Inside the banks – Customers owe $919M

A study funded by the government has found that banks operating in the British Virgin Islands (BVI) are together owed hundreds of millions of dollars, and the persons owing are mainly customers in the territory.

“BVI banks’ assets include $919 million of outstanding loans to customers, of which 97 per cent were for domestic customers,” said the report produced by British company Capital Economics.

It noted that there are six deposit-taking licences currently issued by the regulatory authority, and banking services in the territory are largely limited to deposit taking and direct lending.

The report further said the BVI banking system has $2.4 billion in assets as of September 2015.

Source of Deposits

The sources of deposits into the BVI banks are predominantly domestic, Capital Economics said

“Roughly 94 per cent of banks’ customer deposits are likely to have derived from the local population. A further 1½ percent of deposits have ultimate beneficial owners in the Caribbean, Latin America, the United States, and Canada. The remaining $72 million are deposits from customers from the rest of the world. BVI banks are not home to foreign cash.”

The report noted that customer deposits are not the only source of funding for banks in the territory.

“They (customer deposits) accounted for around 66 percent of the funding of the BVI’s banking balance sheet in 2015. The remaining $812 million of other liabilities include around $189 million of interbank deposits; and $623 million of issued debt, shareholder’s equity, and other instruments.”

Profits sent overseas

Capital Economics, in the meantime, reported that much of the funding collected by BVI-based banks is “up-streamed” to their parents operations – the majority of which are in the Caribbean and Latin America.

“Roughly $1.6 billion, or one quarter of BVI liquidity, is utilised by parent banks to support their balance sheets. The BVI is not only providing liquidity to its neighbouring economies, but it is providing this liquidity in United States dollars,” added the Capital Economics report, which is titled: Creating Value – The BVI’s Global Contribution.

Employs 270 people

The report said the banking sector in the BVI employs 270 people; contributed US$34 million in gross value added, and paid $5 million in taxes in 2016.

“Unlike other international finance centres such as Switzerland or Jersey, the BVI has a relatively small banking sector, which is focused primarily on domestic customers – although these include the corporate service providers and professional services businesses located there,” added Capital Economics.