Change of role envisaged for offshore centres

Wednesday, 29 April 2009 08:56

An interim Treasury report suggests that offshore financial centres could take advantage of new opportunities, perhaps managing the banking sector’s toxic assets as a means of offsetting the financial downturn.

The progress report by Michael Foot, a former managing director of the Financial Services Authority, examines the problems confronting British Crown Dependencies and Overseas Territories. The review was commissioned during December 2008 following adverse publicity regarding the functions of tax havens and the aftermath of the collapse of Icelandic banks.

Writing in a forward to the review, Foot said: “The most immediate issue facing the financial centres is how they can best deal with the current downturn in financial services business, particularly if it becomes prolonged.”

However, he pointed out a number of new financial opportunities, such as the management of toxic assets. Foot commented: “The financial centres are well used to operating in a competitive market place and to adjusting to changes in the economic and regulatory landscape.”

Brendan Barber, general secretary of the TUC, was highly critical of Foot’s conclusions. He described the recommendations as “deeply disappointing”, adding that the Treasury needed to get “a grip of this review” and decide whether it is flowing with or against the grain of world opinion which has turned so decisively against tax havens since the G20.

Terry Le Sueur, the chief minister of Jersey, described the interim report as “a very constructive explanation” of how the review would be conducted.

Foot indicated a key theme of the final report, to be published towards the end of year, would focus on understanding the mutual dependencies, and resulting contingent liabilities between the UK and the offshore centres.

He said the financial centres’ regulatory regimes had received “broadly favourable” reviews from the International Monetary Fund.

Editor’s comment: "Yet another example of the wildly divergent perception of ‘tax havens’, though the opposition of the TUC is of long standing. Foot’s suggestions appear to offer an additional and constructive role for the offshore centres."

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