From the Cayman Islands to Mauritius, and from Switzerland to Guernsey, financial hubs have reacted to the UK referendum vote to get out of the European Union.

A few weeks before the Brexit vote, this publication quizzed international financial centres such as Guernsey, the British Virgin Islands, Isle of Man and Gibraltar about what might happen if the UK voted to leave. Several jurisdictions declined to comment or did not respond, while some did so. (To view that feature, see here.) Now that the UK electorate has spoken, triggering political bloodletting and market gyrations, it is time to review how IFCs reacted. This news service welcomes commentary about this topic and readers can email the editor at tom.burroughes@wealthbriefing.com.

Isle of Man
The jurisdiction had its rating outlook cut from stable to negative by international agency Moody’s Investor Services. The treasury minister, Eddie Teare MHK, said the decision to revise the Isle of Man’s credit rating comes as no surprise.

The ratings agency said that in its view the Isle of Man’s creditworthiness is strongly linked to that of the UK. The outlook on the UK’s own credit rating was changed on Monday amid concerns that the referendum result could lead to a deterioration of the UK's economic performance.

Swiss Bankers’ Association
“The decision to exit the EU results in great uncertainty for all companies. This will have negative repercussions, at least for the short-term, in particular for investments. The Swiss banks are well-acquainted with Switzerland’s situation as a non-EU member and have organised themselves accordingly. Following the outcome of this referendum, they will again decide on an individual basis whether or not amendments to their situation are required,” said the SBA.

“The Swiss banks will now closely follow the ensuing discussions between the UK and the EU. After this decision, the UK will have to deal with questions regarding market access to the EU. Switzerland is currently also discussing questions regarding market access with the EU. The future will show, in what way and to what extent the UK and Switzerland have common interests in these discussions.”

Monetary Authority of Singapore
The MAS gave no comment on the wisdom of the vote’s outcome, but commented on its actions in dealing with market effects. It said Singapore’s interbank money markets “continue to function in an orderly manner and its banking system remains sound”.

“The liquidity positions of the major banks in Singapore are healthy, and overall banking system liquidity remains adequate. MAS will provide additional liquidity to the banking system if needed. The trade-weighted Singapore dollar remains within its policy band, notwithstanding heightened volatility in international foreign exchange markets today. MAS stands ready to curb excessive volatility in the Singapore dollar,” it said.

“We have been prepared for the market volatility. MAS had been in close contact over the past weeks with banks in Singapore, foreign central banks and regulators to take preparatory actions to ensure the resilience of our financial system and markets in the event of Brexit. MAS will continue to be vigilant and stay in close contact with fellow central banks and regulators, as uncertainty is likely to persist following the referendum outcome.”

Finance Malta
"In our view, it is too early and somewhat premature to assess the actual impact of Britain leaving the EU insofar as the financial services industry is concerned as the actual decision by Britain to withdraw from the EU made in accordance with the UK's constitutional requirements is yet to be taken forward. It is also pertinent to point out that the outcome of the referendum is in itself not a decision by Britain which is in accordance with the inherent constitutional requirements to leave the EU," it said.

"In effect, although the European Referendum Act 2015 provided for the referendum to be held, it did not make the vote binding on the government or anyone else and in reality the Act itself did not address the incidence of the outcome. Ultimately, the British government and parliament must now decide what to do in the light of the referendum results. Going forward, if the required steps are taken forward, I believe that any potential impact will be very much dependent on the model/agreements that will be entered into between the European Union and Britain and how this will regulate the way investment services business between Britain and the EU will be taken forward. This will ultimately possibly impact the business and operational models currently in place but its extent are yet to be determined. 

"Consequently, at this juncture, as stated earlier, it is premature to hypothesise on the aftermath of Brexit’s impact on financial services in Malta and Malta’s positioning in this regard. Sure enough, beyond the realms of an eventual non EU membership, Britain will invariably remain highly relevant to our own economy," it added.        

Mauritius
Sir Anerood Jugnauth, prime minister of Mauritius, was quoted by media as saying: “Notwithstanding the scenario that will govern the EU/UK trade relations, Mauritius will need to have a bilateral trade agreement with the UK to safeguard its trade interests. In the event UK decides to maintain the EU commitments towards the Member States which have signed the Interim Economic Partnership Agreement, namely Madagascar, Mauritius, Seychelles, Zimbabwe, there may not be any need for a fresh trade agreement. In the eventuality that the UK would wish a change from the current Interim Economic Partnership Agreement model, Mauritius would have to enter into consultations with the UK over a new agreement safeguarding our trade interests.”

Guernsey Finance
Guernsey's chief minister, Deputy Gavin St Pier, was quoted as saying the island is a “safe haven” for financial services following the UK's vote to leave the EU.

The report said a proposition was passed by Guernsey's elected representatives to enable the island's Policy and Resources Committee, which Deputy St Pier leads, to "negotiate with the UK government in order to: protect Guernsey's interests in the UK exit agreement; replace Protocol 3;  protect our constitutional relationship with the UK; look at, and take advantage of, new trading relationship opportunities." (Under Protocol 3, Guernsey is part of the Customs Union and within the EU Single Market for the purposes of trade in goods, but is outside the EU in all other respects.)

"Officers are also working closely with the UK government and our Crown Dependency counterparts. The prime minister has also confirmed in his statement to the House of Commons on Monday, that the Crown Dependencies would need to be consulted - and this early recognition of our position is to be welcomed,” St Pier said. "We have much better connections with Whitehall, Westminster, Brussels and other jurisdictions in 2016 than we had in 1972 [the year of the accession of the UK to the EEC]. We have invested in our relationships which will assist us in the coming weeks, months and years," he said. “In what seems like an increasingly unstable world we are, and I am confident will continue to be, seen for what we are: an oasis of stability - a safe haven. We are a safe haven for financial services - in or out of the EU - and we are a safe haven physically for those who want to relocate here - or even just holiday here in peace and quiet."

"It is important that the island's finance sector continues to monitor developments closely, while at the same time recognising that while Protocol 3 makes us part of the Customs Union and within the Single Market for the purposes of trade in goods, for most services, such as financial services, we were already treated as a third country and that position has not changed as a result of Brexit," said Dominic Wheatley, chief executive of Guernsey Finance.

Jersey Finance
"Jersey’s role as a stable and well-established finance centre should give some much-needed reassurance to investors, their advisors and the asset management community in light of this outcome. Whilst financial markets are seeing a degree volatility, history has shown that Jersey has dealt well with this in the past and will do so again," said Geoff Cook, CEO of Jersey Finance.

"Fundamentally, Jersey’s constitutional relationship with the UK will not be affected by the UK’s decision to leave the EU, and we remain convinced that the UK’s long-term position as a financial services powerhouse will continue. In addition, Jersey is already outside of the EU itself and maintains strong access to European markets through its broad and robust third country agreements. These also remain unaffected. Meanwhile, given the increasingly global outlook of Jersey’s finance industry, spanning Asia, the Middle East and Africa as well as Europe, it is in a strong position. Jersey’s financial services businesses have always demonstrated real tenacity in the face of change, whilst Jersey’s government is on the front foot in representing its interests to the UK and Europe, which will continue to be major partners for Jersey, and this should all give confidence to investors."

British Virgin Islands
The BVI’s government has been quoted as saying it respects the outcome of the UK vote but has so far given few other remarks about specific details of the relationship, other than pointing out that if the UK does leave, negotiations with the EU will take two years and that developments must be monitored closely.

Cayman Islands
“As the premier global financial hub the Cayman Islands financial services industry will continue to work closely with its clients and countries around the world to resolutely do its part in ensuring the continuing success and stability of the global financial economy," said Jude Scott, Cayman Finance CEO. 

"Cayman’s own political and economic stability, its sophisticated and comprehensive legal system and stable and business-focused government means the Cayman Islands is in a strong position to face any change. Our financial services industry is strong and resilient and has weathered global economic and political change well in the past. Short term we will see some volatility in the financial markets however we will continue to monitor the political and economic situation and plan for the long term to ensure we are well prepared for any implications this decision has over the next few years. We reaffirm our strong working relationship with the UK and Europe and our business partners in that region.”

The Caribbean Council
This body represents a range of jurisdictions. The comments were made just prior to the vote. Anguilla, the British Virgin Islands, the Cayman Islands, Montserrat, and the Turks and Caicos Islands, together with other Overseas Territories, jointly commissioned a study on Brexit and its likely impact.

“Their concerns in part relate to ambiguities in the status of their relationship with Europe. Although they are linked to the EU through the member state to which they belong, as well as by their membership of the Association of Overseas Countries and Territories of the European Union (OCTA) and the EU’s 2013 Overseas Association Council Decision, the Overseas Territories are not part of the European Union. Instead, given their special relationship to a specific EU member state, they are regarded as being associated with the EU as a result of the accession by the EU nation concerned to the Treaty of Rome which established the European Economic Community,” the organisation said.

“This means that the five Caribbean Overseas Territories’ primary relationship with the EU comes through their political, legal and constitutional ties with their ‘parent’ state, in this case the UK’s, which acceded to the Treaty in 1973. As a consequence, for most issues the Overseas Territories are regarded as ‘third countries’ in their dealings with the European Commission, the EU and its many institutions. This means there is no automatic process that causes EU decisions to apply to them.

“Should the UK decide to leave, this ambiguity would immediately become apparent if the Overseas Territories wished to continue their existing relationship with Europe, or develop a new one of their own choosing,” the organisation said.

“For the UK’s Caribbean Overseas Territories, perhaps the most significant challenge would relate to finding a way to ensure future funding from the European Development Fund (EDF), and continuing access to its investment facility and to the European Investment Bank, as well as retaining access to other European programmes of benefit relating to the environment, education and training,” it said. 

“As matters stand, the present EDF programme runs up to 2020, but it is far from clear what would happen when negotiations begin for its successor. Also uncertain is how the Overseas Territories would address in Britain’s absence the complex issues arising from changing EU development priorities, or the new approaches being developed in the light of the UN sustainable development global goals agreed last year,” it said.

“With Britain outside the EU, the Overseas Territories would almost certainly require a direct relationship with the European Commission, a representative office or offices in Brussels, and the capacity to lobby EU member states; the vast majority of which have no historical connection with Caribbean and regard the high GNP per capita of the Overseas Territories as placing them beyond the need for assistance,” it added.

The group said complex diplomatic maneuvering may also be required. The withdrawal of UK funding from the EDF after a "leave" vote would seemingly make it unlikely that the EU would be disposed to provide support for territories associated with the UK. However, given the EU has always been keen to develop as direct a relationship as possible with all of Europe’s Overseas Territories, it may be possible for those in the Caribbean to negotiate an alternative form of direct partnership.

It added that trade ties could also become a factor after any vote to leave. The EU’s 2013 overseas association decision regarded Overseas Territories as trading partners able to enjoy duty and quota free access to the EU market. Although those promoting a decision to leave the EU suggest that a new trade relationship with the EU would be rapidly negotiated, the Overseas Territories might instead wish to develop alternative thinking about longer-term options. They would also need to consider how, for example, trade disputes, the interpretation of the rules on cumulation, phytosanitary disputes, or compliance with EU import regulations relating to agriculture or fisheries imports, all of which have arisen previously, would in future be remedied.

A vote to leave would also raise other practical issues including free movement within the EU’s Schengen area, how best to maintain the free association that brings the Caribbean Overseas Territories peripheral advantages, and questions about security co-ordination. Perceptual uncertainties might also emerge about financial services as there is still a significant lack of understanding in many EU capitals about the centrality of the industry to the economies of the BVI and Cayman.

Gibraltar Financial Services Commission
The nature of the UK and Gibraltar’s future relationship with the EU is yet to be determined and is likely to require a lengthy process. "Therefore, it is important to note that business as usual will continue, and Gibraltar – together with the UK – remains part of the EU," the organisation said.

"This means that consumers and depositors will still be protected by EU laws, and businesses will still be able to rely on access to the EU. The Gibraltar Financial Services Commission will continue to work towards compliance with EU Directives and relevant legislation, and we will work closely with HM Government of Gibraltar at this time and over the coming months."

“The framework for withdrawal is spelt out in Article 50 of the Treaty of Lisbon. However, no Member State has left the European Union before so there is no exact precedent to be followed. Greenland joined the European Community with Denmark in 1973. They held a Referendum to in 1979 and decided to terminate their membership. This was not implemented until 1985. The point is that it took six years in this case," said deputy chief minister Dr Joseph Garcia.

“The Greenland example serves to illustrate the argument that nothing will happen overnight. Gibraltar can rest assured that the government is actively pursuing a number of options in protecting our future and has the expertise and the energy to do everything possible to deal with any eventuality that may arise. It is important that everyone continues to go about their business in the usual way," he added.

“It should also be made clear, at the same time, that the government has already had contact with prominent members of the ‘Leave’ campaign in order to put forward our point of view and to ensure that those views are taken into account in the negotiation of the United Kingdom’s exit and of the new relationship with the EU.”

Dubai
The UAE’s Central Bank reportedly said banks in the country are not expected to see a significant impact from the UK’s decision. “Due to limited interconnectedness between the UAE and the UK financial systems, there are only few channels through which uncertainty about future UK and UAE relations could affect the UAE financial institutions,” the Central Bank said.