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Financial Supervision Commission Annual Report 2004/05 28 July 2005

    ISLE OF MAN REPORTS INCREASE OF 41.5% IN MANAGED FUNDS IN COLLECTIVE INVESTMENT SCHEMES AND BANK DEPOSITS UP BY 16.4%

    DOUGLAS, Isle of Man, 28 July 2005 – A sharp increase in managed funds and bank deposits, is reported by the Isle of Man Financial Supervision Commission (FSC) in its Annual Report for 2004/05, published today. The FSC said that after a more challenging economic climate in the previous year, many businesses in the Island’s finance sector now feel that prospects are improving. This is evident from the profitability of a number of licenceholders.

    The total net asset value of funds under management in collective investment schemes increased by 41.5% during the year to 31st March 2005. There was a 17% net increase in the number of funds managed or administered from the Island during the period. The expansion in the funds sector can largely be attributed to growth in the Experienced Investor Fund and Overseas Fund sectors, reflecting the ongoing popularity of alternative investment/hedge funds. The total net asset value of Experienced Investor Funds grew by 72%.

    During the same period, deposits with Island banks rose 16.4% to £33.08bn from £28.42bn. Over 20 banks had capital ratios exceeding 20% at the end of March 2005. (The capital adequacy of Isle of Man incorporated banks is measured on a risk-weighted basis in accordance with the Basel Capital Accord.)

    The Annual Report notes the continued success of the major offshore financial centres during 2004/05, which highlighted the importance of their role in financial intermediation in the global economy. “Those centres, like the Isle of Man, with a mature and broad base of financial services offerings are likely to be the ones which will continue to attract the major fund flows”, the Report states. “As a consequence of this success there is a continued emphasis being placed by international standard setters on the soundness of the regulatory regimes in these jurisdictions and on the latter’s cooperation on tax and enforcement issues. These pressures will continue. The Isle of Man continues to adapt to these events. With a strong domestic economy and a AAA rating from the leading credit rating agencies, it is well positioned to maintain a competitive business environment.

    In his introductory remarks the Chief Executive, John Aspden, said that the Commission’s supervisory work is now primarily risk-based, enabling it to focus on those areas which incur the greater risks.

    The Commission has a large base of over 320 licenceholders for whose ongoing supervision it is responsible. In addition the Commission undertakes regular reviews in a number of other areas requiring regulatory oversight. With this number of licenceholders, it is essential that the Commission directs its limited resources in the most effective way. This has meant a rigorous programme of risk assessing each licenceholder and then planning a supervisory programme - from which the nature, intensity and frequency of supervisory attention is determined - covering the whole sector.

    Mr Aspden said that a major step over the past year was the announcement of a new initiative explaining how the Commission would in future assess the impact – in terms of costs and benefits – arising from prospective changes to regulation.

    The Fiduciary Services Act 2005 has now been enacted and Mr Aspden said that this provides the framework for the licensing and supervision of trust service providers. Because most trust service providers are already licensed for their corporate activities, this is not expected to be disruptive for the industry although it will involve considerable work for the Commission.

    Mr Aspden said that work had continued in making sure that the Island’s regulatory regime met the appropriate international standards. He said that the IMF can be expected to return to the Island for another assessment of its compliance with those standards in 2007.

    This year’s Annual Report, which is the most comprehensive to date, reinforces the Commission’s commitment to transparency. Key highlights from the Report include – ·

    • An explanation of how the Commission is ensuring that it adopts principles of good corporate governance in the conduct of its own operations;
    • An outline of its corporate plan;
    • An account of how its Authorisations and Supervisory work is appropriately addressing the recommendations of the IMF, including a number of important “safety and soundness” issues;
    • A publication of the Commission’s procedures in connection with disqualification action taken under the Companies Acts;
    • A review of the Commission’s investment in technology and in particular how this has enhanced the competitiveness of Companies Registry’s operations;
    • A reminder of the continuing importance of international co-operation.

    The Commission has published accounts under the Audit Act 1983.

    Going forward, the Commission will continue to work in partnership with the industry in ensuring that its regulation can be applied in a sensible manner. A major project, apart from the licensing of trust service providers, will be for the Commission to undertake a consolidation and modernisation of its financial services legislation to ensure that it is user-friendly and attractive to new business.

    The Annual Report can be viewed below or on the publications section of the Commission’s website, http://www.gov.im/fsc/doclibrary/publications.xml. Hard copies can be obtained from its offices at Finch Hill House, Bucks Road, Douglas, Isle of Man IM99 1DT, British Isles, telephone +44 1624 689300, email fsc@gov.im.

    28th July 2005

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