More bad news for financial services: 35% drop

Less than a week after Premier Dr D Orlando Smith declared that the financial services industry in the British Virgin Islands (BVI) is being threatened to its core, more worrying statistics have been made public.

The BVI Financial Services Commission (BVIFSC) yesterday published its latest Statistical Bulletin, showing that company incorporation dropped by 35 percent in the third quarter last year, compared to the corresponding quarter in the year 2015.

The fourth and final quarterly report for last year is not yet published.

The number of company incorporations recorded for the third quarter last year was 7,766.

That is the worst third-quarter performance reported over the past five years.

In fact, based on the statistics, all individual quarters for last year performed worse than their corresponding quarters over each of the past five years.

And, when one considers all the 19 individual quarters reported since 2012, the third quarter last year was only better than the quarter immediately before it.

The BVI government has been expressing concern about the declines in company incorporation.

“We are currently facing some headwinds in our financial services sector, and we need to retool,” the premier and minister of finance declared during his budget speech in the territory’s House of Assembly on Monday, January 16.

6 percent decline in revenue

Premier Smith further told the House that revenue from the financial services industry, at the end of the third quarter last year, also declined.

“Financial services has faced some challenges including global regulatory changes, new restrictive banking practices, negative media and perceptions, and increasing competition. In 2015, this resulted in a decline in new company incorporation.”

“Those same factors continued to negatively affect growth in our company incorporation business, and we expect to see further declines in that sector. Notwithstanding, the financial services sector continues to strongly contribute to the territory’s Gross Domestic Product, as well as central government revenue – recording only a six percent decline in revenue to central government at the end of the third quarter of 2016,” added Premier Smith.

He also told the territory that his government will defend the industry, which rakes in some 65 percent of the BVI’s annual revenue.

“Although the core of our business has been threatened, my government has fought vigorously on this front, and we are grateful to all those who have assisted us,” Premier Smith continued.

“BVI is, and intends to remain, a significant player in the financial services arena… We continue to maintain a fine reputation among the standard-setting bodies. However, we are not immune from the transformative changes redefining the industry, and which also affect our reputation.”

Premier Smith further said his government is – among other things – banking on a proposed commercial bank to help reposition the financial services industry.

“As we continue to re-position our financial services industry, we expect to maintain strong levels of business. In particular, we expect that the pending opening of a new commercial bank in the BVI will mitigate against the restrictive banking practices that have impacted our incorporation numbers.”