutual funds business over the next three years 74

Figure 24: Historic ties are the most important reason for one region providing majority of business 75

Figure 25: Caribbean offshore financial services providers expect Europe and Asia to be the prime areas of new business in the next two years 76

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