Change in Guernsey’s Standard & Poor’s rating

15 February 2016

The international credit rating agency, Standard & Poor's, has confirmed that it will be lowering the credit rating of Guernsey and other 'micro-sovereign' jurisdictions to AA with a negative outlook.

AA is the second highest rating Guernsey can attain as it does not have a central bank. 

Guernsey's Treasury and Resources Minister, Deputy Gavin St Pier, said he believed the change of rating reflected a revision in the way Standard & Poor's analysed and rated micro-sovereigns such as Guernsey or Jersey, in comparison to larger states. He added that the change of rating would have no direct impact on Guernsey's economy or economic performance.

It is understood that a major underlying factor for the rating being lowered and the negative outlook is the potential for a UK exit from the European Union. Deputy St Pier said this was disappointing for three reasons.

"First, it misunderstands the nature of the relationship between Guernsey and the EU - Standard & Poor's appears not to have recognised the important point that Guernsey is outside the EU for most purposes and already has an established third county relationship on financial services," said Deputy St Pier.

"Second, it is a judgement that appears to be based on political analysis, rather than robust fiscal and economic scrutiny. Third, Standard & Poor's have made this revision well before the announcement of a UK referendum date, so seems both premature and unnecessary, not least as it has been reported that Standard & Poor's itself is expecting UK voters to stay in the EU [Financial Times, 11 December 2015]."

Deputy St Pier said it was also noted that Standard & Poor's had referenced 'rising regulatory complexity and demands, amid the G10's rising focus on low tax regimes' as pressures.

"However we have made the case, and as a jurisdiction have actively demonstrated, that Guernsey is supportive of the EU and OECD anti-BEPS agenda, meets every international standard of tax transparency and financial regulation, and has a finance sector based on expertise rather than tax avoidance or regulatory arbitrage. Therefore, we think this factor has been weighed much too heavily into the analysis, and cite in support of that for example the OECD's view that low tax regimes are not in themselves considered to be harmful," said Deputy St Pier.

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