Kleinwort Benson, the UK-based investment management and financial services group that is one of the largest fund administrators in the Channel Islands, will have its banking licence withdrawn by the Jersey Financial Services Commission when the firm is acquired by Belgian investment firm RHJ International from Germany’s Commerzbank.
The Jersey regulator’s decision is based on its requirement that banking entities must be owned by a top 500 bank “of national and systemic importance”, and comes despite Moody’s Investor Services assignment of a Baa2/Prime-2 long- and short-term deposit ratings and a bank financial strength rating of C- to Kleinwort Benson as a stand-alone business.
The Commission’s decision will lead to the relocation of all deposit-taking activity to Guernsey, but will not affect Kleinwort Benson’s wealth management, fund administration and trust sectors in Jersey, according to Jersey managing director Angus Taylor.
“Kleinwort Benson will still employ some 180 people within its Jersey corporate fund administration, trust and investment businesses, and support functions,” he says. “Subject to Guernsey Financial Services Commission approval, we will just consolidate all of our banking business activity in Guernsey.
“Our ability to act as custodian for Guernsey and Jersey investment fund structures will continue as before – the location of the banking licence does not affect this side of our business. Clients will be further comforted by the fact that we have been assigned this very positive credit rating from Moody’s.”
According to Taylor, the Kleinwort Benson management team and board of directors “worked very hard” with the Jersey regulator to explore options that would allow the group to retain its banking licence, given its stability and long and successful track record in the island. “However, the JFSC has its ‘top 500’ policy, and we must respect its stance on this,” he says.
The move will result in the relocation of 30 jobs from Jersey to Guernsey. Describing the changes as a “positive step”, Kleinwort Benson Guernsey managing director Sandra Platts says: ‘The creation of new roles in Guernsey reflects our vision to develop further the high level of wealth management and fund administration services with which the Kleinwort Benson name is synonymous.”
While declining to comment specifically on the case, a Jersey Financial Services Commission spokesman says: “Our understanding is that there are only a small number of specific differences in policy requirements between Jersey and Guernsey, although there is scope for different analysis, emphasis and appetite applicable to the areas common to both policies.”
The sale of Kleinwort Benson was forced on Commerzbank by the European Commission, which insisted on the disposal of non-core businesses as the price of approval for its acceptance of public money during the financial crisis. Commerz acquired the UK-based firm when it bought German rival Dresdner Bank from insurer Allianz, a deal agreed in August 2008.
“Last year Commerzbank received a significant capital injection from the German government, “ Taylor says. “In May 2009 the European Commission stipulated that the Commerzbank group must focus its future activities in the German domestic banking arena and dispose of some of its foreign businesses – Kleinwort Benson was one of the group entities to be sold.”
The sale of Kleinwort Benson to RHJ International was announced last October. Taylor says the investment firm “also offers considerable equity capital to underpin our development. On completion of the sale, the Kleinwort Benson group will be one of the most well-capitalised businesses of its size in the financial services industry.”
