Sheree Ebanks and Julien Martel head up Butterfield’s trust and fiduciary services businesses respectively in the Cayman Islands and The Bahamas. In a Q&A with the Caribbean Review they considered the future of Caribbean IFCs within the global financial industry.
IFC: How is business in the Caribbean for Butterfield currently?
A: In terms of our trust and fiduciary services business, both in Cayman and in The Bahamas we have seen steady business conditions over the past couple of years. It is fair to say that some clients and prospective clients, perhaps impacted by the recessionary conditions in North America or Europe, have been weighing up quite carefully the cost of implementing or maintaining an international wealth planning structure. On the other hand, certain clients, particularly those from Asia and Latin America, but also from North America and Europe, have been substantially developing their use of fiduciary structures both in Cayman and in The Bahamas.
Both jurisdictions continue to play an important role among IFCs. It is encouraging to see this continued involvement and engagement, as it supports the growth of our business.
IFC: How has the Caribbean been affected by the financial crisis?
A: The Caribbean obviously relies heavily on a strong tourist economy, which that has been significantly affected by the conditions in North America and Europe. Also, with the financial turmoil in late 2008 and 2009, a key aspect of the Cayman business environment, the hedge fund industry, was of course affected, with a downturn in the number of fund structures being formed and administered.
Since then, however, there has been some recovery in this area, and as a result we have also seen increased listings on the Cayman Islands Stock Exchange. Although it is not clear yet how the recent resurgence of volatility in the markets will affect the Cayman funds sector.
Both the tourism and the financial services economies will naturally have an impact on government revenues and therefore, ultimately, public sector capital investment. We have been impressed with the jurisdictions’ ability to cope with downturns in their primary sources of revenues. They have continued to undertake infrastructural projects which certainly has an effect on general economic activity and confidence, which feeds through into an effect on business conditions for the finance industry.
IFC: Which areas of business within the financial services are seeing growth and which less so?
A: We have recently seen an increase in levels of inquiry for our trust businesses, both in Cayman and in The Bahamas, as well as in our Cayman banking and lending businesses. Both jurisdictions continue to be favoured by international trust, tax and estate planning specialists. For example, we have seen ongoing interest in the establishment of Private Trust Companies in both jurisdictions, and have seen a particular level of interest for this in our Bahamas operation. Again, there is no definitive pattern to the origin of clients finding PTCs suitable for their needs, and we have seen interest from North America and Europe alongside the newer markets in Asia and Latin America.
Perhaps less well known is the degree of interest being seen in both jurisdictions for international families of substantial wealth considering making their principal residence there. The Bahamas, for example, makes a point of prioritising immigration applications for families likely to make a significant economic impact, and focuses on making sure the process is efficient and relatively easy. The Cayman Islands are also paying attention to this particular area of opportunity. The development of Cayman in the years since hurricane Ivan, and the significant capital expenditure in The Bahamas with regards to the international airport, road and downtown redevelopment projects, are all steps which will tend to enhance their attractiveness to the international wealthy making a serious life style choice as to where they want to be primarily based.
IFC: Across the Caribbean IFCs, what areas are seeing growth and which financial services are losing out to other jurisdictions in other parts of the world?
A: In the past two to three years the overall global economic backdrop has really outweighed individual competitive factors between jurisdictions. In that sense, Singapore and Hong Kong, as IFCs, have benefited from the relative strength of the Asian macro-economic picture, probably out-performing the western hemisphere IFCs in growth on all fronts. However, certain factors that looked like significant threats to some lines of business in Caribbean IFCs seem to have alleviated over time. For example, concerns arising from the EU’s AIFM directive appear less severe than originally thought. In that sense Cayman, again for example, appears as well positioned as any IFC with regards to renewing the growth of its funds business once external market conditions become supportive. Over time, staying focused on service quality and on high regulatory standards will, in our view, allow the Caribbean IFCs to continue to compete effectively with other jurisdictions around the world.
IFC: Is the offshore trust still a popular method of wealth management?
A: The simple answer is Yes, in that the ‘classic’ offshore trust continues to be an effective structuring solution for many families from many parts of the world. Of course, the picture is not, in fact, that simple. Other fiduciary structures are available, such as the Bahamian foundation. There has been an increasing interest in the Private Trust Company, which is now facilitated by regulations and laws in a number of jurisdictions. Whilst based around the traditional offshore trust, the Private Trust Company can bring in to play a different approach which certain very high net worth families find attractive. Then again, in certain circumstances, advisers will lean towards the traditional trust, with a trustee at a distance from the family for whom the structure is being designed. The issues are more to do with clients’ needs and finding the right solutions for those at any given time, rather than with any particular fiduciary ‘product’.
IFC: What do you think has been the impact of the demands of the OECD Global Forum and other global governance bodies on the Caribbean IFCs?
A: The main impact appears to have been additional cost to business to ensure our jurisdictions are compliant with all the new requirements that arise. However, the process of complying with these demands has also raised the profile of the jurisdictions that are compliant and provided a positive platform for promotion of the region. Overall, the Caribbean IFCs have complied and adapted to the demands and recommendations of these global forums, understanding the importance of doing so. Having an internationally recognised and stable government environment, specifically in the Caribbean jurisdictions where we operate, is a positive factor for our business.
IFC: What is the importance or otherwise of TIEAs and the OCED Peer Reviews?
A: Globally, it’s important the IFCs complete this process, to ensure public perception and understanding of the jurisdictions is enhanced, and to ensure IFCs are considered as important parts of the international financial system. Sometimes the word ‘offshore’ can be perceived in a negative light and offshore IFCs have received bad publicity in the past. As jurisdictions comply further by signing TIEAs and recognising OECD Peer Reviews, it becomes easier to dispel the myths and illustrate that offshore IFCs are willing and able to ‘play-ball’ on a level playing field. Again, in the jurisdictions where Butterfield operates, it is good to see their governments embracing and responding to these issues, which benefits our business overall.
IFC: Where do you see the centre of the world’s wealth – East or West?
A: Whilst there is obviously significant wealth now centred in the East, we believe that there are opportunities in both the East and the West. There are global opportunities for IFCs to benefit within their financial services sectors and to attract wealthy clients, provided their global reputation and involvement in initiatives such as TIEAs and PEER reviews are of a high standard. Our view is that, in the jurisdictions where Butterfield operates in the Caribbean, we can certainly measure up to the scrutiny of the international community, and therefore we believe the jurisdictions are well positioned to take advantage of growth, which is of course beneficial for Butterfield’s business as a medium sized financial institution known for its high levels of service, which is the common factor critical to all our business lines.
IFC: Do you think the future of financial services for the Caribbean lies with the BRIC countries and less so with the traditional centres of wealth in the US and Europe?
A: It is really not that straight forward. Recent research has indicated that the number of millionaires in Europe has increased slightly, growing two per cent since 2008, and reviews suggests that this trend will continue. It does indicate that the number of millionaires in Asia Pacific will overtake European levels by 2015. Overall the IFCs which will benefit from the patterns of wealth generation globally are those which continually evolve through development of their laws and offer a range of services in an efficient and compliant manner. Alongside this, financial services firms present in the region will need to continue to develop technology-based delivery channels and high levels of personal service.
IFC: What does the future hold for Caribbean IFCs?
A: At Butterfield, we are very confident in the future of the Caribbean IFCs in which we have operations, and believe we will see business volumes continue to grow, all through a genuinely focused and consistent service driven environment. By ensuring that we continue to deliver to the highest of standards we think the future is bright for the Caribbean financial services industry.
Julien Martel joined Butterfield in Guernsey in January 2000. In 2006, he transferred to Butterfield's Bahamas operation where he was responsible for the management and development of the Trust and Fiduciary business prior to his appointment as Managing Director in 2011. Julien is a Director of the Association of Banks and Trust Companies in The Bahamas and served as Deputy Chairman of The Bahamas Financial Services Board until September 2012.
Sheree Ebanks has been a member of the Board of Directors of Butterfield Bank (Cayman) Limited since 1999 and has held a number of leading positions within the wealth management area for over 20 years. She has participated and supported many government initiatives, including the Financial Service Council and CFATF steering committee. Sheree is currently responsible for the Bank’s Trust Services in the Cayman Islands.