Jersey in Focus

Karolina Pilcher: Hello, and welcome to Jersey Herd, the Jersey Finance Podcast. I’m Carolina Pilcher, senior Strategy and Research Manager at Jersey Finance.
In this episode, I’m catching up with my colleague Peggy Gielen, from our legal and technical team. We’re talking again about, some of the new developments, here on island, but also what’s happened in the wider world.

So first we would like to talk a little bit about the Government of Jersey’s recently launched financial services competitiveness report, which I’m sure many of you have heard of or at least seen the headlines about.

We will also talk a little bit about some new. Things that have come up in regulation and look at some innovative case studies that I suppose set Jersey apart from other IFCs.

So without further ado, Peggy. Hello.

Peggy Gielen: Hello.

Karolina Pilcher: So obviously our conversation is super timely, right? Just a few days ago We’ve heard a Minister talk about the competitiveness program and its conclusion. Essentially, I thought the event revealed some really interesting findings. So, the question, I suppose to you is what do you think stood out for, for you personally?

[01:14] Peggy Gielen: I thought it was a really interesting event. What stood out to me mostly was the clarity of the message from Sir Howard Davis, and he’s of course the chair of the independent panel behind the programme.

Now, his central point was that Jersey has a very strong platform as an international finance centre but of course the global environment is becoming more competitive and standing still isn’t an option.

The Island really needs to maintain a real hunger for growth, and some of the messages in there were potentially a bit unsettling, but I think that was intentional.
And when you look at the contribution the industry makes, that really matters. So the finance industry supports two in every five jobs in Jersey and generates around £6 in every £10 of the Island’s tax revenue. So competitiveness of the sector is really directly linked to the prosperity of the whole Island. And of course, you are very familiar with this Karolina, through your report with Pragmatix.

[02:21] Karolina Pilcher: Oh, absolutely. I’m glad that these stats were recorded by Davis. As you say, we’ve worked with Pragmatix just under the Vision2050 work stream to look at the value of Jersey’s financial and professional services industry to the Island. But, I’m glad they’ve recalled some of the stats, and obviously, there isn’t a huge amount of time to maybe talk a little bit as well about the more qualitative value that perhaps is not always as visible and is not always recalled, but I’m sure we’ll have opportunity to talk about it in another podcast.

Peggy Gielen: Yes So now again, the panel discussion I found interesting as well. So we had Sir Howard Davis, we had Minister Ian Gorst, Government CEO, Andrew McLaughlin, and then of course, Director of Financial Services, Helen de La Cour. And one of the themes from that panel that came through clearly, was the need to accelerate, of course, digitalisation across the sector. Businesses need to embrace new technology, improve productivity and, of course, continue to innovate.

And Andrew McLaughlin, he helped give that some useful context, I thought, because he acknowledged that while the industry understands the need to invest more heavily in technology, there are practical challenges, especially around mergers and acquisitions and of course, integrating legacy systems can be a real hurdle and it can slow down transformation.

But I think that, of course, that is all temporarily. So, the important point was that businesses are very aware of the challenge and they recognise that continued investment in digital capability is really essential and is going to make sure that Jersey remains competitive.

Now, alongside that, of course, Sir Howard highlighted the importance of reducing unnecessary regulatory friction and cost. And that is whilst maintaining strong regulatory standards. Because these underpin, really, Jersey’s reputation internationally.

There was clear support for Jersey’s opportunity to lead in areas like tokenisation – and that is of course something Jersey Finance and the industry have been championing for years.

I think in terms of what our Members can expect next is the Government has already published their report and the recommendations that will come out of that in more detail are still to come. Beyond that, there should be real momentum behind delivery, Karolina, so that means very close collaboration between Government, regulator and industry.

And of course, we will continue to work on improving competitiveness, a stronger innovation focus and growth areas like, digital finance and tokenisation. So it was a confident message.

[05:17] Karolina Pilcher: I agree. I think it was confident, unsettling, perhaps in some places, but essentially no big surprises, at least from my side. I think a lot of the themes that have been discussed and identified as those we need to really focus on – as you say, we’ve previously looked at – and they feature in our four year plan and our activity plans, so that it’s great to get that further endorsement.

I suppose the big change for us was obviously us taking on the concierge service role, which is something new. And I suppose it’s, it’s just important perhaps to understand what, what we mean by the concierge service. And I think different people may have different definitions of it but essentially we will be the first point of contact, the single point of contact initially to any financial or related professional services business that is considering moving to the Island.

So I think that’s, that’s great and we, we just need to figure out how we deliver on that.

[06:11] What also is interesting – and I think David also alluded to that – is that we’re not the only ones going through the exercise and that competitiveness analyses.  Guernsey did it a few months ago and I think they’ve released their report and so did TheCityUK as well.

In fact, Miles Celic from TheCityUK, together with a Partner from PWC who were, the co-authors of their competitiveness review, came to Jersey a few weeks ago. We went to see the launch of this report, and again, some of the themes coming out of it are very, very similar to what we heard from the Minister on Monday.

It talks about being at the frontier of financial technology. It talks about a reset of regulation and tax for the future of finance. It talks about deepening some of the international relationships, and so a lot of these themes are very much aligned with what we will be focussing on. Which, could feel a little unsettling because then we’re in direct competition and we’re going from the same direction, but actually, we know that, UK have always been and will continue to be our partner. And in fact, actually not related to the competitiveness programme, we’ve partnered with TheCityUK and Guernsey Finance. It started last year and the paper was just released and the paper looks at the contribution of the Channel Islands to the British economy, to the UK economy.

So, whilst. we may have an element of competition between us, at the same time, we recognise that we are essential contributors to the UK’s economic resilience and its competitiveness as well and I think that work is very clearly showing that. So, I’m also looking forward to working with Guernsey Finance and TheCityUK to continue making that message stronger.

[07:42] Turning a little bit from competitiveness into some of the regulatory aspects and some of the new items that have come out recently. What are the key sort of topics, Peggy, that you would like to maybe highlight to Members that again help set Jersey apart in this competitive environment?

Peggy Gielen: One development, Karolina, is AIFMD II. So that directive becomes effective on 16th of April 2026.

Now, for Jersey managers and Jersey funds, the most relevant aspect isn’t necessarily all the operational rules inside the EU. But it is what the directive means for accessing European investors through National Private Placement Regimes and AIFMD II establishes a few new roles for NPPRs.

So first, the jurisdiction where the fund is domiciled cannot be on the EU’s list of non-cooperative tax jurisdictions. Second, the jurisdiction must have appropriate tax information exchange agreements with EU member states, and these have to be essentially equivalent to the standard set out in Article 26 of the OECD model tax convention. And then thirdly, the jurisdiction cannot be identified as high risk from an anti-money laundering perspective.

Now, what this means in reality is that jurisdictional credibility becomes, of course, incredibly important. And if a fund is domiciled somewhere that risks to end up on one of these blacklists, well, that fund could effectively lose the ability to market into Europe under the NPPR. And of course, that’s where Jersey has a very strong advantage.
From a tax transparency perspective, Jersey has already signed the multilateral convention on Mutual Administrative Assistance in tax matters – and, sorry, that is a bit of a mouthful- I’m going to refer to it as the M-A-A-C.

The Government’s position is that M-A-A-C provides effective exchange of information arrangements with EU member states that are fully equivalent to the OECD Article 26 standard. Now, that interpretation was already accepted under the original AIFMD framework, but importantly, nothing in AIFMD II changes that underlying position.

On the AML side, of course, Jersey also performs extremely strongly in the latest MONEYVAL evaluation we received high effectiveness ratings across the majority of our assessment areas. And, the key takeaway for managers here is certainty. Jersey is highly unlikely to appear on any tax or AML blacklist, which means that Jersey funds can continue marketing into Europe under NPPR with confidence.

[10:36] Karolina Pilcher: And what else do you need, if not certainty, in this uncertain world, right? That’s fantastic. And, there is also some, carried interest development, as well. Would you mind talking a little bit about that?

Peggy Gielen: Yes, again, it links quite nicely into carried interest this topic because Jersey has long been a key jurisdiction for carried interest structures in private equity. And one of the key reasons is that our tax treatment here is clear and predictable.

Now, when you compare that to some of our competing jurisdictions, the picture is becoming more complicated. For example, in the UK, reforms coming into force in 2026 will generally treat carried interest as income from a deemed trade at reduced rates, of course. But it still means that there is that risk of income tax rates.

In Luxembourg, we have new rules introduced different categories of carry, which is intended to make the regime more attractive. But it still requires you to meet certain conditions and there are limits on participation and holding periods. Carried interest can be taxed as a speculative gain at rates approaching 45% if those conditions aren’t met.

Now, in Ireland, again, preferential treatment is available, but it largely applies only in specific qualifying venture capital structures. And there are, again, a number of conditions attached.

So when managers are thinking about long-term economics for their teams, well Jersey’s simplicity and certainty around carried interest continues to be a major attraction.
[12:18] Karolina Pilcher: That’s really helpful and very clear. I think Jersey’s position, again, the clarity of Jersey’s position is an advantage here.

And Peggy, we don’t have huge amount of time ,but last thing I wanted to touch on is I know you’ve been, liaising with British Business Bank now for a while, and I know as well that this has resulted in some exciting stuff! So would you mind just touching on this briefly before we, finish?

[12:40] Peggy Gielen: Yes, absolutely. Now Jersey is traditionally associated with private equity but we are seeing growing activity in venture and growth capital as well. And yes, Karolina, you are right. We continue to engage closely with organisations like the British Business Bank, like the National Wealth Fund – and actually I am, going to see the National Wealth Fund in April with industry colleagues and with colleagues from Guernsey.

It plays a major role in supporting investment into high growth UK companies and the Channel Islands have an important role to play.

Now, British Business Bank, for example, is the largest investor in UK venture and venture growth capital funds. And so we have several examples recently where structures were able to attract significant grants. That is a good illustration of how Jersey’s flexible corporate structures can really support innovation. It is, again, an indication of something that’s quite important. Jersey isn’t just a jurisdiction for traditional buyout funds, no; it is increasingly a platform for venture capital and innovation financing.

[13:50] Karolina Pilcher: That’s fantastic. I think all of these developments that you’ve just commented on show us and reiterate the message from Monday’s event. We have very strong foundations of our offering and we just need to build on those and build at pace, I suppose, and with maybe a slightly different mindsets, which I think everyone got the message from the Monday’s event.

So there’s definitely a lot for the industry to get excited about this year, it certainly keeps us busy. Peggy and I will both be back on Jersey Heard in the autumn, to share with you some more updates, so please look out for that episode.

And before I sign off, I just wanted to remind all of the listeners that  if you are working in Jersey’s finance industry and you are a Member or your firm is a Member, you can get the latest updates directly into your inbox by signing up to our weekly newsletter, Industry Insight. All you need to do is go to our website and create a free account under membership.

Thank you very much for tuning in and I wish you a lovely day.