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August 2009 article - Banking, what does the future hold?
Posted: Thursday, September 2, 2010 3:46 PM
Joined: 01/12/2008
Posts: 62

Banking… what does the future hold?


With interest rates at record low levels, new regulation on the horizon, financial institutions collapsing and many banks going cap in hand to central banks and governments what does the future of banking look like and how might the changes affect the yachting industry.


Return: there is currently no return on cash. Even though short term inflation is very low the factors that saw inflation at high levels in 2007 are starting to return. The costs of feeding the world are still going to be high and developing economies will continue to have a huge appetite for natural resources. All of these will push up inflation but it may take longer for interest rates to follow. This means that any money in a bank account is likely to be worth less in a year’s time than it is now. This means that we will all need to look for greater returns elsewhere.


Regulation & Tax: The regulation of banks is changing too, and those in offshore centres will be scrutinised even more. The OECD has formulated a ‘black list’ of jurisdictions which governments and tax authorities will be targeting. It is very important to understand your personal position with respect to the tax liability you may have on your offshore deposits and income, even if you think of yourself as non-resident!


The EU savings Tax Directive currently allows banks to withhold tax on any interest earned (currently 20% rising to 35% in 2011) but this doesn’t remove your obligation to declare the income to the state in which you are resident.


Confidentiality: Offshore centres such as the Isle of Man, Jersey and Guernsey, often used by crew for banking, have signed information sharing agreements with many EU countries and full double taxation treaties are likely to follow. If you are resident in one of these EU states, or the authorities believe that you are, they will have the ability to approach the offshore centre and demand information about you from them; and they will have to provide it. If you spend significant time in one country even on board the yacht, it is vital to confirm whether you are resident there, don’t just assume that you are not.


Security: As more banks have stumbled financially the pressure on governments to guarantee deposits has been discussed for the first time in years. Different countries have different depositor protection levels so it is important not to hold too much money with one bank or in one jurisdiction. Although it is unlikely that any government will actually let a bank fail fully there is a real concern that sooner or later there will be little sympathy for those who have not managed to spread their funds between several banks. Knowing how much protection you have for your cash is vital, and remember that the division is by banking licence, not the banking brand. For example, six brands share the same HBOS licence -  Bank of Scotland, Halifax, Saga, Intelligent Finance, Birmingham Midshires and AA Savings, only £50 000 would be protected even if you had significantly more spread across all six. 


There are things that you can do about many of these issues but professional advice should be sought as the field of international tax planning is an incredibly complicated area.


This article is for information only and should not be considered as advice.


Peter Brooke is a financial planner to the English speaking expatriate community. He is based on the Cote D’Azur and is a member and partner with the Spectrum IFA Group. He can be reached on +33 6 87 13 68 71 or or at


This article was published in the August 2009 edition of Dockwalk magazine.

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