Review of Banking Services in The Falkland Islands

Review
of Banking
Services in the
Falkland Islands

March 2023
Version: 1.0 – Final
Contents
Section 1: Executive summary...................................................................................................................5
Context and rationale for the review................................................................................................................................................. 5
Input received................................................................................................................................................................................................ 6
Summary of principal findings ............................................................................................................................................................. 6
Conclusions and key recommendations .......................................................................................................................................... 9
Section 2: History of banking in the Falkland Islands and an overview of Standard
Chartered Bank .......................................................................................................................................... 11
Shackleton Economic Survey recommends a commercial bank is set-up ...................................................................11
1980 Banking survey ruled out the possibility of attracting a UK bank and recommended instead setting
up a domestically owned bank ...........................................................................................................................................................11
Post 1982 - Shackleton redux, the plan to rehabilitate the Falkland Islands and enter Standard Chartered
Bank ..................................................................................................................................................................................................................13
An early case of ‘buyer’s remorse’ at SCB? ...................................................................................................................................14
The branch opens in December 1983 but frustration soon builds about the perceived lack of a full-
service banking proposition ................................................................................................................................................................15
SCB approach their tenth anniversary in Stanley and seek a long-term licence but has planning
permission for a new branch refused .............................................................................................................................................16
A public – private innovation is launched with SCB in 1996 which boosts access to mortgage funding in
both Stanley and the Camp area ........................................................................................................................................................17
Launching a credit union was explored in 2014 but did not proceed ...........................................................................17
A brief history of the Standard Chartered Bank – not your typical British high street bank .............................18
Is SCB destined to always be the bridesmaid but never the bride? ................................................................................19
Section 3: Review of the Falkland Islands ........................................................................................... 21
Country overview ......................................................................................................................................................................................21
Economic overview ..................................................................................................................................................................................21
Overview of the banking sector .........................................................................................................................................................22
Understanding the banking needs of Falkland Islanders .....................................................................................................26
Families and households .......................................................................................................................................................................27
Fishing industry..........................................................................................................................................................................................28
Tourism ...........................................................................................................................................................................................................29
Hospitality .....................................................................................................................................................................................................30
Conglomerate...............................................................................................................................................................................................31
Agriculture ....................................................................................................................................................................................................32
Retail ................................................................................................................................................................................................................33
Government ..................................................................................................................................................................................................34
Overview of available services ...........................................................................................................................................................35
Climate change resilience ......................................................................................................................................................................36
Summary ........................................................................................................................................................................................................36
Review of Banking Services in the Falkland Islands | 2

Section 4: Peer group cohort case studies .......................................................................................... 37
Methodology.................................................................................................................................................................................................37
Filtering criteria and process ..............................................................................................................................................................38
Limitations ....................................................................................................................................................................................................38
Final cohort selection ..............................................................................................................................................................................39
Peer group at a glance .............................................................................................................................................................................40
Case study one: Niue ................................................................................................................................. 41
Internet infrastructure............................................................................................................................................................................42
Overview of available banking services .........................................................................................................................................43
Summary ........................................................................................................................................................................................................44
Case study two: Cook Islands .................................................................................................................. 45
Overview of available banking services .........................................................................................................................................47
Summary ........................................................................................................................................................................................................49
Case study three: St Pierre and Miquelon ........................................................................................... 50
Overview of Available services ...........................................................................................................................................................52
Summary ........................................................................................................................................................................................................53
Case study four: Easter Island (Rapa Nui) ........................................................................................... 54
Overview of available services ...........................................................................................................................................................55
Summary ........................................................................................................................................................................................................57

Case study five: Saint Helena & Ascension .......................................................................................... 58
Overview of Available services ...........................................................................................................................................................60
Summary ........................................................................................................................................................................................................61
Section 4: Benchmarking of the Falkland Islands ............................................................................. 62
Personal banking products & services benchmarked against cohort peers ...............................................................62
Commercial banking products & services benchmarked against cohort peers ........................................................63
Section 5: Banking sector outlook ......................................................................................................... 64
Overview ........................................................................................................................................................................................................64
The geopolitical landscape and economy will remain in a fractious and brittle state for some time to
come .................................................................................................................................................................................................................64
Banks will turn the dial up on product innovation as they are no longer distracted, under-capitalised and
remediating sins of the past .................................................................................................................................................................65
As one regulatory chapter closes, another one opens ............................................................................................................65
So long Fintech 1.0, hullo Fintech 2.0! ............................................................................................................................................66
Section 6: Setting up a domestically owned bank ............................................................................. 68
Shareholders and senior management must be ready, willing and able ......................................................................68
A credible business plan is an important component of the mobilisation and start-up process which will
guide the setting up of the new bank ..............................................................................................................................................68
Ownership and shareholder considerations ...............................................................................................................................69
Operational management and oversight should be independent ....................................................................................70
Estimated financial resources required of ~£20m to establish a new bank ..............................................................70
Significant level of non-financial resources also required ...................................................................................................72
The ‘Bank in a Box’ concept is significantly reducing technology costs and time to reach the market for
start-up banks .............................................................................................................................................................................................74
A domestically owned bank would require additional regulatory infrastructure to be established by FIG
to meet international standards ........................................................................................................................................................74
Section 7: Key observations .................................................................................................................... 76
Section 8: Structural options and proposed initiatives ................................................................... 83
Analysis of structural options .............................................................................................................................................................83
Portfolio of initiatives ..............................................................................................................................................................................85
Appendix 1: Terms of reference ............................................................................................................ 92
Appendix 2: Sources of information ..................................................................................................... 94
Appendix 3: Standard Chartered Bank lending criteria ............................................................... 101

Section 1: Executive summary
Queenstown Strategic Advisors (QSA) is delighted to have been selected by the Chamber of Commerce to
undertake a review of the banking provision in the Falkland Islands. This report represents the main artefact
which arises from the review. This part of the report seeks to set out the background and rationale for this
piece of work, the approach and methodology adopted by the review team, and summarise the key findings
and recommendations of the review.
Context and rationale for the review

The Falkland Islands is a remote, self-governing British Overseas Territory situated in the South Atlantic
spread across an archipelago comprising two large islands and 776 smaller islands. It stretches across 4,700
square miles and is home to a permanent population of ~3,500 people. In the late 1970’s there were well
founded concerns that the economy was becoming moribund amidst depopulation.
The Falkland Islands is subject to a longstanding irredentist claim by Argentina which came to a head with
the United Kingdom in the short military conflict of 1982. Since liberation, and with initial rehabilitation
funding and support from the United Kingdom, the economy of the Islands has undergone a remarkable
transformation. Powered by a thriving and entrepreneurial business community, the transformation in its
economic fortunes is stark; public finances are in comparatively rude health, there is virtually full
employment and judged on a GDP per capita basis it often ranks in the top fifteen most prosperous places to
live.
There is one bank operating in the Islands with Standard Chartered Bank (“SCB”) having opened and
maintained a branch since December 1983. Government and a number of larger firms also benefit from
commercial banking relationships with clearing banks in the UK in addition to maintaining local banking
relationships with SCB. Some businesses and individuals also have legacy arrangements with UK clearing
banks; existing accounts are maintained, but they have been unable to access new products.
Many businesses and individuals have to find creative solutions to work around the challenges created by
the rudimentary nature of the current banking proposition in the Islands. These include using neo-banks
(digital challenger banks such as Monzo or Starling) if they have a UK address and an increasing use of non-
bank financial institutions such as Wise (nee Transferwise). Some businesses have also put in place banking
arrangements with Gibraltar International Bank – an initiative established in conjunction with the Chamber
of Commerce in order to enable Square to offer the ability for smaller businesses to accept credit and debit
card payments.
There is widespread frustration amongst the business community with the current range of banking services
provided in the Islands. The Falkland Islands Chamber of Commerce with the support of key stakeholders
including the Falkland Islands Government (“FIG”), the Development Corporation and SCB, commissioned
QSA to undertake a comprehensive review of banking services to assess the historical and current landscape,
to consider how the Islands benchmark against other small island jurisdictions and to identify initiatives
which could be pursued by stakeholders to improve the current arrangements.
Approach and methodology

Given the nature of the assignment and the unique circumstances of the Islands it was considered that a deep
dive on the history of banking in the Islands was an essential component of the review in order to understand
why things are as they are today. A significant level of qualitative and archival research has been undertaken
to develop the historical context.
Field interviews with a cross section of the business community across the Falkland Islands, including with
those based in Camp, have been an important component in facilitating the development of a series of
profiles which set out the differing needs of different types of businesses.
To undertake the benchmarking of banking services in the Falkland Islands a peer group of comparable
jurisdictions has been developed. This cohort of peers has been assembled using a filtering process in order

to ensure that the final peer group have a broadly similar range of characteristics.
The benchmarking exercise was completed using a comparative study approach. This has been largely
completed on a desktop basis albeit the project team have endeavoured, where practicable, to validate the
desktop research with sources on the ground in each peer country.
Input received
Members of the project team were warmly welcomed to the Falkland Islands in early January for a field trip
in order to hold interviews with a range of businesses across a breadth of sectors based in both Camp and
Stanley.
The project team would likely to record their gratitude to the following businesses and organisations who
were generous with their time – the insights around their current banking experience have undoubtedly
added significant depth to the research:
§ Coast Ridge Farm, Camp § SG Accounts, Stanley
§ Wild Falklands, Camp § Waverley Law, Stanley
§ 60 South, Stanley § Seafish, Stanley
§ Beauchene Fishing, Stanley § Falkland Islands Company, Stanley
§ Falklands Legal, Stanley § Fortuna, Stanley
§ Government of South Georgia & South § Stanley Services, Stanley
Sandwich Islands, Stanley
In addition to members of the Falkland Islands business community, the project team met with the following
key stakeholders to understand their perspectives on the banking provision in the Islands which include
their views as a consumer of banking services where appropriate:
§ Falkland Islands Government § Standard Chartered Bank
§ Falkland Islands Development Corporation
The project team have not been able to substantively explore the extent of any technical challenges
associated with operating digital banking services in the Islands due to internet or communications
constraints. Despite extensive efforts by both the Chamber and QSA, Sure - the telecoms provider which
enjoys a monopoly in the Islands - did not respond to numerous invitations to organise a face to face meeting
or video conference.
The project team have also either conducted meetings via videoconference or entered into correspondence
with the following organisations:
§ Gibraltar International Bank § Government of St Helena
§ The Bank of St Helena § Bank of International Settlements
§ Niue Development Bank (Kiwibank agency) § Bank of England
§ Issuing Institute for Overseas Departments
(IEDOM, France)
The project team would also like to express their appreciation to the Chamber of Commerce and their team
who assisted greatly with logistical support and co-ordination during the project and field trip in particular.
Please refer to Appendix 2 for a schedule of sources used in undertaking the review and preparing this
report.
Summary of principal findings

The extent of integration of small island territories with their ‘metropolis’ country appears to heavily
influence the plurality of banking providers and breadth of services available.
Based on the academic literature reviewed, smaller, non-sovereign territories tend to be at an advantage as
they are able to leverage both greater resources and political influence compared to their small yet sovereign

counterparts. However, amongst the peers surveyed it is also clear that those countries who are more
constitutionally integrated (e.g. Easter Island, St Pierre & Miquelon) tend to have a greater number of
banking providers present and a broader range of products available than those with greater autonomy (e.g.
Falkland Islands, St Helena & Ascension Islands).
The size and lack of scale of the market constrains the breadth of products and services available –
stakeholders should focus on securing and sustaining access to a core range of essential services.
Banks, particularly large international banks, need to operate in scaled markets in order to generate
acceptable and sustainable returns on equity. Creating sustainable returns which surpass the cost of equity
has been challenging in the recent era of prolonged ultra-low interest rates and in the face of stiff competition
from fintech firms. In response, banking groups have had to curtail their operating expenses which has led
to greater levels of product commoditisation with less scope for customisation in markets with smaller scale.
Investment budgets have also been squeezed with the inevitable consequence that investment allocations
will be directed at projects / geographies which offer the ‘biggest bang for the buck’.
In a Falkland Islands context this means there needs to be an acknowledgement that not all banking products
can be offered in a sustainable or cost-effective way – particularly those which might only have utility for
small portions of the local market. Instead, the focus should be on securing and sustaining access to a core
range of essential services focused on the ability to do three things: (i) help businesses and individuals safely
store money (deposits and savings), (ii) enable credit worthy businesses and individuals to easily borrow
money (mortgages, working capital and funding growth), and (iii) facilitate businesses and individuals to
effortlessly move money (online banking and payments). Having the ability to do just these three things will
meet the vast majority of banking needs in the Islands market.
Standard Chartered Bank deserve significant credit for taking the risk of setting up and persevering
to support the economic development of the Islands over the last forty years.
The bank, largely motivated by political pressure from then Prime Minister Margaret Thatcher, took the
gamble of opening a branch in Stanley to support the rehabilitation and development of the Islands economy.
Other UK clearing banks were not prepared to offer support and there can be no question that SCB’s ongoing
presence has contributed to the prosperity the Islands now enjoy.
Their ongoing commitment to the Falklands in the face of a very challenging operating environment for
banks following the 2008 financial crisis is arguably even more remarkable. Practically all international
banking groups have exited smaller markets citing a lack of scale and a need to prioritise higher growth
markets.
SCB’s current operating model and the lack of digital/mobile channels is a core driver of the Islands
benchmarking unfavourably relative to its peers in terms of breadth of banking services available.
The Falkland Islands is a prosperous country notwithstanding its relatively small sized population. However,
the review reveals that the Islands compare unfavourably to the cohort of peers identified in terms of the
range of banking services available. To a significant degree this can be attributed to the operating model of
SCB which does not presently offer any digital/mobile channels in the Falkland Islands.
All of the businesses interviewed as part of the review cited the lack of digital/mobile channel as their biggest
frustration with the banking service in the Islands. The manual nature of the service creates a drag on their
productivity. The other issue called out by many businesses is the cost and time it takes to transfer money
to and from the Islands as a result of it operating on the SWIFT network.
In addition to the poor customer experience, the resilience of the operating model appears to be increasingly
fragile with businesses reporting a rise in the number of errors being made in terms of payment processing.
In the run up to the recent Christmas period the bank had a significant number of staff absent owing to Covid
and because customers cannot self-serve it was necessary to reduce the opening hours of the branch. A
number of firms reported they had payments made a number of days late including wages for their
employees.

It is worth noting that Niue and St Helena and Ascension Islands, which are less well developed and remain
dependent on direct aid payment from their respective ‘metropolis countries’ have access to a contemporary
digital/mobile banking capability. In both cases the banks are government owned and therefore it is
acknowledged that investment decisions may not be necessarily made on a wholly commercial basis.
The operating model when the branch was originally established was no doubt fit for purpose and it is
acknowledged that internet bandwidth constraints would have hampered the ability to draw investment
funding from the wider bank to introduce digital/mobile banking historically. However, internet bandwidth
has much improved over the last five years and St Helena which has poorer internet connectivity has had
digital banking for some time.
SCB acknowledge there is widespread frustration from the community about the continued lack of
digital/mobile access. The bank has sought to innovate to improve the customer experience including the
introduction of contactless debit cards, bulk payment instructions, an online mortgage calculator, email
payment instructions. However, these innovations improve things around the edges but do not address the
fundamental challenges with the operating model. It is acknowledged that SCB recently migrated the Stanley
branch to the wider bank’s core banking platform – this is an important enabler to introduce digital/mobile
banking but as yet no firm funding or delivery date is in place to deliver this much anticipated improvement.
The commercial lending market is not functioning effectively with the Development Corporation
having a commercial loan book nearly five times the size of the SCB commercial lending portfolio.
The commercial lending marketplace in the Falkland Islands is considered not to be functioning effectively.
This can be observed through a comparison of the FIDC and SCB commercial lending portfolios. FIDC has a
total lending portfolio of ~£2.5 million whereas SCB has a commercial lending portfolio of £600,000 or just
0.4% of its total deposit base. It would be typical to expect commercial banks to have a far larger share of the
lending market relative to a development agency.
It has not been possible given the time constraints involved with this review to undertake a deeper dive on
this topic. It is also acknowledged that not all businesses will qualify for lending support because of their
own idiosyncrasies. However, a number of key themes emerged during the course of the interviews with the
business community, FIDC and SCB which reinforces the need for further work to overcome the current
market dislocation.
Established businesses with a profitable track record and acceptable collateral appear to be struggling to
secure access to bank lending to fund working capital and their growth plans. A number of businesses,
perhaps unjustifiably, expressed a view that SCB are not open for business and based on their past
experience they would not approach the bank for working capital or growth financing. Whereas other firms
noted that they would look to approach FIDC first as they tended to be more proactive, offered finer pricing
and more flexible borrowing terms.
SCB advise they have lost business to FIDC based on both deal structure and pricing terms. There is also little
incentive for businesses which benefit from FIDC support to transition to SCB for their lending needs if the
commercial pricing and terms are going to be less attractive.
FIDC take the view that they will offer loan support to viable businesses which meet their lending criteria –
ultimately, they do not wish to see businesses with credible lending propositions not receive the working
capital / growth funding they require.
Addressing this multi-layered issue will, in all likelihood, require collaboration between Government, FIDC
and SCB in order to properly understand the issues in play and to develop proposed solutions. SCB have
confirmed they do have positive appetite to lend to businesses in the Islands that meet their lending criteria.
Having an international bank in the Islands brings a range of wider benefits – setting up a
domestically owned bank is unlikely to be a panacea, solving current challenges in terms of service
proposition.
There is extensive research which sets out that having international banks in smaller and developing
markets brings a host of benefits. Larger banking groups can bring about improved financial stability given

they have larger balance sheets and a diversity of revenue streams – they can also tap support from central
banks during times of market dislocation. Larger banking groups are also able to transfer their knowledge
and experience from across their network to the benefit of smaller territories – there is evidence of this in
the Falklands in terms of risk management and effective governance frameworks.
Community banks, particularly given the evolution of ‘bank in a box’ technology can tailor their product
range and services to reflect the specific needs of their local community. However, community banks tend to
be most effective when they are part of a wider eco-system and complementary to larger financial
institutions. Small island-based economies without international banks increasingly struggle with
international connectivity particularly as access to correspondent banking relationships can be difficult to
secure and maintain in the face of a wider de-risking by correspondent banks.
The regulatory framework and architecture for banks should be updated to reflect developments
over the past thirty years. Government also needs to lean into digitisation with delivery of its
services.
The current banking legislation and architecture has not been updated for some considerable time. To a large
extent this reflects the longstanding arrangements in the Islands with SCB being a branch of a British bank
which is supervised by the UK regulators. However, it is recommended that the Government develop a plan
to bring forward an updated package of banking legislation. This should be considered a foundational
element which might support an alternative financial institution operating in the Islands.
A refreshed banking regime would not only ensure that the Islands are keeping pace with international
standards and best practice but also affords an opportunity to consider introducing elements which might
help improve the current levels of service provision. By way of example, the revised regime could include
provisions regulating how consumer credit is provided. It could also seek to embed similar Consumer Duty
principles being introduced in the UK which seeks to ensure that banks put their customers interests first
and that their products/services are operated in a fashion which do not provide poor customer outcomes.
The Government and SCB together sit at the heart of the Islands community and inevitably as a result they
play a key role in setting the tone in certain areas including innovation and digitisation. Both institutions
need to set out how they plan to embrace and embed the digital economy in the Falkland Islands.
The challenges facing the Falkland Islands in terms of banking provision are not unique to them –
this creates opportunities to collaborate with other territories to pool expertise and resources.
Many small island countries face broadly similar issues to the Falkland Islands. Addressing some of the
longer-term issues will be difficult to achieve on a solo basis and therefore efforts should be explored to
partner with other territories in order to pool expertise and resources. Developing common legislative
frameworks or sharing regulatory architecture might represent a more cost-effective way of addressing
these shared challenges.
Collaboration with other island territories could also usefully boost the prospects of attracting alternative
service providers by deepening the potential market and associated value pools. It might also usefully
increase the effectiveness of any influencing strategy by creating a ‘louder voice’ for the territories.
Conclusions and key recommendations

As part of the review three broad options have been identified for the stakeholders to consider in order to
improve the provision of banking services in the Islands:
(i) Work with SCB to facilitate improvements to their existing service provision – including considering
whether there needs to be financial support/incentives for addressing specific shortcomings;
(ii) Seek to bring in another financial institution either physically or virtually to compete with SCB; and
(iii) Establish a domestically owned and operated national bank to either compete with or replace SCB.
Based on the work and analysis undertaken it is recommended that the stakeholders pursue the first option.
Working with SCB to improve their current operating model retains the presence of an international and

systemically important financial institution in the Islands. It leverages the wider SCB capabilities including
risk and balance sheet management expertise. Much of the foundational build to enable digital/mobile
banking is already now in place albeit the funding and project resources to deliver it are not yet lined up.
The other options considered would potentially offer a greater level of scope to customise the products and
services to meet the specific needs of the Falkland Islanders. However, it is considered highly improbable
that there is a sufficiently deep market to support two banks operating in the Islands. The Islands risk losing
the presence of an international bank which may have wider consequences for the reputation of the Islands
and its international connectivity. Establishing and operating a domestically owned bank is an endeavour
that requires both deep pockets in terms of funding and is not for the faint of heart.
A portfolio of initiatives which could improve the banking proposition in the Islands have been identified
and are summarised in the schematic overleaf.

A fuller discussion of the structural options and initiatives can be found in Section 8 of the report. It is
recommended that consideration be given to setting up a working group to explore the priority initiatives
further.


Section 2: History of banking in the Falkland Islands and
an overview of Standard Chartered Bank
This section provides an historical overview of the evolution of banking in the Falkland Islands. It orientates
the reader around how the Falkland Islands has arrived at the position it finds itself in today and how this
has shaped the current range of service providers and the proposition available to individuals, businesses,
government and non-government organisations.
Shackleton Economic Survey recommends a commercial bank is set-up

In 1976, the Labour government published an Economic Survey of the Falkland Islands which was led by
Lord Shackleton in association with the Economist Intelligence Unit. It sought to set out a series of initiatives
and the UK investment required to reduce the outflow of resources from the Islands and declining population
with a view to boosting the long-term economic prosperity of the Islands.1
The survey noted that rudimentary banking facilities had hitherto been provided by the Falkland Islands
Company (“the FIC”), the Estate Louis Williams (“ELW”), and the Falkland Islands Government (“FIG”). The
FIC acted as a banker to many of the farming companies, partnerships and wider community. It offered
current account facilities which customers could draw cheques on and it maintained a banking relationship
with a UK clearing bank to facilitate a remittance service together with foreign exchange. The Estate Louis
Williams provided a very similar service.
For its part, FIG operated a Government Savings Bank in the Islands along similar lines to that of the UK’s
Post Office Savings Bank. It paid an interest rate of 3.50% per annum on a tax-free basis whilst making a
return on the rate it received from its commercial bank in the UK where it would place the deposits. FIG had
also made a moderate number of loans, typically for agricultural purposes.2
Shackleton’s survey called for, amongst other recommendations, the expansion of key sectors of the economy
by: (i) expanding the airport; (ii) addressing the problem of absentee landowners and facilitating the sub-
division of farms; (iii) the development of the fisheries industry; and (iv) the creation of a development
agency which would go on to become the Falkland Islands Development Corporation. The survey team also
believed establishing proper commercial banking facilities including the provision of overdrafts and loans
was key to boosting the economic output of the Falkland Islands.3
1980 Banking survey ruled out the possibility of attracting a UK bank and
recommended instead setting up a domestically owned bank
In response to the Shackleton report the Overseas Development Agency (“ODA”) undertook a deep dive of
the banking sector in March 1980 led by Robin A.V. Benbow with a view to evaluating how commercial
banking facilities might be established in the Islands.
The Benbow report first reviewed who was licensed for banking activities. It validated the role the FIC was
playing in providing banking services. It recommended that the licence for ELW be removed as they had
ceased to offer banking services.4 It also identified the Stanley Co-operative Society as providing interest-
bearing deposit accounts up to a maximum amount of £1,600 per member of which there was approximately
300. The deposits financed the trading of the Society, which provided competition in the supply of general
1 Foreign & Commonwealth Office, Volume 1: Economic Survey of the Falkland Islands – July 1976 (London: Foreign & Commonwealth Office, 1976),
i-vii, accessed December 5, 2022, https://www.nationalarchives.gov.fk/jdownloads/Trade%20and%20Industry/R-TRA-ECO-1-

7.%20Economic%20Survey%20of%20the%20Falkland%20Islands%20Volume%201%20of%202%20Resources%20and%20Development%20Po
tential%20July%201976%20-%20The%20Rt%20Hon%20Lord%20Shackleton.pdf
2 Ibid, 260.
3 Foreign & Commonwealth Office, Volume 2: Economic Survey of the Falkland Islands – July 1976 (London: Foreign & Commonwealth Office, 1976),
22, accessed December 5, 2022, https://www.nationalarchives.gov.fk/jdownloads/Trade%20and%20Industry/R-TRA-ECO-1-

10.%20Falkland%20Islands%20economic%20survey%201982.pdf
4 Overseas Development Agency, Banking Facilities in the Falkland Islands – March 1980 (London: Overseas Development Agency), 1, accessed
January 9, 2023, http://www.nationalarchives.gov.fk/jdownloads/Utilities%20-%20General/R-UTI-GEN-1-

2.%20Report%20by%20Robin%20A%20V%20Benbow%20Overseas%20Development%20Agency%20on%20banking%20facilities%20in%20th
e%20Falkland%20Islands%20-%20March%201980.pdf

goods. Benbow recommended that the licence be maintained albeit it might be restricted to the taking of
deposits to members only.
Benbow noted that all of the organisations with a banking licence had been granted exemptions from various
sections of the Banking Ordinance – which meant they did not have to maintain the minimum levels of capital
of £250,000 and were not required to publish audited accounts.5
In terms of FIG banking activity, Benbow observed that the Government Savings Bank provided not only
deposit accounts but also accepted currency deposits, effected wire transfers to third parties and also
introduced a cheque system. In addition, the Treasury department also provided foreign exchange services
through the purchase and sale of currencies – mainly Argentine Pesos, US Dollars and Sterling. They also
issued drafts and effected wire transfers through the Crown Agents.
Treasury was also engaged in providing mortgages for house purchases at favourable interest rates and with
repayment terms of up to 25 years. They also provided loans for property improvements, extension of tourist
facilities. Finally, Treasury was responsible for issuing all bank notes and coins in the Falkland Islands.
Once banking services were reviewed, Benbow noted Shackleton’s recommendations that improved banking
services would be provided by the setting up of a commercial bank. However, he believed that the Islanders
already enjoyed a range of banking services from a number of different sources but the objective was to co-
ordinate this service provision into one organisation which could be scaled as demand dictated.
The report outlined the following services were required: (i) current and savings account in local currency;
(ii) payments to third parties mainly by cheque; (iii) money transmission through drafts, mail transfers, and
wire transfers; (iv) mortgages – longer term facilities of 20/25 years for house purchases albeit restricted in
number given the short-term nature of the deposit base; (v) short term overdrafts and medium term loans
for financing cars or home improvements; (vi) working capital facilities for businesses; (vii) travellers
cheques issuing and encashment facilities in both Sterling and overseas currencies; (viii) collection and
payment of bills of exchange in Sterling and US Dollars to include cheques; (ix) investment advice and
investment dealing through brokers or correspondent banks; and (x) safe custody of documents.
Benbow articulated three principal methods to achieve this:6
(a) An international or UK bank to establish a branch or a new subsidiary in the Falkland Islands;
(b) A new bank is established in the Islands with local shareholder which might include FIG; or
(c) A new Government-owned bank.
This was accompanied with narrative and analysis about the prospects of each option:
§ Establishing a branch or new subsidiary of an international or UK bank: Both Barclays and Lloyds
(through their Bank of London & South America subsidiary) were approached and declined as they
considered it was not a viable proposition. They believed that the investment required to set up premises,
provide a strong room, provide staff including expatriates could not be commercially justified. Benbow
concluded there was little merit in considering this aspect further and it was not desirable to have a non-
UK firm operating in the Islands.
§ A new bank owned by local shareholders: The report concluded, based on discussions undertaken in
the Islands that it would be difficult to find Falkland Island shareholders who would wish to capitalise a
new bank. In addition, a new bank of this nature would not have the benefit of the Savings Bank’s funds.
Therefore, it was not considered a viable option.
§ A new Government-owned bank: Benbow concluded that in order to make the optimum use of the funds
available in the Islands as a deposit base, any commercial bank would need to utilise the funds presently
kept within the Government Savings Bank. Therefore, it recommended that the Government be involved
in setting up a new bank on a wholly owned basis.
5 Ibid, 2.
6 Ibid, 4-6.

The Benbow report recommends that the Executive Council consider whether it wishes to undertake this
type of venture, establish whether it is legally possible for FIG to own a commercial bank, and also to ensure
that the Foreign & Commonwealth Office (“FCO”) has no objection.
By way of second order actions, the report recommends that the legal method of creating the new bank and
transferring the Savings Bank should be explored. The report goes onto provide further considerations about
the proposed customer proposition, the capital levels anticipated, and other arrangements which will need
to be arranged e.g. premises, correspondent banking arrangements and so on.
The final part of the report discusses whether the Falkland Islands should consider embracing offshore
banking. It reaches the conclusion that this line of business should not be pursued given the Islands would
be somewhat “late to the party” with many other countries already well established and more accessible. It
would mean the Falklands would likely only attract banks of a more “dubious element”.7
The Executive Council agreed to progress further work on establishing a government owned national bank.
Councillor Bowles, speaking in the Legislative Council in August 1980, refers to the promising prospect of
the first ‘National Bank’ being established. The Dependent Territories’ desk at the Bank of England was
tasked to draft a more detailed business plan which was forwarded to the FCO and FIG in November 1981.
Then the war came.
Post 1982 - Shackleton redux, the plan to rehabilitate the Falkland Islands
and enter Standard Chartered Bank
In May 1982, as the British Task Force had landed on the Falkland Islands and it was clear that the retaking
of the Islands was only a matter of time, the Prime Minister asked Lord Shackleton to update his 1976
Economic Survey. He was able to get together most of his former team and within just two months published
an updated survey with recommendations as to how the prosperity of the Islands could be improved.8
In terms of banking provision - the updated Shackleton report re-affirmed its earlier conclusion that proper
commercial banking facilities needed to be established with a particular need for overdraft and loan facilities.
The presence of a commercial bank would be a much-needed catalyst in the economic development of the
Falklands.
The Shackleton team re-affirmed their earlier recommendation that the Falkland Islands should not seek to
become an offshore finance centre. They also welcomed the interest which was being shown by an
international bank to set up a branch in Stanley and noted discussions were well progressed with FIG and
the FCO.9
As the war came to an end in June 1982, the focus of Westminster turned towards rehabilitation. Lord
Anthony Barber, the Chairman of Standard Chartered Bank (“SCB”) and former Chancellor of the Exchequer
under Ted Heath’s Conservative administration, attended a meeting with Prime Minister Margaret Thatcher
in Downing Street. At this meeting Mrs Thatcher lamented the lack of commercial banking facilities in the
Islands. Barber conveyed an immediate assurance that his bank would address this issue and returned to his
offices in the City to set the ball rolling.10
SCB moved quickly. By the end of June their Executive Committee had given its approval in principle to
establish a branch in Stanley.11 This new branch was contingent on four principal conditions:
(a) that SCB would be appointed as FIG’s bankers and handle all their cash and payments;
7 Ibid, 13.
8 Foreign & Commonwealth Office, Economic Survey of the Falkland Islands – September 1982 (London: Foreign & Commonwealth Office, 1982), 1-4,
accessed December 5, 2022, https://www.nationalarchives.gov.fk/jdownloads/Trade%20and%20Industry/R-TRA-ECO-1-

9 Ibid, 39-40.
10 Duncan Campbell-Smith, Cross Continents – A History of Standard Chartered Bank (London: Allen Lane, 2021), 496.
11 Michael McWilliam (SCB) to R. Fearn (FCO), 30 June 1982, FCO7/4680, Falkland Islands Rehabilitation: Banking Services, National Archives, Kew,
London.

(b) that the new branch would absorb the business of the Government Savings Bank which would be
subsequently wound up;
(c) that the Ministry of Defence would agree to open accounts with the new branch to hold their main funds
for the Falklands in and would make maximum use of the new bank’s facilities; and
(d) that the FIC agree to end its banking services to the wider community and agree to conduct their banking
with the new branch and to make full use of the bank’s services.
All the parties concerned agreed to the conditions proposed by SCB. There is an exchange of letters between
SCB and FIG in October 1982 agreeing to this new arrangement. The Ministry of Defence agreed to open
accounts and make use of the bank’s new facilities. An agreement was also reached between the FIC and SCB
about the withdrawal of FIC from banking activity in the Islands.
In January 1983, an application for a new banking licence was submitted for consideration by the Governor.
With board approval at SCB granted, a formal agreement is drafted between FIG and SCB which appointed
the bank as its sole banker and stipulated the terms of the transfer of the Government Savings Bank. It also
stipulated that all existing banking licences save for that granted to the Stanley Cooperative Society will be
surrendered by the end of December 1983.12 SCB placed their order for their building materials and pre-
fabricated structure and intended to open the new branch in Stanley by mid-1983.
There were concerns in some quarters that SCB were driving a tough bargain with their conditions for setting
up the new bank. However, the Bank of England expressed genuine surprise that SCB had opted to set up in
the Falkland Islands. They observed in correspondence with the FCO that:
Standard Chartered will be placing some reliance on future economic expansion, backed by a commitment
to the Islands by HMG in the shape of a long-term development plan. Nevertheless, their hope of increasing
business will relate to normal short-term bank financing and a growing level of deposits, not to long-term
development loans.13
The hopes of the Falkland Islands attracting a commercial bank would soon be realised but the Bank of
England remained somewhat perplexed – “I do not understand fully why a bank should be so interested in a
small and still troubled territory when others, under more peaceful conditions, have found the prospective
cost prohibitive … Perhaps they are betting on a major exploitation of the whole region at a later date.”14
The official handling matters at the Bank of England notes a “decision to withdraw would have major political
repercussions since, having achieved a monopoly of banking in the Islands, they would leave a political
vacuum. It does not take much imagination to foresee the political rumpus this would cause. It must be
assumed that Standard Chartered appreciate this point.” This would prove to be prescient in the months and
years to come.15
An early case of ‘buyer’s remorse’ at SCB?

Six months later, by July 1983, SCB’s set up of the new branch had already run into challenges. Implementing
the agreement regarding the transfer of the Savings Bank was proving to be more complicated than
envisaged. The physical building of the new branch was also delayed – the materials had arrived from
Scandinavia but the contractors to build it had no spare capacity as they were fully engaged on other rebuild
projects.
It was becoming apparent that SCB’s lack of market research before deciding to establish a branch was an
issue. Archie Mitchell, SCB’s first manager for the Falklands, only heard about his appointment through the
12 A. J. Mitchell (SCB) to A. E. Palmer (FCO), 26 January 1983, FCO7/4680, Falkland Islands Rehabiliation: Banking Services, National Archives, Kew,
London.
13 P. N. Hayes (Bank of England) to P. R. Fearn (FCO), 26 July 1982, FCO7/4680, Falkland Islands Rehabilitation: Banking Services, National
Archives, Kew, London.

14 Ibid.
15 P. N. Hayes (Bank of England) to P. R. Fearn (FCO), 19 August 1982, FCO7/4680, Falkland Islands Rehabilitation: Banking Services, National

newspapers. In addition, all the decisions about taking over the Savings Bank as its operating base and
becoming banker to FIG were all taken before he even arrived in the Islands.
Mitchell felt it was increasingly unlikely that the branch would deliver even a moderate return on its
significant investment. In particular he felt that the enthusiasm in London about SCB setting up in the Islands
was not reflected locally. M. F. Smith, writing from Government House to the FCO, did not fully share this
view albeit he accepted that some Islanders were wary of SCB’s motives in setting up in the Islands. Smith
acknowledged that FIG’s legal team and treasury, have been at best lethargic in their support of the
mobilisation of the bank; the Financial Secretary was refusing to even share the books of the Savings Bank
and the draft legislation necessary to implement the transfer.16
Meanwhile, back in London, much soul-searching and finger pointing was abound about who was
responsible for the miscalculation on the prospects of setting up a profitable business in the Falkland Islands
should the issue come into the public domain. Mitchell was logging of all his correspondence and telephone
calls with FIG together with their replies in order to demonstrate to his management that he had been
following up and applying as much pressure as possible to move things along. Ultimately, SCB were
committed to the endeavour but the episode emphasised the need for any new enterprise setting up in the
Islands of doing detailed preparatory work, market research, and the need for a reasonably long field trip to
size things up.17
The branch opens in December 1983 but frustration soon builds about
the perceived lack of a full-service banking proposition
The new branch opened for business in December 1983. The Chairman of SCB invited Baroness Young, then
a Foreign Office Minister to formally open the branch in Stanley in January 1984 whilst on a visit to the
Falkland Islands. The Government Savings Bank was transferred shortly afterward.
In September 1985, the Managing Director of the Falkland Islands Development Corporation (“FIDC”) wrote
to SCB setting out proposals for SCB to support both the FIDC and FIG by lending to some of the newly sub-
divided farms and to provide finance for house purchases. Both FIDC and FIG were unable to meet the
demand, given constraints on their finances, which had been generated post liberation. The matter was
referred to London but SCB concluded they would only entertain lending with the benefit of a full guarantee
from the UK government.18 SCB appeared to have reservations about the long-term future of the Falkland
Islands and wished to have a guarantee from the UK to demonstrate the UK’s political commitment to the
Islands.
FIG, working in concert with the FCO, made representations to the senior management of the bank in London
in an effort to break the impasse albeit without success. The FIDC switched tack and proposed that SCB
instead provide them with a £1.2 million overdraft facility to acquire the farming land and subsequently
repay in tranches as each sub-divided parcel of land is sold. SCB agreed to advance facilities but insisted on
a ‘letter of awareness’ being issued by the UK government which in effect amounts to a letter of comfort. This
is considered unacceptable by the UK Treasury.19
Governor Jewkes, whilst in London, met with the Chairman of SCB and senior executives to raise concerns
about SCB’s lending practices. During lunch, Lord Barber confessed that it was he alone that felt that SCB
should open a branch in the Falkland Islands – against the advice of his senior executives. This added to a
growing sentiment within the Islands that SCB are operating in the Islands as just a “Savings Bank” and not
making as broad and positive a contribution to the local economy as it could. They were deemed “out of step
with most of the British clearing banks” given their refusal to entertain domestic mortgage financing.20
16 M. F. Smith (Government House, Stanley) to A.E. Palmer (FCO), 21 July 1983, FCO7/5518, Falkland Islands rehabilitation: Banking, National

17 Ibid.
18 John H. Cosson (SCB, London) to Simon Armstrong (FIDC), 19 September 1985, FCO7/5518, Falkland Islands rehabilitation: Banking, National

19 Gordon W. Jewkes (Governor) to D. Broad (FCO), 27 March 1986, FCO7/5518, Falkland Islands rehabilitation: Banking, National Archives, Kew,
London.
20 Ibid.

The matter was raised at ministerial level in the FCO who were keen that FIG and the FCO explore with SCB
senior management in London whether an accommodation could be reached. It was felt that all avenues
should be exhausted before asking Lady Young to raise these issues with her fellow peer and the Chairman
of the bank Lord Barber. A series of follow up meetings were held over the next year including with the
General Manager of the bank Peter Weller. He had strident views that it would not be in the interests of the
bank shareholders to make available long terms loans for house purchases against a short-term deposit
book. The bank also had concerns about the viability of the newly created sub-divided farms and the ability
for any bank lending to be repaid.21
By autumn 1986, it was apparent that SCB would not shift their position in terms of their restrictive lending
policy in the Falkland Islands. It was felt that there was no alternative other than for the Foreign Minister to
intercede with the Chairman of SCB as the rationale for establishing a commercial bank in the Islands was
for it to provide much needed additional funding which would boost the growth prospects of the Islands.
The resources of both FIG and FIDC were already stretched.
Lady Young was briefed ahead of a meeting in the House of Lords with Lord Barber and Peter Wells at SCB
in October. The briefing revealed that SCB had “been doing good business. Deposits taken over from
Government Savings Bank have provided good basis for expansion. Islanders’ savings ratio are high.”22 This
business also included the provision of short-term lending and working capital facilities. The original fears
about the viability of the new Stanley branch appear to have been misplaced.
In the meeting with Lady Young, Peter Weller provided a useful and reasonable context about SCB’s stance
in relation to residential mortgage lending. They had, unlike the UK clearing banks, ceased mortgage lending
in the UK and as the Islands came under the jurisdiction of the UK they were being treated in the same way.
He also explained why SCB was not a typical high street bank given its strategy was largely focused on
facilitating international trade in the emerging markets of Africa and Asia. Lord Barber undertook to look
into the perceived restrictive lending practices personally to see whether this was true and what could be
done.23
The meeting provided some useful insight and understanding into SCB and how the Falkland Islands fits (or
does not fit) within its wider corporate strategy. The archive material suggests that they are supporting local
businesses and providing a level of short-term business lending in the Falkland Islands. However, it also
confirms FCO suspicions that SCB’s concerns about extending longer-term credit are not framed just by
commercial considerations. Notwithstanding the extensive assurances from the FCO including at ministerial
level about the UK’s political commitment to the Falklands, and in particular to the principle of self-
determination for the Islanders, the SCB executives still held a view that only short-term financing be
considered because a future deal on sovereignty with Argentina might lead to them incurring bad debts.
Islanders may, in those circumstances, decide to just leave the Islands without repaying their borrowing.24
SCB approach their tenth anniversary in Stanley and seek a long-term

licence but has planning permission for a new branch refused
When SCB established their branch in Stanley they were granted a banking licence which was renewable on
an annual basis. In reality, there was little prospect of the licence not being renewed at each anniversary
given the desire to retain a commercial bank in the Islands. However, SCB felt that the short tenor influenced
the way in which it would provide products and services – particularly lending facilities.
In January 1990, its banking licence was extended for a longer period of six years. In May 1992, SCB wrote
to the Financial Secretary seeking a banking licence with no expiry date – thus matching the practice in their
other jurisdictions. The bank were cognisant that there had been doubts in certain influential quarters about
their commitment to the Islands and their willingness to commit further capital and expertise to develop
21 Christopher Hum (FCO) to Peter Weller (SCB, London), 5 March 1986, FCO7/5518, Falkland Islands rehabilitation: Banking, National Archives,
Kew, London.
22 Briefing Note – Falkland Islands : Standard Chartered Bank by David Broad (FCO), 3 October 1986, FCO7/5518, Falkland Islands rehabilitation:
Banking, National Archives, Kew, London.

23 Record of Call by Lord Barber on Lady Young in the House of Lords, 22 October 1986, FCO7/5518, Falkland Islands rehabilitation: Banking,
National Archives, Kew, London.

24 Ibid.

their proposition further. SCB had somewhat eased on their previous reluctance to lend for longer term
periods with business lending increasingly structured over 5 years and residential mortgage lending up to
25 years. The bank was also being asked to consider larger lending transactions over longer periods but the
restrictions on the licence meant they were unable to meet these customer requests. Another consequence
of the short-dated licence is that they could not place branch deposits on longer maturities with their head
office. This had an impact on the rates they could pass on to customers and limited their lending capacity.25
FIG agreed, having taken advice from the Bank of England, to remove the expiry date of SCB’s banking licence
subject to SCB providing a greater level of statistical information to FIG which could in turn be shared with
the Bank of England. Both FIG and the Bank of England had some concerns that granting an unlimited licence
to a firm with a de-facto monopoly might cause indigestion for some stakeholders. This was resolved by
considering it a factor of the small market as opposed to the characteristics of the licence itself.26
SCB understandably felt frustrated that their commitment to the Islands continued to be questioned in
certain quarters. They even went as far as providing a fairly detailed memorandum, on some considerations,
for the Treasury if FIG should wish to explore replacing them with a domestically owned bank.27 As a tangible
sign of their ongoing commitment, SCB was keen to improve the proposition and services provided to
customers. They had earmarked over £500,000 of investment to move to an improved premises across the
road however planning permission was refused on a number of occasions due to concerns about the loss of
recreational amenities. Eventually, planning permission was granted and SCB operate today from this site
on Ross road.
A public – private innovation is launched with SCB in 1996 which boosts

access to mortgage funding in both Stanley and the Camp area
In 1996, SCB partnered with FIG to launch the Joint General Mortgage Scheme (“JGMS”) which significantly
boosted the availability of mortgage funding for borrowers in both Stanley and Camp. Under the scheme, FIG
guarantee the ‘top-slice’ of a mortgage thus providing additional security for SCB in addition to the usual
deed security and enables buyers to borrow up to 95% of the value of the property whereas lending is
restricted to 80% on the variable rate mortgage scheme.28
The scheme was revised in March 2001, July 2003, July 2007, March 2019 and in December 2020 to increase
the maximum thresholds to reflect the increase in house prices. In the most recent scheme revisions SCB
agreed to not only increase the maximum level of borrowing provided under the scheme but also agreed to
reduce the maximum guarantee component required from FIG. For properties in Stanley, it has reduced from
20% to 16% whilst the guarantee component for properties in Stanley now ranges from a maximum of 50%
to 16% whereas previously it was set as a fixed guarantee of 50%.29
The JGMS has particularly helped first time buyers get onto the property ladder and also provides the peace
of mind of having a fixed interest rate throughout the duration of the loan which can be up to a maximum of
25 years. It is noteworthy that SCB has never experienced a foreclosure or significant mortgage delinquency
in the Falkland Islands. This reflects the prudence amongst members of the community but also is a
testament to the sound underwriting framework of SCB.30
Launching a credit union was explored in 2014 but did not proceed
In 2013, the FIDC working in collaboration with the World Council of Credit Unions, undertook an in depth
feasibility study to explore whether a credit union should be established in the Falkland Islands. The aim was
to introduce greater plurality into the lending market. The feasibility study included public consultations
25 Norman Black (SCB, Stanley) to Derek F. Howatt (FIG), 6 May 1992, FCO7/9459, Falkland Islands: Standard Chartered Bank, National Archives,
Kew, London.
26 Richard Wagner (FIG) to Graham Bradshaw (Bank of England), 7 September 1992, FCO7/9459, Falkland Islands: Standard Chartered Bank,
National Archives, Kew, London.

27 Normal Black (SCB, Stanley) to Richard Wagner (FIG), 27 August 1992, FCO7/9459, Falkland Islands: Standard Chartered Bank, National

28 Executive Council Paper – Amendment to Joint General Mortgage Scheme, 9 December 2020, Falkland Islands.
29 Ibid.
30 Ibid.

which found there was a very high level of public support for such an institution in the Islands. However, the
project did not progress as with the relatively small size of population the credit union was forecast to make
a loss of £750,000 over a 5-year period and it was not considered financially sustainable. It would have also
necessitated FIG to contribute start-up capital, overhaul the banking legislation and to appoint a banking
regulator.
A brief history of the Standard Chartered Bank – not your typical British
high street bank
SCB can trace its heritage back to the commanding heights of the British Empire. In order to fund further
overseas expansion, specialist banks were set up to facilitate trade. One such bank was the Chartered Bank
of India, Australia and China – which was focused on serving the markets of those countries albeit it did not
receive a charter in the end for Australia. Its business model was based on being an ‘exchange bank’ with
capital raised in the City of London and then shipped out as bullion to support the foreign currency
transactions of British companies in Eastern ports stretching from Bombay to Shanghai. By the late 1920’s,
Chartered Bank was equal in size to HSBC as a large British bank focused on foreign exchange and trade.31
The Great Depression triggered a collapse in international trade and Chartered Bank’s access to its core
markets became heavily restricted, particularly in China following the rise of the Communist Party after the
end of the Second World War. The bank retreated to Hong Kong and built a lucrative business by pivoting to
lending to local companies as opposed to firms of the Empire. It opened a network of retail branches to raise
deposits and, come the 1960’s, it was opening up to 3 new branches per month in the territory. Its reliance
on the remnants of the Empire was diminishing fast.32
The Labour devaluation of Sterling in the 1960’s ended its role as an official reserve currency and led to the
dismantling of the UK overseas banking model. As the era of Empire was drawing to a close and with fierce
competition coming from American banks, Chartered Bank merged with Standard Bank of South Africa. The
aim was to create a more balanced firm with operations stretching across Asia, the Middle East and Africa.33
Standard Bank had a similar backstory to Chartered. It was conceived to facilitate trade albeit in Africa with
the burgeoning diamond industry supporting over 100 branches across South Africa giving it a quasi-central
bank role. But geopolitics also played a role in its evolution – as South Africa became more isolated because
of Apartheid, it spun off a chunk of its South African operations and ventured into other African markets
through the acquisition of the Bank of British West Africa.
Both banks had courted suitors. Barclays held a 14% stake since the late 1950’s and there was a clamouring
within its international division to bolster its shareholding ahead of a full-blown merger. Midland (now
HSBC) also floated the idea of a merger in 1963. The Chartered chairman rejected these overtures having
also turned away Australia & New Zealand Bank (“ANZ”) as well as an American outfit. Over at Standard
Bank, Chase Manhattan (now JP Morgan) had accumulated a 15% stake and the two bank’s African
operations were well integrated. Chase and two other firms declared an intention to increase their holding
to 40%. Standard’s board was not impressed neither too was the Bank of England. Their preference was to
merge with another overseas bank with links to Asia to create a global business – this triggered the merger
with Chartered Bank.34
The newly combined firm was large and very complex. Getting approval from the minority bank
shareholders and the full array of regulators was no mean feat and integrating the two firms with very
different cultures was challenging. The market signalled that the integration was not going well – the share
price had fallen from 267 pence to 160 pence within the year. The task of merging the two banks was put
into the ‘too difficult’ box and the two banks were run separately for years to come.35
31 Duncan Campbell-Smith, Crossing Continents: A History of Standard Chartered Bank (London: Allen Lane, 2021), 2-4.
32 Ibid, 5-12.
33 Ibid, 431-432.
34 Ibid, 438-440.
35 Marc Rubenstein, “The Bank that Never Sold,” Net Interest (substack), 13 January 2023, https://www.netinterest.co/p/the-bank-that-never-sold

A strategic review was launched in the mid 1970’s by a new CEO with the aim of diversifying the bank’s
international revenues. The idea was to have a quarter of assets in North America and to build a business in
Europe which would account for another quarter of its assets. At the time assets were split roughly 50:50
between Africa and Asia with a very small presence in the UK. Over the next decade it pushed for global
expansion. It bought a bank in America and tried to buy the Royal Bank of Scotland. By the time it opened
the branch in Stanley, the group was riding high - reporting a £405 million profit with just over a quarter of
revenues coming from South Africa and ~ £50 million from Hong Kong and Singapore.36
But the bank soon hit the rocks. The geopolitical situation in South Africa turned sour and the banks
reputation, because of its association with the country, was damaged. Combined with heavy losses on its loan
book, the share price fell to levels where it yielded 9.5%. Trading at a 50% discount to book value bidders,
sensing an opportunity, began to circle. Senior management mounted their defences including evaluating
innovative solutions including taking the bank private through a management buy-out. Amidst rumours of
potential bids, Lloyds sprung the first hostile takeover bid of a British bank valuing the bank at £1.2 billion.
A hurriedly assembled and eclectic mix of ‘white knights’ blocked the Lloyds bid. It worked in the near-term
but left SCB with a register of new shareholders with sharply differing interests. Some wanted to focus on
how the bank’s position in Hong Kong could be exploited to capture growth in China whereas others were
urging a tougher focus on profitability and the disposal of marginal business lines including the US bank.37
Respite from bid distractions did not last long. SCB, as had all the other British banks, piled into the
syndicated lending market in the early 1980’s building up an imprudent level of exposure to Latin American
sovereign debt. It triggered a wave of defaults and SCB were forced to take over US$600 million of write
downs which plunged them into a loss. Shareholder reserves declined sharply from £1.3 billion a year earlier
to just £717 million. Vultures circled once again but were ultimately rebuffed. A new management team
embarked on a heavy restructuring and cost-cutting plan which saw the American operations sold. This
refocused its strategy on gathering funds in Africa and Asia to facilitate international trade and institutional
business.38
The Asian Financial Crisis in late 1997 engulfed SCB given its pivot to Asia. This led to more internal soul-
searching. The stock price collapsed by 50% over just five months and the merit of exploring tie-ups as a way
of shoring up the business was broached. Barclays, like a phoenix rising from the ashes, emerged as a
potential partner. They were keen on internationalising their business but again a deal did not materialise. 39
SCB, along with HSBC, were the British banks who fared best during the Financial Crisis of 2008. The pivot
Eastwards and decision to exit the US market shielded SCB from the sub-prime mortgage write downs which
holed many peers below the waterline. Perhaps, finally the value of its global network would start to shine?
Alas, another crisis would soon afflict the bank. In 2011, it was charged in the US with engaging in a criminal
conspiracy to bust sanctions imposed against Iran. The bank paid significant fines and a new CEO, Bill
Winters was hired. Since this time, Winters has overhauled the risk culture, bolstered the compliance
function, exited high-risk business lines including a number of countries and regions – all against a backdrop
of ultralow interest rates in the era of quantitative easing. SCB was hit with another round of enforcement
action and fines as recently as 2019 relating to earlier money laundering and sanctions breaking.40
Is SCB destined to always be the bridesmaid but never the bride?

Winters took up the reins at SCB when it was in midst of a crisis and no one should doubt the size of the task.
The restructuring has seen the loss of ~15,000 jobs and over US$5.1 billion of fresh equity was raised in
2015. It needed to shed risky emerging markets loan assets, introduce an effective financial crime/money
laundering framework and overhaul its risk culture. Growing revenues and boosting shareholder returns is
a tall order against that backdrop.
36 Ibid.
37 Duncan Campbell-Smith, Crossing Continents, 534-547.
38 Ibid, 558-568.
39 Ibid, 620-625.
40 Frances Coppola, “Standard Chartered Bank’s Long History of Financial Crime,” Forbes, 10 April 2019,
https://www.forbes.com/sites/francescoppola/2019/04/10/standard-chartered-banks-long-history-of-financial-crime/

On the face of it SCB should be an attractive opportunity. It has a 150-year heritage, is well positioned in a
number of attractive markets and should be positively geared to benefit from rising interest rates. But, why
do so many firms appear to walk away after taking a closer look at the business? In 2014 and 2015 alone –
ANZ, JP Morgan, Santander and Scotiabank were linked to potential transactions attracted by its
international reach. In 2018, Barclays rekindled its long-standing interest but chose again not to proceed
with a bid.41
SCB’s longer term shareholders are nursing significant paper losses with the share price having dropped by
a third during Winters custodianship. The first 9 months trading of 2022 saw underlying income rise by 10%
to US$12.5 billion and pre-tax profit jump 17% to US$3.2 billion. Return on equity also moved into double
digits to stand at 10.1% up from 6% a year earlier. The Financial Times also reports they have returned
US$1.4 billion to shareholders via dividends and buybacks in the first nine months of 2022. However, the
shares are not enjoying the same re-rating as peers with a marked gap developing as shown in Figure [1]
below.42
Figure 1: Mind the gap – SCB price to book ratio vs. a selection of peers
1.8
1.6
1.4
1.2
0.8
0.6
0.4
0.2
2015 2016 2017 2018 2019 2020 2021 2022 2023
Barclays Standard Chartered HSBC NatWest Lloyds DBS Group ANZ BBVA

Source: Refinitiv
SCB remains one of the cheapest banking stocks in Europe. The recent softening in Sterling may also
stimulate further take-over interest as the buying power of foreign suitors is boosted. In early January 2023,
First Abu Dhabi Bank confirmed to the market it had mulled a takeover of the bank but was not progressing
with an offer. Perhaps, the near 50% discount to book value is not considered to represent sufficient value
bearing in mind the complexity of integrating SCB and the extent of regulatory approvals which would be
required.
41 Stephen Morris & Emma Dunkley, “Why Standard Chartered remains a target despite its latest suitor walking away,” Financial Times, 6 January
2023, https://www.ft.com/content/77c5e742-fc3c-4fdd-a5d1-96865e5cccb9.
42 Ibid.

Section 3: Review of the Falkland Islands
Country overview
The Falkland Islands is a remote British Overseas Territory (“BOT”) positioned in the deep South Atlantic
Ocean. Its ties with the UK can be traced back to the seventeenth century when the first British landing was
made. The relationship with the Crown formalised in 1843 with an Act of Parliament that enabled the British
government to conduct civil administration on the Islands. A local government was soon established with a
Governor, Legislative Council and Executive Council to assist the governor. Initially, suffrage was limited but
became universal in 1948 alongside changes to have elected members of the Legislative Council.43
Further changes were made in response to the recommendation contained in the Shackleton report that
greater autonomy be granted to the Islands. A new constitution was enacted in 1985 which shifted the
decision-making away from the Governor towards the elected legislative council members. There were
further constitutional changes introduced in 2008 which incorporated a broad range of fundamental rights
and enshrined self-determination in the constitution itself. The Legislative Assembly was created to replace
the old Council. Under these arrangements the Governor, representing His Majesty the King, has
responsibility for external affairs, defence and police. Whilst, the government directs the economy, health,
education and immigration. The Governor retains a right of veto but in reality, this is seldom exercised.44
The Falkland Islands operates in a uniquely complicated geopolitical context because of the continuing
irredentist claims from Argentina. This can create logistical challenges in areas such as communications,
airlinks and so on however the Islanders are highly resourceful and have found ways to work around these
challenges to build a prosperous economy.45
Economic overview
By the late 1970’s, Shackleton found the economic situation of the Falkland Islands troubling – it was a ‘quasi-
colony’ manifesting a dependency culture with significant depopulation, deteriorating public finances and a
political class who lacked confidence to arrest its decline. After the liberation in June 1982 and after a follow
up report from Shackleton, the UK committed significant funds to the rebuild of the Islands. A good many
initiatives identified in the Shackleton report were implemented. These included the setting up of the
Falkland Islands Development Corporation which spear-headed a series of economic changes including land
ownership reform, projects to diversify the economy and the declaration of a fisheries zone around the
Islands. The Falklands, in just 40 years, has gone from being on the verge of economic peril to becoming
financially independent of the UK in all matters save for defence. Public finances are in rude health and
offering a high standard of living for residents as evidenced below in terms of GDP per capita.46
Figure 1: GDP per capita (FK£)

100
80
60
40
20
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GDP per capita GDP per capita - non resource sectors only

Source: Falkland Islands Government
43 Peter Clegg, “Political and constitutional issues for the contemporary Falkland Islands,” March 2022, The Round Table – The Commonwealth
Journal of International Affairs, 2-4.

44 Ibid.
45 Sarah Tudor, “Sovereignty since the ceasefire: The Falklands 40 years on,” 2022, House of Lords Library,
https://lordslibrary.parliament.uk/sovereignty-since-the-ceasefire-the-falklands-40-years-on/#heading-3
46 Clegg, “Political and constitutional issues for the contemporary Falkland Islands,” 2-5.

As Figure 2 demonstrates, the fisheries industry dominates the economy of the Islands and also drives other
sectors such as transport and storage, administrative and support services. Investments made by the
fisheries companies in other sectors including retail and real estate are also present in an effort to diversify.
Efforts are underway to try to reduce the reliance on fishing, as it can lead to volatility linked to fish stocks
and annual catch. Tourism is considered to be a driver of future growth in the Islands however its
development was retarded by the pandemic.
Figure 2: Sector drivers of economic performance (FK£)

250
200
150
100
50
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Fishing and aquaculture Mining and quarrying Public administration

Retail Transportation and storage Information and communication
Real estate activities Construction Other

Source: Falkland Islands Government
There has been widespread speculation for some time that the Falklands is on the verge of largescale
hydrocarbon extraction. It is important to note that currently this sector is a relatively small contributor to
national income albeit it has boosted economic output in previous years. Should extraction become a reality
it is likely to have a significant influence on the future development of the Falklands albeit it may potentially
introduce a greater level of volatility into the public finances.
Overview of the banking sector

Standard Chartered Bank
Standard Chartered Bank (“SCB”) is an emerging markets focused global banking
group, headquartered and listed in London. The bank opened a branch in the
Falkland Islands in December 1983, on the initiative of its Chairman Lord Barber, in
response to urgings from then Prime Minister Margaret Thatcher.
The branch operates with an FTE of 21 people from premises on Ross Road in the centre of Stanley. The
branch is fairly characterised as being ‘traditional’ in terms of look and feel with a number of tellers and an
enquiries desk sitting front of house. Behind which sits the machine room and strong room with a suite of
management offices on the upper floor.
Until recently the bank operated on its own servers situated in the Falkland Islands but recently migrated to
the wider SCB back office platform; the implementation of which took place in November following five
months of delay owing to challenges identified in the User Acceptance Testing (“UAT”). It is understood the
delay stemmed partly from a review by the UK regulator but also due to extended UAT connected to the
internet bandwidth challenges in the Islands. Data continues to be stored locally and transmitted at various

points during the course of a working day as opposed to operating purely on the cloud given the broadband
challenges in the Falkland Islands.
The branch provides a range of rudimentary money transmission (current) and savings accounts. Payments
can be made via debit card, cheque or funds transfer slips. Payments in and out of the account electronically
can only be made by SWIFT as the branch does not form part of the UK banking network. The bank does not
provide an Automated Teller Machine (“ATM”) and neither does it issue credit or charge cards. Customers
can choose to receive e-statements by email on a daily, weekly, monthly or quarterly basis. There is no online,
digital or mobile banking for customers to access their accounts to view information or to originate
payments. Funding for this project was previously allocated but was subsequently cancelled owing to the
Covid-19 pandemic. There is no confirmed date or funding allocated for the delivery of this capability.
SCB have banking relationships with ~3,000 individuals and ~500 businesses albeit it should be noted that
nearly 50% of these business relationships have balances of <£15,000. They have issued ~2,000 debit cards
across these accounts. The SCB branch has total deposits ranging between £150 million and £180 million
with the majority of these being on sight or short dated tenors. They are laid off with other SCB offices in
Jersey and London.
The bank has a total loan book of ~£21 million. Residential mortgages comprise ~£17.5 million of this loan
portfolio of which ~£14 million is underwritten through the Joint General Mortgage Scheme and benefiting
from the ‘top-slice’ guarantee from FIG. There is a commercial lending book of ~£600,000 and the balance
of loan book comprises other personal lending (e.g. car finance loans and so on). SCB in the Falklands will
not lend to businesses which have not been operating for less than three years. SCB operates with a loan to
deposit ratio of between 11 – 13% in the Falkland Islands.
The SCB business is led by current Local CEO Sarfraz Rao who joined the business in 2021. The Local CEOs
are rotated in from the wider SCB network for terms of between 3-5 years and they lead a team of 21 branch
colleagues including 14 in operations. There are 5 colleagues who provide support with customer due
diligence and credit management and a finance officer. The Stanley branch is also supported by functional
Subject Matter Experts in Jersey in areas such as compliance and financial crime. The Stanley branch reports
to SCB in Jersey which focuses on international personal banking.
The Falkland Islands Development Corporation
The Falkland Islands Development Corporation (“FIDC”) was setup in 1983 following
on from the Shackleton Report which saw an important role for a Development
Corporation on the Islands. The FIDC was charged with spearheading a number of
initiatives including the reform of the farming land and also attracting to the Islands
missing skills and expertise which would support the wider development of the
economy.
Its mandate is to act as a partner to business, helping to develop and execute strategies for the improvement
of the Islands’ rural, tourism and wider business sectors. The FIDC is managed at arm’s length from the
government by a Board of Directors. It receives its budget from the FIG which currently sits at ~£1 million
per year.47
FIDC provides loan and grant funding to businesses. It presently has a loan book of £2.5 million although in
the past it has on occasion provided equity financing. There is a formal loan approval process with FIDC staff
having a delegated authority for smaller loans and larger loans requiring sign-off from a credit committee,
the Board or Executive Council.
FIDC support, in loans or grants, are always made on the basis they support its core mission to boost the
economic development of the Islands. Loans will be considered for start-up ventures and established
businesses for a variety of purposes including working capital, growth funding or the acquisition of land and
property. Loans will be provided either on a concessionary basis or at commercial rates of interest. Loan
47 Falkland Islands Development Corporation. 2021 Annual Report, https://www.fidc.co.fk/about-us/annual-report

terms of up to 5 years are available for financing plant and machinery or up to 25 years for financing land
and property.
In addition to its role as a development lender, FIDC also plays a critical role in helping businesses develop
business plans and strategies to grow, advice and support including training and skills seminars. These
additional services are provided free of charge.
Wise (previously Transferwise)

Wise functions like a digital bank for many Falkland Islanders, although it is not
authorised as a bank by the UK regulators. Instead, it is authorised an electronic money
provider and is subject to placing customer funds on safeguarding bank accounts with
established banks.
Wise offers a multi-currency bank account for both individuals and businesses with a
UK sorting code and account number. Its services are delivered entirely digitally through an intuitive and
simple to use mobile app. It offers the ability to make international and domestic payments at competitive
rates compared to SWIFT.
Wise also issues a multi-currency debit card which allows Falkland Islanders to spend their money both at
home and abroad. These accounts are increasingly being used by businesses using the Square card merchant
service as an alternative to Gibraltar International Bank because of the faster account opening service.
Wise have announced they are applying for authorisation to become a regulated bank in the UK. This would
benefit their customers by also providing coverage under the Financial Services Compensation Scheme for
deposits held with them.
Square
Square is a payment processing platform that charges a flat 2.5% transaction fee. It
allows businesses to accept card payments from all major debit, credit and charge
cards, this was particularly helpful to businesses which relied on the custom of tourists
who have increasingly not wanted to use cash. A trend which has accelerated following
the pandemic. Many businesses who have adopted Square payments note that the 2.5%
transaction fee is more than offset by an uplift in the total customer spend.
The business is owned by Block Inc. which is a multinational technology conglomerate, owning a suite of
payment related platforms, including in the buy-now pay-later sector.
It is important to note that Square have declined to roll-out the service to St Helena, Ascension Islands and
Tristan de Cunha at the current time. They have cited technical difficulties with the roll-out of the service to
the Falkland Islands.
Gibraltar International Bank
Gibraltar International Bank (“GIB”) is a Gibraltar based full-service bank, wholly
owned by the Gibraltarian Government. It was setup following the Barclays withdrawal
from Gibraltar and the concerns which arose around the competitive landscape of the
remaining banking sector.
GIB have been providing bank accounts and digital banking to businesses in the Falklands to allow them to
operate the Square payment platform which cannot run using SCB’s existing infrastructure. Each transfer
payment back to bank accounts held at SCB is charged at ~£30 as it has to be routed via the SWIFT network
which means businesses have to plan carefully to minimise the number of payments. Some businesses noted
that the on-boarding process with GIB can be a little protracted and the recent introduction of text messaging
as a means of secondary authentication for online banking / payments has caused issues given challenges
with the mobile signal in Camp.

GIB is not a full-service bank in the Falklands but they have offered a much needed solution and access to the
UK banking network. They do not provide any credit facilities in the Falklands given they do not have a
physical presence. Without their support the roll-out of Square would not have been possible.
The Falkland Islands Company
The Falkland Islands Company (“FIC”) is the largest business on the Islands and has
approximately 25 business units including a car retail outlet. FIC provides credit
accounts to customers in its retail stores and also provides car financing including hire
purchase loans. It is understood that the loan financing book is in excess of £1 million.
FIC are also heavily involved in the building of new properties in the Islands and offers a turn-key solution
to prospective buyers which affords them a level of certainty in terms of the price and enables them to
continue renting whilst the house is being built. At completion the property is typically financed by SCB
through the JGMS scheme.
FIC are also act as agents for the Caribbean Alliance Insurance Company who provide a range of insurance
for residents of the Islands including personal, property, vehicle, employer and cargo insurance.
Stanley Services
Stanley Services is one of the larger corporations on the Island owned by a consortium
of stakeholders including FIG and two other institutional shareholders. The primary
business of Stanley Services is oil import, storage and distribution. As well as the
civilian petrol station, the business provides commercial refuelling including marine
bunkering and aviation fuel.
In terms of financial services there is a modest car finance portfolio. More recently Stanley Services has
become well known for their ATM service which is on the Visa/Mastercard network. As the only ATM on the
Island, it dispenses cash of £100,000 and £150,000 per month. It is understood this service is operated on
the basis it ‘washes its own face’ as a community service as opposed to being a for-profit endeavour.
Service provision ex-Falkland Islands
It is noted that a number of the larger organisations and FIG have arrangements with UK banks some of
which are very long-standing in nature. Some firms which were interviewed indicated that whilst these UK
banks were comfortable in maintaining their existing arrangements they were not open to extending further
services including the opening of additional accounts.
These arrangements are in addition to maintaining accounts with SCB in Stanley which are typically used for
settling local wages/salaries and suppliers. All of the firms interviewed with UK accounts of this nature have
access to them via digital or mobile banking including the ability to originate payments. A number of those
undertaking retail operations also benefited from card merchant services to accept debit and credit cards.
Figure 3: Lending & Deposits to Islanders by banks without a physical presence (£m)
350
Lending
300
Deposits
250
200
150
100
50
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source: Bank of International Settlements, Bank of England

Figure 3 shows the level of deposits and loans for Falkland Island residents with banks outside of the
Falkland Islands. As at June 2022, there is £49m of lending – almost entirely from Spanish banks and likely
to one of the fishing joint venture companies – and over £280 million of deposits. This suggests that the total
size of the banking market in the Falkland Islands for deposits stands in the range of £430 million to £450
million.
Over the past decade deposits outside of the Falkland Islands have grown 238%, with a compound annual
growth rate of 9%, lending has grown 538% which corresponds to an 18% compound annual growth rate.
Whilst deposits have grown at a slower rate than lending, it is important to note deposits started at a far
higher level relative to lending (£121m compared to £9m).
This is greater than the total amount of deposit and lending book held by SCB at present and represents a
significant value pool which is being lost by the Islands. Some of these deposits will be placed with banks
other than SCB because of the requirement to have counterparty diversification however it is not
unreasonable to assume that a significant proportion of these deposits might be repatriated to sit within the
Falkland Islands should the range of services be expanded.
Figure 4: Analysis of lending to Falkland Island residents from outside of the country (£m)
60
50
40
30
20
10
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Bank sector Non-bank financial sector Non financial corporations
Households General government Unallocated

Source: Bank of International Settlements, Bank of England
Figure 4 shows the lending to Falkland Island residents from outside of the country. The overwhelming
majority of lending takes place in € to non-financial corporations, most likely the joint venture fishing
companies which have started a significant fleet renewal programme.
Understanding the banking needs of Falkland Islanders

The Falkland Islands has a diverse range of businesses operating in Stanley and Camp which were
interviewed as part of this work in order to get a clear picture of the breadth of the banking needs on the
Islands. It is not considered appropriate to profile specific businesses in this report – instead a range of
generic profiles have been developed to articulate the characteristics and needs of a typical retailer,
hospitality business and so on. These are set on the following pages together with a short narrative summary.


Families and households
All individuals have day to day banking needs for receiving their salaries, paying their bills, and making
savings. Many also require lending facilities, this might be an unsecured personal loan, an overdraft, a
mortgage, a car loan or a secured personal loan. Many individuals, particularly expats from more connected
countries, expect to be able to do their primary banking through either an app or an internet portal. Families,
particularly those who live far away from Stanley and those who are time-poor, would benefit from a means
of doing their banking online.
The Falkland Islands has a relatively young and able population relative to the UK, however there is a
substantial number of vulnerable individuals. Greater levels of digitisation may adversely affect the service
proposition for those who prefer the highly personal and traditional banking process that currently exists.
Any service changes must consider this vulnerable sector of the Falkland Islands, ensuring that there is a
degree of financial inclusivity maintained. This could come by way of greater promotion of financial
education tools online.


Fishing industry
The Falkland Islands rapid economic growth since the 1980’s is largely attributed to innovations in the
fishing sector. Fishing businesses have distinct asset finance needs, many of which a high street bank branch
would not have the expertise to offer. This has led most fishing companies to establish a relationship with
overseas banks for both making payments and facilitating lending.
Larger fishing companies often have more complex structures owing to their presence in overseas markets,
primarily Spain which is the predominant export market for squid. This has contributed to prominent
partnerships with Spanish banks who have better knowledge of the risks posed by fishing related asset
finance. This will be particularly relevant over the next few years, owing to the need of several businesses,
which are renewing their fleets at the cost of several million pounds. The terms offered by Spanish banks
have tended to be reasonably generous owing to the strength found in the relationships they have with
Spanish partners of Falklands fishing companies.
Fishing companies often employ expats in their ship’s crews, and thus some require a means of paying wages
in several currencies, or to several different bank accounts in different countries. It is understood that SCB
have only minimal involvement with local fishing companies. The only significant involvement is where SCB
Jersey provide investment services for companies with excess cash.


Tourism

The tourism sector of the Falkland Islands is growing quickly, notwithstanding the negative impact of the
Covid-19 pandemic. Tourism activities largely revolve around the unique environment and history of the
Falklands and as a result are geographically diverse, some businesses even basing themselves overseas.
The core banking needs of tourism businesses include asset financing, commercial mortgages, business
lending, accounts from which to pay bills/wages (both domestically and internationally). The lack of digital
banking services has been subject to a wide range of workarounds including using Wise, utilising overseas
accounts, at times even resorting to posting cash to the branch for deposit.

Hospitality

The hospitality sector is strongly linked to tourism, albeit there are notable differences in their banking
needs. The most obvious need for hospitality businesses is the ability to take card payments, and whilst the
Square solution has improved this aspect of business it is by no means without significant drawbacks. The
most crucial shortcoming is the fee associated with getting money back into the Falklands which
hospitality businesses must do more frequently than most in order to meet local suppliers bills and to pay
wages. This requires careful planning of their cashflows.


Conglomerate

There are several businesses on the Islands which function like old fashioned conglomerates, with
operations in multiple sectors. This creates more complex requirements from a banking provider, which has
led some in the sector to partner with UK banks. The complexity relates to the greater scale of the businesses,
often managing over a dozen business units each with their own unique needs and risk profiles.


Agriculture
The agricultural sector in the Falklands is dominated by sheep farming for wool exports. Although there is
some modest cattle farming on the Islands. These businesses are generally smaller in scale and have
reasonably straightforward needs from a banking perspective. They require asset financing for farming
equipment, commercial lending, and international transaction services. There is a perception from the
agricultural community of the Falkland Islands that there is too limited lending from SCB than is warranted
by the sectors risk profile. SCB indicate that the nature of many farms financial reporting is not sufficient
for SCB to properly assess the credit proposition.


Retail

There are several boutique retailers in the Falklands servicing both locals and tourists with a range of
products and services. These businesses have modest financing needs, perhaps a commercial mortgage and
a small amount of working capital finance for the purchasing of stock or productive capital. Most significantly
these businesses require a means of making and receiving payments. These businesses have similar issues
relating to making and receiving card payments through Square. Any improvements which reduce the cost
of transferring money back into the Falkland’s would benefit retailers.


Government

Broadly speaking, FIG is responsible for taxation and the provision of public services. In this regard they help
to administer and improve all aspects of economic and social policy on the Islands. Their financial needs are
relatively complex and require a variety of providers in the interests of diversification. Government requires
a means of making and receiving payments, and facilitating investments.


Overview of available services
Below is an overview of banking services and the respective providers. Green shows availability, red shows
unavailability, and grey is partial or unknown. This approach is also used in the peer-group case studies. It
should be noted that it does not include situations where Falkland Islanders have access to other banking
products and services through other providers outside of the jurisdiction.
Personal Banking

Money Transmission
Accounts (inc. Debit Card)

Savings Accounts

Online/Digital/ Mobile
Banking

Share dealing &
Investments

Lending

Mortgages

Credit & Charge Cards

Insurance

Foreign Exchange
Services

Asset Finance

ATM

Commercial Banking

Money Transmission
Accounts (inc. Debit Card)

Savings Accounts

Online/Digital/Mobile
Banking

Markets / FX

Lending

Commercial Mortgages

Real Estate Finance

Asset Finance


Trade Finance

Business Insurance

Card Merchant Acquiring

Support Services

Relationship Manager
Service
Climate change resilience

The Falkland Islands, along with the United Kingdom, have a strong commitment to fight climate change. In
its 2021-2040 Environmental Strategy, the Falklands set out the principles and commitments that would
guide government action going forward. Among others, the government is committed to; running Stanley
entirely off renewable energy, plan for the potential impacts of climate change, reduce pollution through
improved waste management. These strategic objectives will have to be followed by a comprehensive
programme of both public and private investment. The nature of green public investment is currently in flux,
with greater clarity likely to come following the discovery work currently planned or underway.
The private sector in the Falkland Islands has not shown significant appetite to undertake green investment
projects. Albeit, owing to the dominance of sectors depending on a stable relationship with the natural
environment there is a powerful incentive to reduce environmental degradation.
Summary
The Falkland Islands has a solid economic and fiscal position. However, there are core banking needs for
both businesses and individuals which are currently not being met by the existing bank in the Falkland
Islands.
Indeed, some of these needs which are not being met might be retarding the overall development of the
Islands. This is because deposits which would otherwise be with SCB locally, improving their profitability,
and thereby contributing more by way of tax revenue to the FIG, are with other overseas providers. This is
largely due to the isolation of local SCB accounts from the wider financial system, and the challenges caused
by the lack of internet banking. Indeed, offshore deposits amount to ~£289 million which if a reasonable
proportion was brought back to the Falklands would increase the deposit base and boost profitability for
SCB. Insufficient service provision could be a contributory factor to this capital flight.

Section 4: Peer group cohort case studies
This section devises a cohort of jurisdictions which share similar characteristics to the Falkland Islands.
These jurisdictions are used for comparative analysis in order to assess and determine what banking
provision should reasonably be expected. Based on the review of the Falkland Islands found in the previous
section, unique factors can be identified that have informed the selection of the peer cohort.
The Falkland Islands are a unique jurisdiction – a self-governing British Overseas Territory comprised of an
archipelago of islands located in the South Atlantic Ocean. Notwithstanding its remoteness it enjoys a high
level of development as exhibited by its high Human Development Index rating and robust economic
performance. It is financially independent of the United Kingdom save for the matters of defence and foreign
affairs.
Methodology
The following factors are unique to the Falkland Islands and have been considered in the selection of the
relevant cohort. These factors were chosen to reflect those things which determine the viability of certain
banking propositions and represent key factors determining the level of banking services the Falkland
Islands should expect.
§ Sovereignty Status: The Falkland Islands are a British Overseas Territory (“BOT”) meaning it is self-
governing, yet non-sovereign; depending on Britain for its foreign affairs and defence. Whilst the Falkland
Islands is a self-determining territory, it does not have representation within international bodies such
as the United Nations or International Monetary fund.
§ This is an important consideration as non-sovereign territories tend to lack the full policy flexibility of
sovereign states. Notably they lack the ability to effectively conduct monetary policy as they often have
pegged currencies (as is the case with the Falkland Islands Pound which is pegged to Sterling). The
interaction between the jurisdictions and their ‘metropolis country’ is important in the final analysis as
public policy decisions at a metropolis level have the potential to significantly impact banking provisions
overseas.
§ Population and Population Density: Population is directly relevant to a bank’s considerations as to
whether to serve a market in any given jurisdiction as the scale of market opportunity directly affects
their profitability. Population size and density also affect customer needs. The Falkland Islands requires
banking products which cater to the diverse needs of the agricultural, fisheries, retail and tourism sectors
in addition to the personal banking products each Islander would require.
§ Population size also influences how small states navigate their integration into international trade and
what kind of industries they can adopt into their macro economy (e.g. human capital restraints and so
on).48 The Falklands is a territory with a comparatively small population of ~3,600 permanent inhabitants
although its population density is just 0.3 people per km2 which places it firmly within a low-density
subcategory of jurisdictions.
§ Remoteness – Located in the South Atlantic, remoteness is a key feature in the economic development of
the Falkland Islands. It therefore is prudent for this case study to use distance from the ‘metropolis
country’ as an indicator of remoteness, as non-sovereign states tend to be reliant on support from the
metropolis for certain decisions. Greater proximity can mean a more straightforward path for material
support, as well as greater ease in providing technical support and advice. For the private sector
remoteness can affect the feasibility of ventures by adding geographic obstacles such as poor internet
connection and limited physical connectivity. This largely affects the service proposition but may also
impact profitability. Given the centrality of this issue the project will look to compare the Falkland Islands
against other jurisdictions which have similar levels of remoteness as measured by their distance from
their metropolis.
48 Harvey W Armstrong et al, “The non-sovereign territories: Economic and environmental challenges of sectoral and geographic over-
specialisation in tourism and financial services,” European Urban and Regional Studies (2021): 3-5.

§ Economic Composition: The Falkland Islands is a small but comparatively wealthy jurisdiction that was
resilient during the pandemic. Its economy is primarily driven by the primary industries of fishing and
agriculture, yet oil exploration and tourism have also supported it and show viable prospects for
development.49 A broadly similar economic composition is a necessary component for the cohort in order
to compare the needs of each local jurisdiction and each strategy they found to cater to these needs. It is
acknowledged that this is a relatively unique economic composition, thus some jurisdictions may only be
compared in those areas where similarities exist.
Filtering criteria and process

The following criteria have been used in selecting the cohort of peer jurisdictions:
§ Sovereignty Status: Only those jurisdictions/territories which are not considered to be sovereign
territories in their own right have been selected. It should be noted the legal status and constitutional
position of each jurisdiction with its ‘metropolis country’ within the cohort differs.
§ International Finance Centres: Countries with active international finance centres have been excluded
for the purposes of this exercise. Domestic residents and businesses are likely to be over-served in
international finance centres as banks are not operating there on the strength or size of the domestic
market.
§ Population and Population Density: With the Falkland Islands population of ~3,600, this metric should
only be stretched to consider jurisdictions with a population less than 20,000 to ensure comparable scale.
§ Remoteness: Jurisdictions have been selected based on their remoteness from their ‘metropolis country’
e.g. the United Kingdom. With the Falkland Islands being significantly distanced, anything closer than
2,500km ought to be considered too close for comparison.
§ Economic Composition – Peer group countries have been selected with a view to ensuring they have
similar economic characteristics i.e., a dependency on primary industries such as fisheries, agriculture
and with tourism representing an increasingly important component of economic output.

The following academic comparative research has been used to inform the starting point of the cohort
selection: Ferdinand, Oostindie and Veenedaal,50 and, Armstrong and Read.
Limitations
Factors of GDP per capita and the Human Development Index have not been included in terms of screening
as to do so would likely constrain the ability to develop a meaningful peer group for this exercise. They are,
however, important markers and have been included within the overview and consideration of each case.
The overall approach is more qualitative than quantitative. Availability of robust and granular quantitative
data is challenging for small island countries. A comparative and qualitative approach was therefore
49 Standard and Poors, “Falkland Islands assigned ‘A+/A-1’ long- and short-term sovereign Credit Ratings,” S&P Global Ratings (2021).
50 Malcolm Ferdinand et al, “A global comparison of non-sovereign island territories: The search for ‘true equality,” Island Studies Journal (2020):
15(1), 43-66.

considered to be the most sound approach to develop a cohort of peer countries. It is also acknowledged that
each island jurisdiction is unique in its own right with a wide range of factors (heritage, culture and history)
that have shaped their economic development.
Lastly, quantitative comparisons across jurisdictions run the risk of a lack of available or accessible
information. Only official documents have been digitally translated and follow up phone calls / emails have
been used where possible to endeavour to get an ‘on the ground view’ as opposed to what a purely desktop
exercise may reveal.
Final cohort selection

After carefully considering a range of countries using the above selection criteria, the final cohort of peers
was determined as: Niue, Cook Islands, St Pierre and Miquelon, Easter Island, and St Helena. A brief
overview of each country is detailed below:
§ Niue: A self-governing territory part of the Commonwealth which is in a free association with New Zealand.
Major industries are tourism and fisheries with significant foreign aid from New Zealand also featuring.
Tourism sector has been heavily impacted by the Coronavirus pandemic. The New Zealand Dollar is its
currency.
§ Cook Islands: A self-governing territory and part of the Commonwealth, which is in a free association with
New Zealand. Heavily dependent on foreign aid from New Zealand. Agriculture and tourism are dominant
economic contributors. Running down its nascent offshore finance industry after political pressure from
New Zealand. Uses the New Zealand Dollar as is its currency.
§ St Pierre & Miquelon: A devolved parliamentary dependency of France (Overseas Collectivity) which is
represented in the French legislatures. The Euro is the official currency but Canadian Dollars are also
widely accepted. Fishing and agriculture were historically a very dominant component of the economy
however this has significantly reduced and they now stand at ~15% of total economic output.
§ Easter Island: A Chilean Special Territory which has its own set of additional legislation due to its unique
demographic and history. Its formal economy is relatively new and largely dependent on tourism. The
Chilean Peso is the currency in use.
§ St Helena & Ascension: A British Overseas Territory who receive substantial funding from the UK’s
development budget. St Helena’s economy is geared to growing coffee, fishing, tourism and the exporting
of alcohol. The airbase on Ascension is the focal point of the economy there. The local currency is pegged
to the British Pound.
These countries fit within the core criteria outlined above but there are also differences. It is deemed
valuable to have a range in GDP per capita, population, and population density. The most notable difference
is that of the Cook Islands, with a population comparatively much higher than the Falklands. Nevertheless, it
still fits within each metric, and conversely has a much lower GDP.
Comparatively, the Falkland Islands has a much higher, even unusually high, GDP per capita for such a small
and remote jurisdiction – with global rankings placing it between the 9th and 13th most prosperous. It was
therefore unlikely to find other jurisdictions that were comparable in this regard, albeit one could assume
that banking provisions with such a high GDP p/c would be comparatively better – this may benefit the
comparative study also.
A one page overview of each peer group country with key information is attached overleaf.


Peer group at a glance

Case study one: Niue
Country overview
Niue is a self-governing small island Pacific state of ~1,750 people which is in a free association with New
Zealand, a member of the Commonwealth, and with King Charles III as the head of state. It has a legislative
assembly of 20 members albeit New Zealand is responsible for its foreign affairs and defence matters as well
as economic and administrative assistance (when requested).51 Wellington, the central ‘metropolis’, is
2,862km away.
Economic overview
The population of Niue had an 18% decline through the decade from 1997 to 2007 but has since stabilised.
This decline can be explained by economic migration, indeed there is now over 30,000 ethnic Niueans
residing in New Zealand.52 Niuean’s are also New Zealand citizens, and they share the same currency – the
New Zealand Dollar (“NZD”).
The population decline has been a challenge to Niue’s macroeconomic performance notwithstanding the
recent challenges presented by the Covid-19 pandemic. Tourism represents the main driver of its economy
with ~12,000 visitors in 2019 (six visitors per resident).
GDP per capita (US$ - 2023 prices) Economic Composition

20,000
18% 19%
19,000
18,000
3%
17,000 14%
33%
16,000
5%
8%
15,000
Primary Industries Construction
14,000 Wholesale & Retail Hotels & Restaurants
2014 2015 2016 2017 2018 Transport Government

Other
Source: Statistics Niue53
Primary industries also make up a sizeable portion of its economic composition (19%), but it can suffer from
significant fluctuations year to year. Foreign aid particularly from New Zealand and the Asian Development
Bank help to supplement government revenues.
Communications infrastructure on the island has recently been improved through the arrival of an
interconnector communications line from New Zealand. Previously, Niue was dependent on satellite internet
services.
51 New Zealand Legislation, “Niue Constitution Act 1974,” https://www.legislation.govt.nz/act/public/1974/0042/latest/DLM412793.html.

52 Ministry of Foreign Affairs and Trade New Zealand, “About Niue,” 2022, https://www.mfat.govt.nz/en/countries-and-regions/australia-and-
pacific/niue/new-zealand-high-commission-to-niue/about-niue/.
53 Statistics Niue, “Home,” December 2022, https://niuestatistics.nu.

Westpac, the Australian bank, previously operated in the Island however they sold their operations to the
Bank of the South Pacific in 2004, who in turn exited the island in 2013. Commercial banks would seem to
find it difficult to operate profitably in this small, relatively impoverished market. It should also be noted
that there are no insurance companies on the island due to the high risk of cyclones and small population
making it commercially unviable.
Niue Commercial Entities Limited (NCE)
Two entities are in operation under this State-Owned Enterprise (“SOE”), a Kiwibank agency and Niue
Development Bank:
Kiwibank Agency
The Niuean government, through NCE, partnered with Kiwibank to provide an agency
offering of selected Kiwibank products to individuals and businesses. The products
include transaction bank accounts, call accounts and internet/mobile banking access
with EFTPOS card access and full payment functionality. New Zealand legislation and
regulation applies, thus all services relating to AML and KYC comply with New Zealand
law. There are no ATMs provided but rather cash can be drawn out from the local
Kiwibank teller, or via cashback at retailers. There is a general confidence in the
Kiwibank service stemming from it being an SOE of New Zealand and linked to the
governments strong commitment to the territory.54s
Niue Development Bank (NDB)
Kiwibank does not provide any credit products – these are provided by the Niue
Development Bank, which has a total asset book of ~NZ$12 million (approximately
one-third of Niue’s total GDP). They are the only official lender on the island. There is a
significant client base made up of both individuals and businesses. Commercial and
lending products range from micro-loans, car loans and mortgages to working capital
and loan facilities. Work is underway to ensure NDB is able to offer online services
where customers will be able to access and administer their lending products remotely.
In 2020 their loan advances totalled almost 4.25 million NZD.55
Australia and New Zealand Banking Group Ltd. (ANZ)
Merchant services are provided by ANZ bank and there are ~65 businesses on the
island accepting EFTPOS / Credit Cards. Visa and Mastercard are thus options which
enables ease-of-travel for tourists. In 2022 ANZ announced its commitment and
renewed investment towards the Pacific region stating they are “committed to the
economic, social and environmental development of the Pacific” even when the past
years have not seen any profit.56 This may have a flow on effect for Niue as well.
Internet infrastructure
Sufficient internet connectivity has been available on the island since 2000, with Telecom Niue providing
mobile, fixed-line and internet telecommunication services. Since 2020, Niue has been connected to the
Manatua fibre cable (an extension of the cable which runs from Hawaii) which has resulted in significant
improvements in services. There is a high level of use of internet service, but with the major challenges being
54 Ministry of Foreign Affairs New Zealand, “New Zealand – Niue statement of partnership,” December 2022,
https://www.mfat.govt.nz/assets/Countries-and-Regions/Pacific/Niue/Aotearoa-New-Zealand-Niue-Statement-of-Partnership-2022-2025.pdf.
55 Government of Niue Department of Finance and Planning, “Financial snapshot: 1 July 2020 – 31 January 2021,” 2021,
https://www.gov.nu/wb/media/2021/GON%20Snapshot%20Report%20of%20the%20Niue%20National%20Economy-%2031Jan21.pdf.
56 ANZ, “ANZ to strengthen focus on core Pacific markets,” 2022, https://news.anz.com/new-zealand/posts/2022/03/ANZ-strengthen-focus-
Pacific-markets.

affordability for the public, reliable power, and return on investment due to the small population. Despite
such challenges, Kiwibank offers a full internet banking service, even before the cable was completed.
Overview of available banking services

Personal Banking
Money Transmission

Accounts
Savings Accounts
Banking
Share dealing &
Investments
Lending
Mortgages
Insurance
Foreign Exchange
Services
Asset Finance

Commercial Banking

Money Transmission
Accounts
Savings Accounts
Banking
Markets
Lending
Commercial
Mortgages
Real Estate Finance

Asset Finance
Trade Finance
Business Insurance
Card Merchant
Acquiring
Support Services
Service

Niue is particularly concerned about the impact of climate change upon its residents, owing to its geographic
vulnerability, and has therefore prioritised the promotion of sustainable infrastructure projects as well a
number of conservation projects. In their National Strategic Plan 2016-2026, the government deems climate
resilience as the primary consideration and hence only prioritises investments in its economy that are
economically sustainable and climate friendly.57
Of primary importance is improving the Islands resilience to sea level rises, and extreme weather patterns
by building flood containment and weather resilient infrastructure. Australia, New Zealand, the UK and a
number of development banks have committed resources towards projects to help build Niue’s economy to
be sustainable and climate resilient. Banks in Niue are not lending, so green financing is thus only adopted
through development aid and government.
Summary
In the context of an economy that has a low relative income, a hostile and uninsurable environment, an
uncompetitive market, and a dependence on foreign aid, the banking service portfolio seems to have found
a sufficient resolution for residents. The relevant findings highlight access to required banking services albeit
via Kiwibank in New Zealand. The arrangement that Niue Commercial Enterprises has with Kiwibank seems
to enable all necessary banking products for clients, as well as meeting the needs of the diaspora in New
Zealand, and Australia. This arrangement also resolves issues around regulation and legislation within the
jurisdiction as it is able to rely on New Zealand’s banking regulation which has the confidence of markets.
This banking arrangement is an overt example of the relationship between New Zealand and Niue; although
New Zealand doesn’t deem itself as ‘owning’ the Island by any means, it does consider itself as having an
important role in the upkeep in services and socio-economic wellbeing.
Two significant features are highlighted in this case. Firstly, there is comprehensive internet/digital banking
which is maintained despite there being comparatively less need in Niue for electronic banking due to both
smaller travel distance and population size. The second aspect is that there is a superior communications
infrastructure to that of the Falkland Islands. It should be noted that this infrastructure was not an
investment made only by Niue itself, but with the support of foreign aid programmes.

57 Government of Niue Department of Environment, “Niue national strategic plan 2016-2026, https://niue-data.sprep.org/dataset/niue-national-
strategic-plan-2016-2026-0.

Case study two: Cook Islands
Country overview
The Cook Islands is constituted as a self-governing Pacific state which is in a free association with New
Zealand, a member of the Commonwealth with King Charles III the head of state. The Cook Islands
administers its own affairs with an expectation of good governance, yet New Zealand holds responsibility for
foreign affairs, defence and security.58 Wellington, the central metropolis, is 3,266km away. The New Zealand
government, with the consent of Cook Islanders, assists with the state’s administration, providing vital
expertise and was highly influential in ensuring it stepped away from becoming an international financial
centre because of concerns about its international reputation.
The population of the Cook Islands is larger relative to other jurisdictions in the cohort but still sits within
the limits the framework prescribes. The population is roughly 17,500, with a diaspora of ~80,000 living and
working in New Zealand. Cook Islanders are New Zealand citizens with full rights to live and work there. The
currency used is the New Zealand Dollar. The Cook Islands consists of 15 small islands spread over 1.8
million km2.
Economic overview
Tourism has been the main cause of economic growth over the past 2 decades of which 2018 saw the islands
receive almost ten times the population in tourists. This culminated in a record total of 65% of the annual
nominal GDP. The strong tourism sector has increased from ~40% to ~60% of GDP since 2012 but was
profoundly affected by the Covid-19 pandemic in 2020.59 This triggered significant demands from the
residents to build up other areas of the economy to reduce its reliance on a single industry.
It is important to note that although real GDP has increased and decreased significantly over the past decade,
per capita GDP has stayed relatively constant meaning that other factors need to be considered such as
population changes, government intervention or foreign aid transfers. The Asian Development Bank and the
New Zealand Government both supported through match funding.
GDP (NZ$ - 2016 prices) Economic Composition

600,000
10%
15%
500,000
16%
400,000
12%
300,000
8% 12%
200,000
100,000 27%
Primary Industries Public services
0 Finance and Real estate Hospitality & Tours
2015 2016 2017 2018 2019 2020 2021 Transport Retail and trade

Other
Source: Cook Islands Statistics60
58 Ministry of Foreign Affairs New Zealand, “Joint centenary declaration of the principles of the relationship between the Cook Islands and New
Zealand,” 2001. Accessed at https://www.mfat.govt.nz/assets/Countries-and-Regions/Pacific/Cook-Islands/Cook-Islands-2001-Joint-Centenary-

Declaration-signed.pdf.
59 Ministry of Finance & Economic Management Cook Islands, “Economic development strategy,” December 2022,
https://www.mfem.gov.ck/economic-planning/economic-development-strategy.
60 Ministry of Finance & Economic Management Cook Islands, “Statistics,” https://www.mfem.gov.ck/statistics.

Main industries other than tourism are the public services and some primary industry materials exported
mostly to New Zealand. It should be noted that there is an international financial centre operating out of the
Cook Islands with Trust Business, insurance (including captives), and banking services but deemed small in
comparison to other industries. This is largely a legacy of previous policy decisions when the Islands were
attempting to become an international financial centre.
As with Niue, New Zealand remains committed to the territory. Especially with indigenous roots stemming
from the Cook Islands, the mutual obligations and cultural identification remains strong between the two
states.

The Cook Islands is serviced by 4 banks as expanded on below. Each bank operates under the Financial
Supervisory Commission (FSC) which provides and administers a complete regulatory framework according
to parliamentary legislation. The banking sector has NZ$1.11 billion of lending assets, of which ~30% is in
real estate. Insurance is provided via one bank and a small number of insurance companies. The aggregate
loan-to-deposit ratio is currently ~50%.61
Bank of the South Pacific
BSP began operations in the Cook Islands after it acquired Westpac’s branches in
2015. Full services are offered (personal and commercial) including multiple
transaction and savings accounts, investment options, personal and home loan
availability, with access services through ATMs, full online services, Visa Debit cards,
and EFTPOS. BSP was founded in Papua New Guinea and has recently become one
of the most dominant banks in the South Pacific, offering its full services across
borders throughout the region. The banks total Customer loan-to-deposit ratio was
56.95% in 2021.62
ANZ Banking group
ANZ’s presence in the Cook Islands dates to 1988, and since then has become a well-
established branch integrated into ANZ’s Pacific division. Personal banking includes
transaction accounts, saving and lending. Business banking, in addition to the
former, includes international trade finance, asset finance and leasing, structural
finance, and acquisitions. Customers access banking services through branches,
online banking, ATMs, EFTPOS and credit cards. ANZ has recently announced
intentions to expand its role in the Pacific region, seeing it as core to its customer
proposition.
Bank of the Cook Islands
BCI is the only locally owned bank on the islands. It was founded in 2001 after the
local savings bank and development bank merged. It boasts the largest branch
network in the Islands supporting even the outer islands. The business operates as
a State Owned Enterprise at arms distance from the government. As with both ANZ
and BSP, BCI offers a wide range of products and services to both the personal and
commercial sectors. Beyond this, they also offer what they term “community
accounts” towards charities, clubs and organisations in the community for ease of
access. They also offer currency exchange and are an intermediary for insurances.

61 IMF, “Cook Islands: technical assistance report.” August 2020, https://www.elibrary.imf.org/view/journals/002/2020/269/article-A001-en.xml.

62 Bank of the South Pacific, “Annual Reports,” https://www.bsp.com.pg/investor-relations/investor-resources/annual-reports/.

Capital Security Bank
CSB has been in operation for 25 years as a private bank in the Cook Islands. Its
operations are largely a legacy of the Islands’ move towards becoming a financial
centre. It now operates with licensing and administering from the FSC for regulatory
purposes. It caters to both domestic and international customers. It largely offers
investment services, and does not do traditional banking.
Residents of the Cook Islands benefit from internet banking and mobile apps from all four banks. All
telecommunications on the islands are provided by Vodafone with 4G access on the two main islands, 3G on
the smaller ones, and over 300 WIFI hotspots spread across the Islands. Access to such effective internet is
due to the establishment of the Manatua fibre cable (2020). Spreading throughout the pacific region, the
Cook Island’s financial involvement stems from New Zealand aid programmes and a development loan from
the Asian Development Bank. Vodafone has the sole multi-year use of the cable to provide the Islands with
fibre internet.
Despite only the recent development in cable, each bank already had a fully operational internet service in
the Cook Islands. This was dependent on satellite services which sometimes came from provisions based out
of Hawaii.
Overview of available banking services

Personal Banking

Money Transmission
Accounts

Savings Accounts

Banking

Share dealing &
Investments

Lending

Mortgages


Insurance

Foreign Exchange
Services

Asset Finance

Commercial Banking

Money Transmission
Accounts

Savings Accounts

Banking

Markets

Lending

Commercial
Mortgages

Real Estate Finance

Asset Finance


Trade Finance

Business Insurance

Card Merchant
Acquiring

Support Services

Service

The government of the Cook Islands is susceptible to the effects of climate change and has therefore adopted
policy that will support their resilience against rising sea levels and extreme weather events. To this end, the
government has established a specific climate change fund that has the intention of prioritising investment
in 11 different sectors including; energy generation, coastal protection and restoration, water security,
disaster and risk management, waste management, infrastructure, agriculture and ecosystems.63 The Cook
Islands have a positive reputation with a number of banks, including the Asian Development Bank, which
has contributed to the favourable lending criteria allocated to green investment projects on the Islands. BCI,
as the Delivery Partner for the Green Climate Fund, have access to further funding to support green
investment ventures from both private and public entities.
63 Green Climate Fund, “Country programme: Cook Islands,” 2019,
https://policy.asiapacificenergy.org/sites/default/files/Cook%20Islands%20Climate%20Change%20Country%20Programme%202018-2030.pdf.

Summary
The Cook Islands has a larger population than the Falkland Islands, yet as an economy it is not as productive
(diverse but more reliant on tourism). It is neither as wealthy as shown by the lower per capita GDP. As a
whole, the Cook Islands remains dependent on development aid from New Zealand and the Asian
Development Bank. The legacy of being an International Financial Centre cannot be ignored, but may also be
part of the reason for the first key observation of this case; that it (i) has an independent regulatory system
in place through the Financial Supervisory Commission. This in part likely stems from its plan to become an
international finance centre, nevertheless it is reputable with required accountability and upkeep coming
from New Zealand. The second observation and possibly a flow-on effect from the first point, is that (ii) the
Cook Islands is not only well serviced by several banks, but these banks are competitive with one another.
With three banks in full operation, and another in private banking, the Island has the range of services one
would expect to see in a developed nation-state. It does however have comparatively higher lending interest
rates (sometimes up to double) than that found in New Zealand. This is the main limitation to the availability
of financing options within the Cook Islands and generates a significant level of dissatisfaction from local
residents – something that recently New Zealand has also expressed discontent with.64

64 Newsroom, “NZ extends hand to Pacific as foreign banks pull anchor,” July 1, 2021, https://www.newsroom.co.nz/nz-extends-hand-to-pacific-as-
banks-exit.

Case study three: St Pierre and Miquelon
Country overview
St Pierre and Miquelon is a self-governing state that consists of two main islands with an area totalling
242km2. It is a parliamentary dependency of France, and has been officially titled a “Territorial Collectivity”
since 1985. Located off the coast of the Burin Peninsula in Canada, Paris the central metropolis, is 4,288km
away. All French Territorial Collectivities are represented in the French parliament. Reflecting this, the
relationship of the territory and France is well integrated in governance, administration, defence, foreign
affairs, law enforcement and even legislation. It does however have a degree of autonomy in its
implementation of taxes, customs and council responsibilities (i.e. budgeting and project implementation).
It is not part of the EU unlike some of the other French island territories
The census in 2016 recorded a population of 6,008 residents with a dominant ethnic composition
representing immigration from the Francophone world. This, along with its proximity to a second nation
(Canada), is similar to the Falkland Islands (Argentina). Official currency is the Euro, but Canadian Dollars
(CAD) are also widely accepted.
Economic overview
Economic Composition
St Pierre and Miquelon’s economy has traditionally
centred around the fishing industry however since
4% 11%
quotas and economic zone reductions were enacted in
1992 this industry has been through major
5%
adjustments and is currently in a restructuring
5%
process the aim of which to diversify the market. Over
80% of its fishing exports are to Canada yet with the 6%
58%
economy largely dependent on imports, it is running
11%
significant trade deficits each year. The dominant
sector is found in tertiary industries such as
education, health and other public services. Tourism
Public Services Commerce
is deemed as having significant potential for growth Extractive industry Finance
on the islands with large investments from both the Construction Communications
public and private sectors. Per capita GDP is currently Other
~ 40,000 Euros. 66
Source: IEDOM65

Delegated Central Bank for the French Overseas Departments and Territories (IEDOM)
IEDOM acts as the central bank for the French Collectivities “on behalf of and under the
authority of the Banque de France.”67 Their operations and services are the same in all
jurisdictions: Issuance and maintenance of fiduciary money, and production of
information for financial stability and regulation. IEDOM carries out some functions which
would not ordinarily be associated with its role as a central bank. These include: listing of
companies, small business support and technical analysis, public sector national strategy
reports, mediation, over-indebtedness prevention (private and corporate), research,
expertise and advice etc. IEDOM enables each jurisdiction to set up its own agency of
IEDOM, thus providing even small overseas jurisdictions with access to regulatory
oversight, registration procedures and the rights to all banking provisions as mainland
France would. Throughout the Covid-19 pandemic, IEDOM was able to oversee support
65 IEDOM, “Évaluation de PIB de Saint Pierre et Miquelon en 2015,” 2015, https://www.iedom.fr/IMG/pdf/evaluation_du_pib_spm_22032018.pdf.

66 Public Expenditure and Financial Accountability program, “Collectivité Territoriale de Saint Pierre et Miquelon: Evaluation de la performance du
systeme de gestion des finances publiques,” 2022, https://www.pefa.org/sites/pefa/files/2022-04/PM-Apr22-PFMPR-

Public%20with%20PEFA%20Check.pdf.
67 IEDOM, “Institut d’émission des départments d’outre-mer,” 2015, https://www.iedom.fr/IMG/pdf/plaquette_iedom_2015_version_anglaise.pdf.

for the economy in St Pierre and Miquelon, such that their economy had a similar
intervention to France.

Caisse d’Epargne
The French cooperative Caisse d’Epargne bank has two divisions in operation in the
territory: Provence Alpes Corse (CEPAC), and Ile de France (CEIDF). The former has
a focus and commitment towards the French territories and offers its full service in
all regions, the latter is one of the regions’ bank and thus also identifies with them. In
effect, it is two separate banks that operates the majority of services on the Islands,
including a large percentage of the Islands’ annual lending. Both are fully authorised
to offer full operations. The cooperative ownership structure of the bank may be the
reason for such identification with the overseas territories.
In 2016, CEPAC merged with Bank of St Pierre and Miquelon which enabled it to have a branch on each
island, even though Miquelon represents only 10% of the population. CEPAC expanded their role by opening
4 ATMs on the island in 2018, all with international bank card availabilities.
Banque Postale (LBP)
LBP is the only commercial bank on the island, operating out of the post offices located
on both St Pierre Island and Miquelon Island. It is however, a limited service with less
than 1% of residents being clients. Founded in 2006, the bank aims to serve all French
citizens in which St Pierre and Miquelon is considered an integral part. All general
management services of current accounts are offered on the islands, presuming the
exclusion of lending services.
Real Estate Cooperative of the St Pierre and Miquelon Islands (CISPM)
CISPM is a cooperative lending company that supports individual investments. It was set up in 1950 with the
intention of enabling access to ownership for residents of the Islands. It acts as an intermediary by borrowing
from the AFD in order to offer scaled loans out to individuals who may not be able to obtain from banks
directly. It currently offers around 30 loans per year at competitive rates with over 1,600 households having
obtained ownership. As of 2019, there are 703 members in the cooperative – just over 10% of the population.
CISPM also participates in the deposit guarantee scheme of France.68
French Development Agency (AFD)
AFD is a French finance company that seeks to fund sustainable development projects
around the world – primarily within French jurisdictions. Where CISPM funds
individuals, AFD primarily lends to companies and other entities. 2017 saw an agency
of AFD established in St Pierre and Miquelon. Since then, €19 million have financed
projects ranging from aviation, to medical services, tourism and housing. Their
services in the territory focus on financing of loans for social development projects
with an aim to go beyond what a commercial bank may be able to offer.69
Both islands in the territory have access to a communications cable via the St Pierre and Miquelon cable line
which connects to the nearby Canadian links in Fortune and Lamaline. This has been in place since 2018 and
is fully owned by the local government. SPM Telecom provides internet access well above the minimum
required bandwidth threshold, leaving the islands well serviced with internet infrastructure.
68 The Banks EU, “Coopérative immobilière des îles Saint-Pierre-et-Miquelon: Deposit Guarantee,”
https://thebanks.eu/banks/13746/deposit_guarantee.
69 AFD, “Saint Pierre and Miquelon,” https://www.afd.fr/en/page-region-pays/saint-pierre-and-miquelon.

Overview of Available services
Personal Banking CISPM
Money Transmission
Accounts

Savings Accounts

Banking

Share dealing &
Investments

Lending

Mortgages


Insurance

Foreign Exchange
Services

Asset Finance

Commercial Banking
CISPM

Money Transmission
Accounts

Savings Accounts

Banking

Markets

Lending

Commercial
Mortgages

Real Estate Finance

Asset Finance


Trade Finance

Business Insurance

Card Merchant
Acquiring

Support Services

Service

Green investments in the Collectivity once again highlight the level of integration that it has with ‘the
metropolis.’ Since 2016, the French Environment and Energy Management Agency (ADEME) has been
present in St Pierre and Miquelon with the aim of supporting companies and communities in taking steps
towards a green transition. It is prioritising projects on waste management and energy consumption.70
Beyond this agency, AFD also invests in projects that are climate friendly and promote the protection of the
biodiversity in the region.
Summary
St Pierre and Miquelon has a per capita GDP similar to that found in other continental European states,
marking it as the wealthiest of the peer cohort (excl. Falkland Islands), this is driven mostly by the public
service at the time being as it faces transitions in the economy. This drastic shift in the economy due to
challenges in the fishing industry has not caused poverty on the island presumably due to a support base
from France; The level of public services within French territories is very high, and in general there is a
significantly greater integration into France that the UK would have with its BOTs. It must also be noted that
it is far from its metropolis but close to Canada, which must be considered when analysing its relative
remoteness as it has a large French language market (Quebec) relatively close in proximity.
Within this context, and through the research and verification processes, the main observations are that (i)
the banks are fully operational and take a greater proportion of the total lending than the development
corporations. Indeed, 85.7% of lending on the Islands comes from the banks even when there are two
development agencies, one of which, being state-supported, has access to significant funds. The second
significant observation is (ii) banking service provisions are on par to that of France. In fact, French
territories are enabled to be able to provide a full banking service through the operations of IEDOM which
acts like a central bank, regulatory service, and a support for all the territories.
70 ADEME, “L’ADEME Saint Pierre et Miquelon,” https://www.ademe.fr/direction-regionale/saint-pierre-et-miquelon/.

Case study four: Easter Island (Rapa Nui)
Country overview
Easter Island is often regarded as being the most isolated inhabited island in the world. This in itself is an
explicit factor when considering any particular challenges the Island may face to its banking and
telecommunications – its closest continental point is 3,510km away. The Island comes under the governance
of Chile where in 2007 it was titled with the status of “Territorio Especial.” It is in this sense non-sovereign
and administered as a region of Chile, albeit distinct from the continental state. The land cannot be alienated
from its indigenous people and much of the Island is a designated national park. It also has its own distinct
language. The distance to its central metropolis, Santiago, is 3,750km. Easter Island uses the Chilean Peso,
yet interestingly is exempt from taxes (resulting in a highly informal economy).
The population sits at ~7,750 (pre-pandemic) with almost 50% being the Rapa Nui indigenous people. This
demographic is a noticeable difference to the other jurisdictions within the cohort, here state/indigenous
interests both need to be navigated more carefully. Previous energy analyses have highlighted the
complexities of needing to adhere to two sets of laws (territorial law, and the indigenous law), resulting in
longer processes in decision-making and implementation.71 In 2014/2015 significant protests occurred over
land use and ownership contestations.72 This has had a flow on effect on the local economy, which has relied
on tourism, yet does not have the necessary infrastructure to sustain it.73 Something which protests
exacerbated by stalling local investment.
Economic overview
Easter Island in the past practically had no working Economic Composition
economy outside of its own borders. The residents there
grew their own food and lived off the sea. Since Chile’s
direct involvement from the 1960’s, the population has
increased by almost 400%. The internationally
connected economy is due to the attraction of tourism.
The 2020 pandemic has thus seen a sharp challenge
arise for the economy. The awareness of such a
dependence on tourism is present, and an increase in
other productive activities is now being fostered. It is
estimated that around 70% of the island’s economy is
composed of the tourism industry.
It is apparent that Easter Island’s economy faces stark
challenges and has only been able to sustain growth due
to tourism. Whether the government will introduce any
measures to reduce the Islands reliance on tourism is
currently unknown. The most important factor to Source: Economia Y Negcios74

consider in relation to the level of development in the
Easter Island’s financial sector is the involvement of the
Chilean government.

71 SD Strategies, “Energy and transport profile: Easter Island, Chile,” 2019, https://sd-strategies.com/wp-
content/uploads/2020/06/Profile_Easter_Island.pdf.
72 Christina Newport et al, “Polynesia in Review: Issues and Events, 1 July 2014 to 30 June 2015.” The Contemporary Pacific (2016): 28(1), 204-244.
73 Elena S. Rotarou et al, “Sustainable development or Eco-collapse: Lessons for tourism and development from Easter Island.” Economic and
Business Aspects of sustainability MDPI (2016), https://www.mdpi.com/2071-1050/8/11/1093#B90-sustainability-08-01093.

74 Economía y Negocios, “Rapa Nui in figures: no taxes, only two banks and 4,000 islanders with declared economic activity,” 2018,
http://www.economiaynegocios.cl/noticias/noticias.asp?id=503237.

Easter Island makes an interesting comparative case study owing to its stark economic, geographic and
demographic challenges. The nature of the economy both causes risk for the banks but also opportunity with
support from the Chilean government. Despite the challenges, two banks service the Island, with a total of
~6,000 clients. The informal economy of the Islands creates significant challenges from a banking
perspective as asset ownership as well as business and personal cash flows are less transparent than banks
would be used to. Insurance and support services are offered under a different institution, Caja Los Andes.
Banco Estado
Banco Estado is a banking group owned by the Chilean government. It is the only
publicly owned bank in Chile, beginning operations in 1953. Chile has a large number
of isolated communities, and the bank prides itself in having the ability to reach these
communities with key services and products.75 This includes Easter Island where they
have ~5,000 current accounts and the ability to service the complete tourism
industry, currency exchange, online banking and 24hr ATMs. They also hold current
accounts available in Pesos and USD. Financing, when sought, is also available albeit
in an unknown quantity. As an SOE, the Banco Estado has a mandate from its
shareholder to promote financial inclusion among the people of Chile, thus not all its
operational decisions are made on a purely commercial basis.
Banco Santander
Banco Santander is a publicly traded, multinational Spanish banking group. It has a
smaller number of clients on the Island, but also helps to cater to the numerous
tourists the Island receives. Its lending tends to be more competitive and unrestricted
compared to that which is offered by the state-owned bank. It offers ATMs, customer
and executive advice to clients, as well as the full provision of internet banking,
investment services, and lending. The bank’s financing ventures on the islands largely
revolve around construction such as a recent debt financing for a hotel project.
The Island, since 2016 has been connected to satellite broadband. It can only access 3G mobile data, yet most
hotels are able to offer WIFI (albeit warning that it can be patchy at times). It is a limited service, and its
speed is the subject of widespread discontent.
Overview of available services

Personal Banking
Money Transmission Accounts
Savings Accounts
Online/Digital/Mobile Banking
Share dealing &

Investments
Lending
75 Banco Estado, “Integrated annual report 2020,” 2021,
https://investor.bancoestado.cl/sites/default/files/content/documents/BE%20Or%20Libro%20Memoria%20BE%20Ingles%2026_04_2021.pdf.

Mortgages
Insurance
Foreign Exchange Services
Asset Finance
Commercial Banking

Savings Accounts
Markets
Lending
Real Estate Finance
Asset Finance
Trade Finance
Business Insurance
Support Services
Relationship Manager Service

Easter Island struggles with its investment in climate projects. There is potential for a high level of renewable
energy to be implemented on the Island however due to a number of political and economic complications
this has not been taken any further. It is currently 100% dependent on diesel generation. The influx in
tourism over the past 20 years has not been met with the adequate infrastructure which would be required
to minimise its environmental impact. There are four energy projects in the planning and development

stages, which will aim to improve efficiency and reduce reliance on fossil fuels.76 It is unclear as to whether
these have advanced in light of capital allocation changes which have occurred as a result of the Covid-19
pandemic.
Chile has a commitment to reduce its carbon emissions through green investment which Easter Island will
likely benefit from. Nevertheless, any development of green infrastructure will still need to navigate the more
complex legislative processes on the Island.
Summary
The context of Easter Island, in comparison to the other jurisdictions within the cohort, may be the most
challenging from a market perspective. Its remoteness makes the transporting of raw materials for physical
infrastructure challenging; it also makes it difficult to attract human capital. As a market, the Island poses
significant risks environmentally, politically, and geographically. Beyond this, its high reliance on tourism
leaves it largely exposed to global economic cycles. All of this has made economic development a challenge
from a public policy perspective.
The key observation in the Easter Island case is that despite the above context, (i) two banks are present on
the Island with offerings of a wide range of services. Although communications infrastructure is slow and
patchy (arguably far worse than the Falkland Islands), internet banking is still provided to personal
customers. This cannot be noted, however, without also considering (ii) the level of integration that the
Island has with Santiago as its metropolis. It seems that there is a trade-off between; support, development
and provision of services on the one hand; and integration into the ‘mother country’ on the other.
76 SD Strategies, “Energy and transport profile: Easter Island, Chile.”

Case study five: Saint Helena & Ascension
Country overview
Saint Helena, Ascension and Tristan da Cunha is a British Overseas Territory located in the South Atlantic
with its closest landmass being continental Africa at ~2,000km away. It is one of the most remote Islands in
the world. London, the central metropolis, is ~7,500km away and is responsible for the territory’s foreign
affairs and defence. A significant expression of the UK’s relationship with St Helena is found in the completion
of the UK-funded airport in 2016, enabling a few commercial flights per week and greater ease of access for
the RAF. It is one of the few BOTs still dependent on the UK’s foreign aid.
Economic overview
The population of St Helena is ~4,255 with Ascension and Tristan Da Cunha adding another ~1,000. The
early 2000’s saw a third of the Island’s residents move elsewhere for work as the UK confirmed full
citizenship status for residents of the Islands. This event was preceded by two decades of economic growth
owing to the UK’s revamped support for the territories after the Falkland Islands war. This period of growth
increased GDP per capita, and reduced instances of poverty throughout the Islands.77 Despite this early
period of growth, the most recent decade has seen GDP per capita become stagnant, if not decline.
GDP (SH£ - 2020/21 basic prices) Economic Composition

38,000
37,500
37,000
36,500
36,000
35,500
35,000
34,500
2017/18 2018/19 2019/20 2020/21

Source: Government of St Helena and Ascension
In further reference to the economy, the Island’s largest sector is public administration. As of 2020, 43.5%
of GDP was produced by government and public services. This reflects the dependence that it has on aid from
the metropolis. The information sector (finance, insurance, communication) is the second largest, generating
16.5% of GDP.78 The composition shows a strong leaning towards a service-based economy, something that,
owing to their location and size, is not deemed sustainable. In this light, St Helena has adopted a 10-year-
economic-plan with the overall intention of minimising the risk of decreasing national wealth due to large
net imports. The intentions set out to diversify the economy even further in the primary markets and exports
by better utilising their comparative advantages, and by overcoming the obstacles such as a lack of skilled
workers, logistical issues, small scale and remoteness.79
77 BBC, “St Helena, Ascension, Tristan da Cunha profiles,” 2022, https://www.bbc.com/news/world-africa-14123532.

78 St Helena Government, “Statistical bulletin no. 8,” September 2021, https://www.sainthelena.gov.sh/wp-content/uploads/2021/09/Stats-
Bulletin-8-2021-GDP.pdf.
79 St Helena Government, “St Helena’s sustainable economic development plan 2018-2028,” https://www.sainthelena.gov.sh/wp-
content/uploads/2022/03/Sustainable-Economic-Plan.pdf.

The Islands of St Helena and Ascension each have one branch of St Helena Bank, who provide the majority of
banking services on the Islands. Gibraltar International Bank provide some additional financial services
which may facilitate better international payment flows. The currency is the St Helena Pound which is pegged
1:1 with Sterling.
Bank of St Helena (BOSH)
BOSH was founded in 2004 when it took over the operations of two banks; St Helena
Government Savings Bank, and Ascension Island Savings Bank. It is an SOE of the
Island’s government, yet the bank has been operationally independent from the
government for a while now. Products and services have improved over time with
present capabilities being current and savings accounts, personal and commercial
lending, online banking, local debit cards, foreign exchange, and cash-back services in
retail shops around the island.
There are of course, improvements to be made to these services in comparison to what is offered in
continental banks. The advantage of the locally owned bank is that the unique and niche challenges can be
addressed through unique and innovative solutions such as “St Helena Pay.” This is a service that mediates
between the credit card restrictions and international payment challenges they have, where ease-of-access
is made for tourists to the island by uploading money to a “tour card” using a QR code. Perhaps because of
its position as an SOE, the bank has made great strides in terms of financial inclusion, even winning an award
recognising this.
There are, however, unique challenges that the bank faces. Wider infrastructural challenges have an impact
on the ability for the bank to operate efficiently. Without cable internet, online access is very expensive and
although internet banking is offered, a significant majority of the public seems to prefer (or be limited to) in
branch services. It is anticipated that as internet connectivity improves, the banks e-banking platform will
become increasingly popular. There have been some reputational challenges due to the status and risk
categorising of the island. This has made it difficult to adopt new banking services that are available
internationally as the bank is often categorised by other financial institutions as representing a greater risk
than its country profile would suggest. The bank strives to meet international standards in order to continue
existing correspondent banking relationships, but this still has its challenges. In regards to lending, the cost
is comparably higher than what mainstream banks can offer and the bank has not reflected the global trend
of decreasing interest rates over the past decade. On this point it is necessary to note St Helena’s Government
agreed with the UK not to raise government borrowing.
Gibraltar International Bank (GIB)
GIB is domiciled in Gibraltar but offers retail and commercial clearing services in St
Helena. It is an added provision of business flow for international banking services. St
Helenian customers can obtain an account in Gibraltar and a debit card with access to
online banking and purchasing, along with of the ability to conduct money transfers
whilst abroad.80 In a sense, it provides the locals in St Helena with greater ease of
access to international banking services which BOSH cannot provide owing to issues
relating to its perceived risk profile. Albeit a valuable service, the engagement of local
St Helenians has been less than 1% of the population and may be due to costs,
convenience and underdeveloped international industry issues.
The present reality for St Helena is that its internet services are via satellite; making it both patchy and
expensive. A spur of a large cross-Atlantic cable has been acquired with connection scheduled to take place
80 St Helena Government, “Gibraltar International Bank supports St Helena,” 2020, https://www.sainthelena.gov.sh/2020/news/gibraltar-
international-bank-supports-st-helena/.

in early 2024. This will increase communications capabilities significantly. It is expected that this will have
a positive impact on the ability to upskill and modernise public and private sector services.
Overview of Available services

Personal Banking
Savings Accounts
Share dealing &

Investments
Lending
Mortgages
Insurance
Foreign Exchange Services
Asset Finance
Commercial Banking
Savings Accounts
Markets
Lending
Real Estate Finance
Asset Finance
Trade Finance

Business Insurance
Support Services
Relationship Manager Service

St Helena has already made a significant contribution towards adopting its energy strategy of being 100%
self-sufficient on renewable energy.81 The original goal was to have this complete by 2022, however in
2021 only 25% of energy consumption came from renewable sources.82 It is an ambitious project but it is
deemed achievable and may make a large difference on the income for the Island if they are able to
implement it. It has however not been able to meet its ambitious goal of completion by 2022. In addition to
energy sources, in accordance with the governments “Altogether Greener” vision, a waste management
plan has been implemented as well as a fund to protect the environment from invasive plants. Future
projects include reducing sea pollution due to sewerage, new incentives to encourage green practises, and
a more resilient water resource management plan.83
Summary
St Helena and its banking services are a case that should be considered for further in-depth discovery and
research due to the many similarities it has with the Falkland Islands, most notably in the political status and
relationship each has with Great Britain. In terms of remoteness and sovereignty status, St Helena is the most
comparable jurisdiction in the cohort. The unique and key observation is that the banking system in St
Helena is quite different from the Falkland Islands, following the path of opening a state-owned bank having
been unsuccessful in attracting an international banking group.
The most relevant consequence of this approach is the ability of St Helenians to access electronic banking,
despite less resilient internet and a smaller economy. More than this it shows that access to internet banking
is possible in a jurisdiction as remote and isolated as the Falkland Islands. Indeed, looking at the profitability
of BOSH’s annual reports, it shows that there is a business case for implementing an e-banking platform.
Saint Helena does face many of the same problems as the Falklands in terms of being unable to access card
payments using existing bank infrastructure. However, where the Falklands were able to secure coverage
using Square and GIB, no such solution has been possible for St Helena.
Without speaking with a similar swathe of businesses it is impossible to dimension its commercial lending
appetite. At first glance they had total commercial lending facilities extended of ~£5 million in the
2021/2022 financial year. This is significantly higher than SCB, who have a larger deposit base, and a more
active business sector in which to lend. The services offered by the bank in St Helena, in an economy
comparatively not as wealthy, equally remote, with poorer internet infrastructure, and with a similar
jurisdictional status, are arguably superior to the services available in the Falkland Islands in areas of
electronic banking systems and commercial lending.
81 St Helena Government, “St Helena energy strategy,” 2019, https://www.sainthelena.gov.sh/wp-content/uploads/2019/11/161025_St-Helena-
Government-Energy-Strategy-FINAL-October-2016.pdf.
82 St Helena Government Statistics, “Utilities.” 2021, https://www.sainthelena.gov.sh/st-helena/statistics/the-economy/.
83 St Helena Government, “St Helena 10 year plan 2017-2027,” https://www.sainthelena.gov.sh/wp-content/uploads/2012/08/10-Year-Plan-20-
January-2017.pdf.

Section 4: Benchmarking of the Falkland Islands
This section of the report benchmarks the provision of banking products and services in the Falkland Islands
against the cohort of peer jurisdictions reviewed in the earlier section. To achieve this, the current offering
and functionality in the Falklands has been benchmarked against the findings in the peer countries. Given
businesses typically require a broader and more sophisticated range of products compared to individuals
the benchmarking has been undertaken separately for each. The results of the benchmarking exercise are
summarised in the schematics below. These give a clear view of how the Falkland Islands compares together
with some high-level commentary where appropriate as to what is driving the particular rating. The 1-4
rating scale has been devised on the following basis:
Personal banking products & services benchmarked against cohort peers

Commercial banking products & services benchmarked against cohort
peers

Section 5: Banking sector outlook
Overview
Global banks have had a remarkably dull decade or so. Revenues were growing albeit lagging GDP growth.
New competitors, in the form of well-funded fintechs, and ultra-low interest rates meant their margins were
being gently squeezed. Asset prices, fuelled by quantitative easing, kept surging spawning the rise of volatile
new asset classes such as cryptocurrencies. These animal spirits were barely checked by the economic
shutdown caused by the pandemic.
But, now the landscape has changed inexorably. Suddenly, firms large and small have to consider the
geopolitical context and what it means for their energy costs or supply chains following Russia’s hostile
incursion into Ukraine and rising tension over the fate of Taiwan. Interest rates, hiked in response to surging
inflation, meant that banks could start to widen spreads which has cheered long-suffering stockholders who
have endured below par returns since the financial crisis. Fintechs, the darlings of finance for the last decade,
found the tide of easy money going out exposing business models and, valuations underpinned by hubris and
what some might consider outright fraud in crypto-markets. One thing that has not changed is that a great
many banks are still valued at a significant discount to their book value.
The geopolitical landscape and economy will remain in a fractious and

brittle state for some time to come
The ongoing war between Russia and Ukraine combined with further Western decoupling from China will
mean that energy costs will remain volatile and supply chains under pressure for an extended period of time.
Stubborn inflation and tightening monetary policy will be felt unevenly across different economies and
across the banking industry. Meanwhile the world is facing the reality of a potential new economic order
driven by an increasingly multipolar world and the unwinding of globalisation.
In the near-term higher interest rates will benefit banks as interest rate spreads widen which will provide a
boost to profitability. Revenues derived from trading activity should benefit from the prolonged volatility
although fee income more susceptible to an economic recession could come under pressure. Households and
businesses will find the environment tough and the longer these conditions persist the more likely it is that
there will be some distress seen in loan portfolios.
Banks are well positioned to weather these headwinds. Unlike during the global financial crisis, capital levels
are strong and there is ample liquidity which means banks can continue supporting their customers. Should
a prolonged recession emerge or loan portfolios deteriorate more quickly than anticipated banks will
inevitably start to focus on their expenses. In this scenario, banks are likely to focus heavily on cost controls
with discretionary projects being deferred, rationalising branch footprints and deploying greater use of
advanced technologies to drive efficiencies.
Banks, including SCB, may choose to pare back on discretionary spending projects and instead focus on
investing in those markets and geographies where the investment spend has the biggest impact in terms of
scale. In this scenario there is a risk that the funding to introduce the eagerly anticipated upgrade to
introduce digital and mobile banking for customers in the Falklands might be deferred, again.
A discernible trend in 2022 which will continue to feature over the next 18 months is the level of out-reach
being undertaken by the UK high street banks to both households and smaller businesses. Nearly all of the
major banks are proactively contacting these customers to offer them financial health checks and to explore
how they might be able to save money or reschedule their borrowing to avoid loans falling into default. It is
expected banks will offer a number of options to customers who are struggling to make their debt
repayments including providing capital repayment holidays.
The housing market in the Falklands remains buoyant notwithstanding the cost of living pressures being
experienced. Historically, it is understood that there has never been a default on the SCB mortgage portfolio
albeit it should be anticipated there will be some borrowers, both individuals and businesses who might
benefit from proactive support from SCB and the FIDC along the lines being seen in the UK.

Banks will turn the dial up on product innovation as they are no longer
distracted, under-capitalised and remediating sins of the past
Executives at many banks have spent much of the last decade focused on restructuring their balance sheets,
exiting unprofitable markets where they lack scale. These clean-ups have been particularly expensive not
just in financial terms but it has also sapped banks in terms of having the bandwidth and financial resources
to launch new products and harness the true potential of the technological innovation which is underway.
Individuals are demanding more from their banks. A revealing survey completed in 2022 by J.D. Power
revealed that “hands on guidance during challenging times” is the thing that retail customers wanted most
from their banks and is more important than convenience or efficiency.84 With many households facing a
cost of living squeeze for the foreseeable future there is no better time for banks to provide this support.
Banks will in future organise more around the customer experience and not just narrow product lines.
Customers want to use multiple channels when completing a task with the bank – when seeking a mortgage,
they might start researching rates on their phone, want to come to a branch to talk with a mortgage advisor
during the application process and review the mortgage offer on their laptop. Banks will need to ensure they
can complete the various stages of obtaining a mortgage through the full range of channels. Banks will
increasingly deploy robotic automation and machine learning to improve the overall customer experience.
There will also be increasing use of embedded finance – where financial services products are offered on
third-party technology platforms. At present this takes the form of payments or lending options such as Buy
Now Pay Later. But, expect to see additional financial services being woven into retail platforms. For
example, supplementing shopping experiences with financial management tools.85
Financial innovation also brings novel risks which banks will need to contend with. An increasing number of
people are venturing into new asset classes such as cryptocurrencies and digital assets. Banks have been
building new capabilities to support digital wallets and regulators will be keen to understand how banks
intend to protect consumers from these new risks. The advent of technology will help as AI and machine
learning can allow banks to shift away from a point in time risk assessment to a more dynamic situation
where these automated tools constantly scan for unusual changes in customer behaviour using live
transactions.86
In the commercial and corporate banking space banks will increasingly seek to augment the relationship
manager proposition with new digital tools noting that a significant amount of time is still devoted to manual
processing of activities e.g. arranging and monitoring of loans. The role of the relationship manager will
remain important as they serve as brand ambassadors but also being an advocate for their customers.
Deploying technology will require a culture shift from many of the relationship managers who will be
instinctively wary of their role being marginalised.
Work to bring international payments more into line with domestic payments in terms of efficacy and cost
will gather pace. The Financial Stability Board in 2020 recognised that international payments had fallen
well behind the innovations being seen in domestic payments with the SWIFT system still lying at the heart
of cross-border payments. A roadmap has been delivered which will explore how new technology can be
exploited to speed up payments, reduce routing errors and lower the costs. However, this will be a long-term
project as it will require extensive work to re-plumb central market infrastructure.87
As one regulatory chapter closes, another one opens

Most of the heavy-lifting to ensure banks are more resilient to financial shocks is now largely complete. The
sector is well capitalised, better funded and with strong liquidity buffers as demonstrated by how it has come
through the pandemic and the advent of a war in Europe. There are further changes – dubbed Basel 3.5 which
84 J.D. Power, “US retail banks struggle to differentiate, deliver meaningful customer experience as economy sours,” press release, 7 April 2022.
85 Deloitte, “2023 banking and capital markets outlook,” November 2022.
86 Ibid.
87 Financial Stability Board, “G20 cross-border payments roadmap,” November 2022, https://www.fsb.org/work-of-the-fsb/financial-innovation-
and-structural-change/cross-border-payments/

will change the way banks calculate capital in certain asset classes but represents nothing like the step
change between the second Basel Accord and the third.
There will be a continuing focus on the conduct of business and in particular around how firms interact with
consumers (individuals and smaller businesses). In the UK, the Financial Conduct Authority has launched
what it terms a ‘paradigm shift’ in its expectations of firms. They have introduced a new regime which
requires firms to “act to deliver good outcomes for retail customers.” It will force firms to deliver a higher
standard of customer care and protection - all products and services will need to be designed and delivered
in a way that puts the customer first. Banks in the UK will need to review their product range, how they
communicate with customers and the end-to-end customer journey. This new Consumer Duty will also
impact how new products are approved and monitored, as well as the pricing and ongoing servicing and staff
training. The FCA has made it clear to industry that they will be taking an ‘assertive’ approach to the
implementation of the new regime with a particular focus on tracking how firms monitor customer
outcomes. This new regime will go live in July 2023.88
Policymakers in Europe and the UK are also setting out their plans to regulate digital assets, decentralised
finance and cryptocurrencies. They are taking very different approaches. The EU is creating a dedicated
regulatory regime under the Markets in Crypto-Assets regulation which will set out harmonised discrete
rules for digital assets. The UK instead has set out a detailed consultation paper to bring digital assets
including cryptocurrencies within the envelope of existing financial services regulation. Some in the industry
are nervous about lending credibility and legitimacy to crypto – they would prefer to let ‘let it burn’ outside
of the formal financial system citing its lack of a clear use and the propensity for investors to lose their money.
The reality is that with up to 10% of retail bank customer having some form of crypto exposure it has grown
to a size where it could start to exhibit systemic risks for the financial system and wider economy.
So long Fintech 1.0, hullo Fintech 2.0!

With lower levels of funding available and valuations falling there is a significant change taking place in the
Fintech sector. Banks will play a much bigger role owing to a more positive landscape for them moving
forwards.
Higher margins mean banks can shift from just surviving to starting to think more about how they will thrive.
Following nearly a decade of ultra-low interest rates the earnings outlook for banks is more constructive –
they are in a better position to access capital whereas it was virtually on ‘free-vend’ for fintechs over the past
10 years.
The health of banks is much improved – they hold sufficient capital and are increasingly capital generative.
They can also look forward as they are not having to worry about their back books so much. This means they
will be able to play a more influential role in shaping the fintech sector through either building their own
offerings, pursuing joint-ventures or taking stakes in promising fintech firms. Higher interest rates have also
raised the cost of capital for fintech firms which means a growth strategy underpinned on burning through
cash no longer works. Fintech and technology firms are for the first time having to address their bloated cost
bases and set out a path to achieving profitability.89
Many banks have also overhauled their technology estates which will enable a more rapid rollout of new
products and boost innovation. There is a growing ability to take new technology on a ‘plug and play’ basis’
which is giving banks the ability to roll out and scale new products much more quickly. There is also growing
competition in the Banking as a Service industry which is also fomenting innovation and bringing down costs.
Banks across Europe are also building their own Neobanks – these operate without a branch network and
being lumbered with legacy technology. Goldman Sachs estimates the return on equity for these new digital
banking platforms is ~20% vs. ~10% for traditional branch banking. In 2022, Societe Generale’s digital bank
Boursorama added over 700,000 customers in the first half of the year whilst Credit Suisse owned CSX had
grown its customer base to 150,000 by the year end from just 25,000 in the first quarter. Intesa Sanpaolo
88 PWC, “The FCA’s new consumer duty: Raising the bar on consumer outcomes,” August 2022, https://www.pwc.co.uk/industries/financial-
services/understanding-regulatory-developments/fca-proposes-new-consumer-duty-in-paradigm-shift-for-firms.html
89 Chris Hallam et al, “European Banks – Adjusting to Fintech 2.0,” Goldman Sachs, September 2022.

followed in the footsteps of Lloyds and Mox, who both worked with Thought Machine, to launch its own
Neobank. Whereas UBS, launched their key4 digital banking app which will provide current and savings
accounts together with global foreign exchange payments. There is also innovation on the lending front with
Credit Agricole investing €450 million in BforBank which aims to become a digital lender with a focus
initially on France before rolling out across Europe.90
In addition to building out capability, banks are also engaging in partnerships and joint ventures to expand
their product ranges. BBVA launched BBVA Spark which is in effect a corporate banking product dedicated
to high-growth technology start-up firms. Standard Chartered entered into an agreement with SBI Holdings
to gain blockchain and digital assets capability which builds on their Zodia crypto asset custody platform.
Finally, regulatory focus is also starting to shift from banks to the fintech sector with a focus on conduct and
corporate governance. There is a shift from being concerned about the banks to scrutinising more closely
new market entrants, new business models, and greater vetting of owners and the corporate governance
arrangements in place to provide effective oversight and challenge.
90 Ibid.

Section 6: Setting up a domestically owned bank
This section of the report provides advice and guidance on the key considerations involved in establishing a
domestically owned and operated bank. Establishing such a locally owned bank might bring a number of
potential benefits – not least it could be designed with the needs of Falkland Islanders in mind in terms of its
range of products, services and credit appetite.
Equally, setting up a domestically owned bank is not only a considerable undertaking but will also bring
other challenges which might impact on the customer proposition which would need to be addressed. This
section draws on insights gained from interviews with senior management of government-owned banks
established in other British Overseas Territories including some of the lessons learned based on their
experience of setting up and operating a domestically owned bank.
A core assumption, given the small size of the Falklands market, is that the setting up of any domestically
owned bank is not in competition with the existing SCB operation. Therefore, the business currently
undertaken by SCB would transfer to the new bank with SCB through an ordinance having opted to exit the
market. It is envisaged that some of the existing SCB team would also migrate to the new bank.
Shareholders and senior management must be ready, willing and able

§ Ready and thinking ahead – the shareholders and senior management will need to make sure they have
a comprehensive and well researched proposition. The proposition needs to include consideration of the
full range of risks and mitigating measures needs to be reflected in the business plan. Whilst, input from
external advisors might be useful the senior management intending to run the firm should lead on the
development of the firm’s business plan.
§ Willing – Senior management will need to demonstrate they have undertaken comprehensive research –
showing an understanding not only of what activity they will be undertaking and with whom but also how
they will deliver their products and services in terms of premises, technology and financing their
operations. They will also need to clearly articulate the rules and regulations which will apply to them.
§ Able – the firm will need to ensure they are operationally ready to start their regulated activity at the
time they are granted their licence. Securing an appropriately experienced technology provider will be
key and a significant cost commitment. Therefore, having an early and iterative dialogue with the
authorities who will consider the licence application is considered essential.
A credible business plan is an important component of the mobilisation

and start-up process which will guide the setting up of the new bank
§ The business plan is the key artefact that articulates the proposed proposition and will also act as a
guiding document throughout the build-out of any new bank. It must set out what products and services
the bank intends to offer, to which customers, and how the bank will be set up in terms of its governance
and its business model. This business model needs to clearly articulate how it will achieve short term
viability and become sustainable through the medium-term economic cycle.
§ The business plan should also set out the risks the proposed business model brings and how these will be
identified, monitored and prudently managed. The business plan will also be an important tool in
communicating to broader stakeholders including the Governor, acting in Council, who is ultimately
responsible for granting the licence to commence operations.
§ It is recommended that any business plan be developed on an iterative basis and include independent
review as it is developed. This could take the form of sessions with a number of stakeholders including
the proposed shareholders of the new bank and the proposed board of directors of the firm.
§ Consideration should also be given to arranging review and challenge sessions with a group of people
from outside of the Falkland Islands, who have significant banking experience, in order to test the viability
of the proposed proposition and business plan. The feedback from these sessions will tend to lead to a

more robust and resilient business plan and ensure senior management are going into the endeavour
with their eyes fully open as to the challenges they will encounter.
Ownership and shareholder considerations

The shareholding and ownership structure of any Falklands owned bank should be given careful and
thoughtful consideration. Whilst banking as a business lends itself well to private ownership, there are
potentially a number of challenges associated with establishing a bank owned by a small group of private
individuals. Policymakers and regulatory authorities have become increasingly wary about a small group of
individuals exerting a high degree of influence over the affairs of financial institutions – particularly if they
are considered to be systemically important to the local economy.
Research undertaken to understand the impact that ownership structures had on banks based in the
Eurozone during the 2007/08 financial crisis shows that listed banks were more transparent as a result of
the need to comply with greater disclosure requirements compared to their unlisted counterparts. This
boosted transparency relative to those controlled by a single or small group of shareholders.91
Another consideration for banks owned by a sole or smaller group of shareholders is the ability to raise
fresh capital. In the event of unforeseen losses, raising much needed equity can be difficult as controlling or
influential shareholders don’t wish to see their stakes diluted. The ability to raise capital in a timely fashion
can be critical in order to preserve and/or restore the confidence of depositors that the bank can absorb
losses and that their deposits are safe.
Ownership by a small group of private individuals’ also runs the risk of ‘politicisation’ of management
which might influence the operation of a bank. In some circumstances it can lead management teams to move
away from commercially motivated business decisions e.g. lending to preferred borrowers or not pricing
risk appropriately. This could lead to unacceptable trade-offs in relation to risk taking and profitability.
It’s only fair to note that government-owned banks in smaller jurisdictions also run the risk of politicisation
with political pressure applied to management to lend to certain sectors, or perhaps the government itself
or during economic downturns. Equally, poor risk assessment can be found across many banks no matter
their ownership structure – with listed banks losing significant amounts of money in multiple financial crises.
The ability to secure and retain correspondent banking relationships is another key factor when
considering the ownership structure of a bank. Access to correspondent banking is a critical enabler as they
clear payments on behalf of banks, particularly smaller institutions who do not meet the eligibility criteria
for direct access to payment schemes on an economically viable basis.
Larger financial institutions have, in response to increased scrutiny from regulatory agencies and
enforcement action, undertaken a significant level of de-risking in relation to correspondent banking. This
has resulted in many larger banks terminating or limiting their correspondent banking services to certain
regions, jurisdictions, or categories of clients.
This de-risking is creating challenges for small banks notwithstanding their shareholding structure.
However, there is evidence that institutionally and government owned banks are able to maintain or secure
new correspondent relationships whereas privately owned banks are finding it more challenging in meeting
the new level of requirements around due diligence.
Finally, in a Falkland Islands context, it is also worth reflecting on whether customers would feel
comfortable in placing their deposits with and giving visibility of their financial affairs to a bank
owned by single private shareholder or small group of shareholders. Concerns of this nature could be
allayed in part by ensuring the operational management of any new bank is independent of the shareholders
and clearly seen to be so.
With all these considerations in mind and with institutional investment being improbable it is likely that
government ownership, in part or full, would have to feature in any domestically owned Falkland Islands
bank. A significant level of taxpayers’ funds would be required to cover the initial set-up costs and capitalise
91 Nicolas Veron, “The governance and ownership of significant euro-area banks,” Bruegel Policy Contribution 14 (May 2017): 9-10.

a new bank (further analysis below) at a time when there is also a need to invest in renewing the wider
Falkland Islands infrastructure e.g. Stanley’s port, a new airport terminal, power generation, or aged care
facilities.
Operational management and oversight should be independent

The senior management of a bank must operate within the risk appetite and mandate established by its
owner(s) whether they be private individuals, institutional or government. However, oversight by the
shareholders should be exercised through appropriate corporate governance mechanisms and reporting as
opposed to being involved in the day-to-day operational running of the bank.
Whilst, it is not uncommon to have a shareholder representative appointed to the Board of Directors of a
bank they should avoid taking the role of Chair - nor should they be able to dominate the Board. Ideally, and
as a matter of good corporate governance practice, the Board of Directors should have a majority of
independent non-executive members led by an independent Chair together with a small number of executive
directors.
Ensuring that experienced senior management are able to take the day-to-day operational decisions will
ensure that the risk to reward ratio remains acceptable. It will also constrain the propensity for poor decision
making which could lead to reputational issues or financial impairments at a later stage. This is vital given
that confidence in the sound running of a bank is an important consideration for depositors particularly
when there is not any depositor compensation scheme in place within the Falkland Islands.
Estimated financial resources required of ~£20m to establish a new bank

In order to assess the estimated financial resources required to establish a new bank in the Falkland Islands
a high-level financial profile has been worked up premised on the following assumptions:
§ The SCB business transfers to the new banking entity which presently consists of up to £180 million of
deposits and £21 million of customer lending.
§ At the end of year 5 the new bank will have prudently grown the business to have £240 million of
customer deposits and £80 million of customer lending. The customer lending will be comprised of £30
million of residential mortgage lending and £50 million of commercial lending.
§ The surplus deposits will be placed with a range of financial institutions outside of the Falkland Islands
on a range of maturities with a significant proportion also invested in a portfolio of high-quality liquid
assets such as UK Gilts or Bonds. Ideally, FIG would also provide a quasi-central bank role noting that a
Falkland Islands bank would not be eligible to have a bank account with the Bank of England under the
current Sterling Monetary Framework rules. FIG would place these deposits with their own bankers or
seek to open an account with the Bank of England (noting some other BOTs have similar arrangements).
§ The new bank will adopt the standardised approach to calculating both credit risk and operational risk
weighted assets (“RWAs”). The following credit risk weightings have been applied in this high-level
analysis: Residential mortgage lending @ 35% risk weighting, commercial lending @ 100% risk
weighting, placements with banks @ 20% risk weighting (assumes minimum credit rating of A-) and
placements with sovereign counterparties including government bonds @ 20% risk weighting. Any
exposure to FIG could be zero-weighted should FIG choose to exercise their national discretion.
§ Given the start-up situation, operational risk RWAs have been calculated at 20% of anticipated annual
revenues in the interests of prudence.
§ The business will achieve a blended net interest margin of 2.5 percent which generates net interest
revenues of ~£6 million per year with fees and commissions generating a further ~£1 million per year.
§ The business will operate with a 75 percent cost : income ratio which is broadly in keeping with peers in
other British Overseas Territories and reflecting the ‘digital first’ strategy of the bank.


Balance sheet (after 5 years)
Assets
Loans to banks (at amortised cost) £60,000,000
Loans to customers (at amortised cost) £80,000,000
Liquidity portfolio / placements with FIG £100,000,000
Other assets £15,000,000
Total Assets £255,000,000
Liabilities
Customer deposits £240,000,000
Owners’ equity
Shareholder funds £15,000,000
Total liabilities & equity £255,000,000
Risk weighted assets
Credit risk RWAs £92,500,000
Operational risk RWAs £1,400,000
Total risk weighted assets £93,900,000
Income statement (after 5 years)
Revenue
Net interest margin £6,000,000
Fees & commissions £1,000,000
Total revenues £7,000,000
Expenditure
Operating expenses and impairment reserves £5,250,000
Total expenditure £5,250,000
Profit before Tax £1,750,000
Key performance metrics and ratios (after 5 years)
Assumed regulatory minimum CET1 capital (@14% RAR) £13,146,000

Regulatory trigger CET1 capital (@15% RAR) £14,085,000
Management target CET1 capital (@16% RAR) £15,024,000
Cost : income ratio 75%
Return on equity 11.6%
Leverage ratio (target minimum 5%) 6.25%
Based on this high-level analysis a new bank would require £15 million of capital. It is estimated that start-
up costs will be ~ £5 million which would lead to a total investment commitment of ~ £20 million.
It should be noted this is a high level analysis based on a range of assumptions which require further
validation. It should however dimension the level of capital and shareholders’ funds which would be
required to set up a domestically owned bank.

Significant level of non-financial resources also required
In addition to the financial resources required to establish a sustainable new bank there would also be a
requirement for a significant level of non-financial resources.
Specifically, there would need to be: (i) An experienced senior leadership team hired in order to mobilise the
new bank and lead the wider team; (ii) A Board of Directors including non-executive, independent members
to provide oversight of the senior management team; (iii) A technology platform to be procured which is
connected to the Swift payments network and ideally the UK banking system; (iv) securing and fitting out of
suitable premises to reflect the needs of Falkland Islands customers today; and (iv) Experienced legal and
risk resources to develop the initial customer contracts and the control framework. Further detail of the
likely requirements is expanded on below.
§ Hiring of an experienced senior leadership team: Whilst a number of the existing SCB team would
transfer to the new bank – not all roles would be required given the new bank would be established on
the basis of offering a “digital first” approach i.e. the majority of customers would interact primarily
through online or mobile channels with in person contact primarily for vulnerable customers who require
a more traditional service or those customers who are relationship managed.
§ There is also a need to hire a senior leadership team from outside of the Falkland Islands who have
suitable track record of running a fully-fledged bank as opposed to a branch. The senior leadership team
would need to be experienced in managing the balance sheet of the new firm including its liquidity
position. The new firm would also be solely responsible for underwriting and managing its credit
positions together with managing the full range of risks that a banking entity is exposed to including cyber
security risk. It is likely that in addition to a Managing Director there would also be a need for a Finance
Director, Head of Risk and a Head of Operations.
§ A key objective for the senior leadership team would be to upskill the wider team with a view to equipping
Falkland Islanders with the skills required to undertake the senior leadership roles. However, at the
outset, talent will need to be hired into the Islands at remuneration levels pitched so as to be sufficiently
attractive to bring them to the Falklands. An annual remuneration budget for these roles in the range of
£400,000 - £500,000 would likely to be required to achieve this.
§ Board of Directors: Best practice requires that a Board of Directors should comprise a majority of
independent, non-executive directors with a smaller number of executive directors (perhaps just the
Managing Director and Finance Director) as members. It might also be prudent to establish one or two
sub-committees to support the Board of Directors – by way of example this might include a Board Risk
Committee and / or Audit Committee. These would typically be chaired by one of the independent, non-
executive directors with the other independent directors as members.
§ The majority of the Board of Directors should be drawn from the Falkland Islands community itself and
encompass a sufficiently broad range of skills / experience. This might include a track record of successful
running a sophisticated business with multiple business lines but more important is the ability to provide
effective challenge and oversight to the executive management team. Remuneration of independent, non-
executive directors would need to be in the range of £25,000 - £50,000 each with the Chair role being at
the upper end of that range.
§ Technology and correspondent banking/payment systems access: A new bank would need to
procure a technology platform which would provide both the ‘back office’ platform for accounting and
data management but also support the channels through which customers would be served including
digital / mobile banking. Doing this is less of a challenge for small, start-up banks now given the advent
of dedicated technology companies who provide a ‘Bank in a Box’ service (more on this below).
§ Another important enabler of any new bank will be gaining access to international payment systems
including SWIFT for international payments and ideally the UK banking network through a sponsoring
agency bank in the UK. In addition, to this access the new bank would need to establish correspondent
banking relationships with banks who will ‘clear’ payments in the major international currencies. As a

minimum, correspondent relationships will need to be established in the United States for USD, in the
United Kingdom for GBP, and in the Eurozone for EUR.
§ Securing correspondent banking relationships as a new bank can be an arduous and time-consuming task
particularly given many correspondent banking providers have raised both the level of due diligence
undertaken and the minimum price to recognise the high-risk nature of providing correspondent banking.
It also should be noted that correspondent banks might potentially be uneasy about having high levels of
concentration risk /reliance on them i.e. all payments for a particular country being cleared through them.
§ The experience of domestically owned banks in other British Overseas Territories is that once
correspondent banking relationships have been secured they need pro-active relationship management
in order to sustain them. Regular review meetings and ensuring a good two-way flow of information about
the performance of the bank, the business being undertaken and demonstrating a robust risk and control
environment will be key. In a Falklands context it will be important to ensure they are briefed on geo-
political issues and it would be prudent to consider including FIG and perhaps the FCDO in doing this.
§ Securing and fitting out of premises: A new bank will need premises to operate from. One option given
the core assumption outlined earlier would be to inherit the existing SCB premises which are situated in
a good location in Stanley. However, this building is currently configured in a way that reflects how SCB
operates today. Any new bank will be operating on a ‘digital first’ basis and therefore will require much
less by way of space for traditional banking activities that involve a teller. Taking on the existing bank
premises and then reconfiguring them would be both costly and disruptive to the operations of the new
bank. It might therefore make better sense to acquire and set up new premises - configured to reflect the
new banks customer proposition and staffing arrangements from the outset. In a practical sense this
might also be required to give SCB time to wind down their operations as they exit the country.
§ Setting up the legal, risk and control framework: As part of mobilising the new bank there will be a
need to stand up a team of legal and risk professionals. Legal advisors would need to lead on drafting a
range of customer and supplier documents. These would include albeit this is not an exhaustive list -
terms and conditions for all products being provided, product application forms, borrowing and security
documentation to reflect the unique legal characteristics of the Falkland Islands.
§ In addition, arrangements would need to be made to secure an auditor likely from the UK given that there
is not a firm of sufficient size or with experience of auditing a bank resident in the Islands. Arrangements
would also need to be put in place with surveyors and solicitors in the Islands in order for them to act on
the bank’s behalf when conducting secured lending.
§ There would also need to be a significant up-front investment in developing an appropriate risk and
control framework. This would include developing a comprehensive risk management framework for the
firm which would include exercises to identify all of the risks the firm is exposed to and how they will be
managed effectively. Detailed policies and procedures will also need to be put in place and maintained to
cover the end-to-end operations of the bank.
§ Specialist treasury expertise will also be required to manage the capital and liquidity position of the new
bank including undertaking the annual capital and liquidity adequacy assessment processes. The
treasurer would also be responsible for developing a recovery plan for the firm which would provide
senior management with a range of options should the bank experience either idiosyncratic or market
stress events.
§ In the start-up phase it might make sense to bring in contingent resources or a consulting firm with access
to significant and experienced resources to achieve these tasks and to implement the target operating
model of the new firm. After standing up the target operating model a smaller team within the bank would
be responsible for monitoring, managing and reporting on its risks whilst ensuring the control framework
remains apposite for the ongoing operations of the bank.

The ‘Bank in a Box’ concept is significantly reducing technology costs and
time to reach the market for start-up banks
A significant evolution over the past ten years is the way that new banks can access scalable technology
solutions both relatively cheaply and easily. Historically, most banks operated on natively developed
technology systems which were expensive to maintain and cumbersome to change. These legacy technology
systems have also made it difficult for larger financial institutions to be agile in how they respond to changing
customer needs in the digital age.
As far as procuring technology and payment capabilities go, an IT firm like Temenos or Fiserve can provide
a new start-up bank with a standardised ‘bank in a box’, hosted in the cloud on equipment rented from a
leasing partner. The operating costs of the platform are set to flex with the number of customers and
employees of a new bank which means that costs therefore scale more in line with revenues, reducing the
upfront costs of setting up a new bank. Gibraltar International Bank and the Bank of St Helena both operate
in this fashion.
Both Temenos and Fiserve focus only on providing banking and finance software. Each typically invests 20
percent of their revenue in research and development. Firms running their platforms – provided they do not
extensively customise them – receive regular software updates. These updates allow banks to stay up to date
in a cost-effective way with regulatory and market needs whilst avoiding the need for extensive technology
expertise and teams of their own.
A criticism that could be levelled at this approach is that product design and delivery ceases to be a
differentiating factor between banks which leaves them only being able to compete on service and price. In
a Falklands context this is not an issue – customers require a relatively straight forward set of products albeit
delivered through contemporary digital channels.
UBS believe that increased regulation and technology combined are, perversely, increasing the scale
requirement for larger, international banks while driving it down for simpler newer banks which are backed
by new technology.92 Indeed, new banks might find handling a significant cyber-attack very challenging
whereas established banks have survived significant technology outages (think TSB in the UK) – nevertheless
new banks with simpler technology architecture are easier to control and defend than larger, complex firms.
OakNorth Bank in the UK provides a good case study of this changing landscape in terms of scale for new
banks. OakNorth was set up by two London based entrepreneurs and received its authorisation from the UK
regulators in March 2015. They started trading in September of that year and within a year reached
breakeven, spending just £5 million in set up costs whilst going on to achieve a profit before tax of £33.9
million and a return on capital of 19% in just their third year of operations with a loan book of £1.3 billion.
A domestically owned bank would require additional regulatory

infrastructure to be established by FIG to meet international standards
The current Falkland Islands banking legislative and regulatory framework can be fairly characterised as
rudimentary. It exclusively comprises the current banking ordinance which was enacted in 1987 and
monitoring of compliance with its requirements is undertaken by the FIG due to the absence of a separate
regulatory authority.
It could be argued that this is an acceptable arrangement bearing in mind that there is a single bank operating
in the Islands which is a branch of a UK firm regulated by the Prudential Regulation Authority (“PRA”).
Therefore, the PRA is responsible for the prudential oversight of SCB and monitoring that it holds an
appropriate level of capital and liquidity reserves to reflect its risks and ongoing programme of operations.
The current Ordinance and lack of a regulator would not be considered sustainable in the event that a
domestically owned bank was to come into existence. The Ordinance would need to be significantly
overhauled to reflect contemporary international expectations – it was framed the year before the first Basel
92 Jason Napier et al, “Big banks and the bigtech, fintech & digibank incursion. What is at stake?” UBS Q-Series (June 2019): 32-34.

Capital Accord was introduced in 1988 which set minimum capital levels for banks. Since then the Basel
framework has been expanded to include not just minimum capital expectations but granular standards on
how banks should calculate risk weighted assets and minimum standards in relation to liquidity and stable
funding ratios and maximum levels of leverage.
It is difficult to see how it would be considered acceptable to continue having just FIG being responsible for
overseeing a domestically owned bank. This becomes even more acute given the earlier observations about
the likelihood of FIG being on the shareholder register either in part or full. There would need to be a
regulatory authority created whose senior management and board would be appointed by FIG and/or the
Governor but operating independently of it.
The principal role of a new regulatory agency would be to provide oversight of any bank established in the
Islands to ensure they are operating in a safe and sound fashion so that depositors are adequately protected.
A secondary objective of ensuring consumers are protected in terms of the conduct of business would also
be desirable particularly around providing guardrails around acceptable lending practice not just by banks
but also firms offering consumer finance.
A new independent regulatory agency would also be important for two additional reasons. Firstly, it would
be required to demonstrate the Falkland Islands’ commitment to meeting international standards in relation
to the management of its finance sector. These standards relate to observing the Basel Core Principles in
respect of the prudential oversight of domestic banks but also the expectations of FATF in demonstrating
that there is an effective anti-money laundering and terrorist financing framework in the country.
Secondly, it is highly likely that correspondent banks would expect there to be a more sophisticated
regulatory architecture in the Falkland Islands overseeing the operation of a domestically owned bank. The
absence of an independent regulator might constrain the ability to secure and maintain a network of
correspondent banks which would adversely impede the ability of a new bank to meet its customers’ needs.
Setting up a new regulator would be a significant endeavour for FIG and would require investment in hiring
appropriately skilled personnel to stand up and run such an agency. In addition, there would also need to be
a significant level of additional drafting of primary and secondary legislation to enable the new regulatory
authority and its various functions. It is noted that there is already an ambitious legislative programme
envisaged for the next four years with FIG in the process of hiring an additional legal drafter.
A final important consideration relates to dimensioning whether a Depositor Compensation Scheme would
need to be established. During the global financial crisis of 2008, the levels of deposit insurance cover was
increased in order to re-assure depositors that there funds were safe. In the UK and across Europe the
industry is responsible for meeting any shortfall of retail deposits up to a maximum of €100,000 in the event
of a bank failure. However, designing Depositor Compensation Schemes is much tougher in small
jurisdictions particularly when you have a small number of banks or even just one bank.
At present, there is no such cover in the Falklands for deposits placed with SCB locally – depositors instead
can draw comfort that their deposits are being placed with a large, systemically important financial
institution which is supervised by the UK regulators and with extensive financial resources. Depositors might
have different expectations in the event they were placing deposits with a much smaller and locally
incorporated bank with a far more concentrated business model.

Section 7: Key observations
This section sets out the key observations based on the review of the current banking provision in the
Falkland Islands and the benchmarking of services available across the cohort countries. It also draws on the
information gathered during the various meetings and interviews undertaken whilst visiting the Islands. The
analysis of products and services across the cohort countries has been conducted on a desktop basis albeit
interviews and meeting have been undertaken where possible in order to validate the desktop research.
1. The idiosyncratic constitutional arrangements of each country studied appears to heavily
influence the banking provision available. As a rule of thumb the more integrated a territory is to
its ‘metropolis country’ the greater breadth and plurality of banking services there is.
In terms of banking in small island jurisdictions the study reveals there is an apparent trade-off between the
levels of integration and autonomy a country enjoys. There is academic research available, reviewed as part
this work, which highlights that small, non-sovereign territories tend to fare better than their small,
sovereign counterparts. In large part, this is because they are able to leverage the resources and political
influence of their metropolis country.
There is, based on the cohort studied, a correlation between the level of integration and the breadth of
banking services provided. Easter Island is the most constitutionally integrated out of the cohort with it, in
effect, being a province of Chile albeit having its own additional local law. Chilean banks have established
themselves on the Island notwithstanding the politically charged and economically under developed
environment.
Likewise, St Pierre and Miquelon also benefits from a high level of integration with France. Although not part
of the EU, it is represented within the French parliament. It is also noteworthy that the French central bank
has a division which is focused entirely on the economic wellbeing of the French territories and ensuring
they have access to an appropriate range of financial services.
Easter Island and St Pierre and Miquelon have the greatest breadth and plurality of banking provision
considering their remoteness and population. A clear factor in these two jurisdictions is the constitutional
arrangement that links them closely together with their ‘metropolis country’. Some however, particularly in
Easter Island may ponder at what cost given concerns about the pace of change to their way of life and
heritage.
Niue and the Cook Islands are more unique. The formal constitutional arrangement is first and foremost with
the United Kingdom given King Charles III is the Head of State albeit they are in a free association with New
Zealand. Both countries have a higher level of devolved decision-making compared to Easter Island and St
Pierre however there are also important normative factors (cultural and political) to consider in terms of
their relationship with New Zealand. A significant proportion of New Zealand Māori identify strongly with
their Pacific Island neighbours given their strong heritage links. In addition, there are more Niueans and
Cook Islanders living in New Zealand than in their home of origin. As a small democracy with a proportional
electoral system and with concentrations of these groups in just a handful of electorates this tends to lead to
them having a significant influence in New Zealand government policy. Indeed, the Deputy Prime Minister
and Central Bank Governor both celebrate their Cook Islands heritage. Consequently, the New Zealand
government and private sector firms exhibit a strong sense of obligation to support the development of their
Pacific Island neighbours. Finally, there is also a unique geopolitical context in the Pacific region. Both
Australia and New Zealand are cognisant of the rising influence of China, as Xi Jinping pursues a more
muscular foreign policy. Supporting their Pacific Island neighbours is critical to their national interests as a
way to underpin their influence in the region.
St Helena and the Falkland Islands enjoy a long-standing relationship with the British Crown as British
Overseas Territories. St Helena continues to be reliant on aid from the UK government whereas the Falkland
Islands is financially independent owing largely to the success of the fisheries industry. Both countries have
small markets and have only a single bank providing a limited range of services. The British have tended to
adopt a less interventionist approach in terms of the provision of certain infrastructure compared to, say,
France. This includes the banking sector. More broadly, as part of the evolving post-Brexit relationship

between the British Overseas Territories and the UK, consideration should be given as to the future role the
UK government might play in ensuring each Territory has access to the core infrastructure, including
banking, required to support further economic development.
2. Standard Chartered Bank took a risk in 1983, when their clearing bank cousins would not, in
opening a branch in the Falkland Islands to support the Islands development. Their presence has
contributed to the remarkable success and prosperity of the Islands over the past forty years.
The need for a commercial bank in the Islands had been originally identified in the first Shackleton report of
1976. Efforts were made to persuade one of the UK clearing banks to open a branch or to set up a subsidiary
– these came to nothing as both Lloyds and Barclays did not believe it was economically viable to do so. As a
result, in the years preceding the 1982 conflict, plans were being laid to set up a National Falklands Bank
owned by the Government.
That SCB established their branch in Stanley is due principally in no small measure to the personal
intervention of then Chairman Lord Anthony Barber. Politics and the right people being in the right roles
were also factors. Margaret Thatcher, in the political ascendancy following the liberation of the Islands, was
determined to see a commercial bank established there. It was fortuitous that at the helm of SCB was a former
Conservative Chancellor of the Exchequer and member of the House of Lords. Barber put the wheels in
motion against the advice of his executive team and a somewhat perplexed Bank of England.
Setting up a new branch in a new country always comes with challenges, but the mobilisation encountered
problems which might have been foreseen with the benefit of greater planning. It is also fair to recognise it
was not just the SCB executive team who lacked enthusiasm for this new endeavour. The arrival of SCB felt
like an imposition in some quarters of the Falkland Islands owing to the terms attached to their entry which
also scotched the plans to set up a National Falklands Bank.
Nevertheless, the branch opened and began to thrive as the rehabilitation of the Falkland Islands got
underway in earnest. The archives reveal that there has always been a simmering tension in the relationship
between the bank and the local community over the years - often stemming from a perception that they are
not providing the full breadth of services expected of a UK high street bank. But, SCB never did hold
themselves out as being a typical high-street bank. This tension continues to echo down the years and still
frames the relationship today. Often, the frustrations of the day have been resolved either through changes
in stance/policy by SCB over time or the case of more intractable problems through strategic partnerships
with FIG such as the launch of the Joint General Mortgage Scheme.
If the original decision to open a branch was a patriotic and politically driven gamble in 1983, the fact SCB
have remained in country for 40 years is even more remarkable. No doubt being the ‘only show in town’ and
the political profile of the Falkland Islands has influenced their longevity. However, the fact they have
remained committed to the Islands when most banks, including SCB, over extended periods of time were
exiting larger and more profitable markets should be commended. It would have been easier to cut and run
as any political fallout would have soon blown over. Their presence has contributed to the success and
economic prosperity of the Islands over the past forty years.
3. SCB’s operating model and lack of digital/mobile channels is incongruent with how systemically
important financial institutions meet their customers’ needs in 2023. The outdated operating
model creates a poor customer experience with a commensurate impact on the SCB brand, lacks
resilience elevating operational risk and is a drag on productivity for the bank and businesses.
The current SCB operating model leads the Falkland Islands to benchmark unfavourably in terms of breadth
of banking products and services available relative to the peer group, particularly when considering its
overall economic prosperity and wealth. The banking proposition is inferior to that found in Niue and St
Helena – two countries which are far less developed and continue to require direct development aid from
New Zealand and the UK respectively.
Every business, without exception, interviewed as part of this study expressed their dissatisfaction and
frustration at the lack of online or mobile banking channels with SCB. The lack of ability to view their SCB
bank accounts let alone originate payments creates a drag on productivity for all customers. For businesses

with a higher level of payment volumes this necessitates team members spending extensive time manually
reconciling payments and calling the bank during their opening hours to raise queries. There is also no ability
to interact with the bank outside of their core opening hours. It was common to receive feedback during the
interviews along the lines of “we do not want anything out of the ordinary – we just want them to be a normal
bank doing what normal banks do.” The lack of online / mobile capability also hampers businesses from
linking their banking to accounting, invoice and payroll platforms which would bring efficiencies.
During the course of the interviews it was striking to note that the businesses struggled to identify many
positive features in their relationship with SCB save for noting the friendliness and dedication of the people
they interact with on a daily basis. There is a clear cognitive dissonance between what businesses feel about
SCB and how the bank thinks its customers view them. It is noted the bank does not undertake any form of
customer satisfaction or net promoter surveys.
When SCB first opened their branch in the Falklands the current channels and operating model would have
been regarded as fit for purpose. But, online banking in some form has been available since the late 1990’s
in the UK. In fairness, the communications infrastructure in the Falklands was likely an historic impediment
to upgrading the Stanley branch. The wider bank will have moved ahead with the Islands remaining on its
legacy platforms owing to internet bandwidth constraints. Typically, in large international banks, business
wide technology upgrades are often funded centrally. Smaller business units which then seek to catch up
later have to demonstrate a clear benefits case to justify the cost of the upgrade and will likely be competing
with other larger business units for funding allocations. That being said, the internet bandwidth in the
Falklands has improved significantly over the past five years. Both St Helena and Niue have operated online
or mobile banking for some time with an inferior internet capability. It is noted that the banks operating in
St Helena and Niue are government owned and therefore may have different return on investment hurdles
to banks operating exclusively in the private sector.
In addition to the poor customer experience the resilience of the current operating model appears fragile. A
number of businesses interviewed report an increasing number of errors being made in terms of the
processing of their payments. In the run up to the recent busy Christmas period the bank had a significant
number of staff absent owing to Covid. As customers cannot self-serve it was necessary to reduce the opening
hours of the branch in order for the days’ work to be processed. However, a number of firms indicated they
had payments made up to four days late including wages for their employees.
Nearly all of the businesses interviewed recognised that the SCB team they deal with on a day-to-day basis
strive to provide the best service they can notwithstanding the operating model constraints. Within the
current technology envelope, the team at SCB have also endeavoured to innovate to improve the customer
experience. The bank introduced a number of initiatives during the pandemic to send payment instructions
by email and to also streamline the forms required to initiate multiple payments. The bank have also
introduced a number of other changes in an effort to improve the day-to-day customer experience including
in-house debit card PIN number production, an online mortgage calculator and bulk upload of salary
payment instructions. The recent migration to a new core banking platform is also an important enabler for
the bank to introduce digital or mobile banking at some point in the future.
SCB in recent years introduced a debit card in an effort to reduce the number of manual payments and
improve the customer proposition. This has seen some success, however businesses have reported that they
cannot often use their debit cards for higher value items such as flights for international business trips. SCB
have advised that one of the contributing factors for this relates to how a number of retailers in the Islands
have set up their card acquiring system with a generic retailer coding. This means that higher value
transactions might be flagged as suspicious and be automatically declined. It is not apparent whether this
issue is widely understood and retailers in the Islands could potentially make amendments to reduce the
incidences of these issues.
Another contributory factor relates to the way SCB have set up the debit card capability in the Falklands.
Usually, debit card transactions automatically check that the account has sufficient funds in place at the point
of sale. However, due to its current system configuration SCB is not able to do this in the Islands – instead
they take a risk-based approach to setting payment thresholds for each card. This unusual arrangement
means that SCB can offer the debit card product in the Islands but customers who attempt to undertake

transactions above this threshold may experience declined payments which requires them to use alternative
methods of payment.
Another feature of the current operating model is that SCB in Stanley has job roles which do not exist
elsewhere in contemporary banking today. The manual nature of the branch’s operations is also a drag on
the efficiency and profitability of the bank. When online/mobile banking is introduced many of these
operational roles will become obsolete. These changes may give SCB the opportunity to create a broader
range of career paths for its team as part of a strategic workforce plan. Some of the team could be reskilled
and deployed into new roles which would not only enrich the customer experience but also enhance the
career prospects for its colleagues.
It should also be acknowledged that when digital/mobile banking is introduced it is unlikely that the majority
of customers will be able to also use the current manual processes (e.g. funds transfer slips) as SCB will not
wish to operate a hybrid model. This means a small number of businesses will need to embrace new payment
methods such as accepting card payments. SCB have confirmed their intention is to continue to support
vulnerable customers who may not be able to readily access digital/mobile channels.
Finally, the time and cost of remitting payments to and from the Falkland Islands and the UK was raised as a
key challenge particularly for smaller businesses. This is largely a factor of the Stanley branch not forming
part of the UK banking network and having to rely on the SWIFT international payments network. The
Financial Stability Board in 2020 identified international payments as an area which has been neglected at
the expense of speeding up domestic payments. Work is underway to explore how technology could be
deployed to speed up settlement, reduce the incidence of misrouted payments and reduce the costs of
payments. The introduction of the IBAN number for the Falklands will help with more efficient routing and
it is understood this will be adopted by SCB within the next six months.
4. Setting up a domestically owned bank to replace Standard Chartered is unlikely to be a panacea
and solution to addressing the current challenges. The Islands have, and continue, to benefit from
the presence of a large international bank.
A domestically owned community bank would be able to tailor its product range and services to reflect the
needs of its local community. The evolution of technology in banking means that ‘out of the box’ banks are
easier and cheaper to set up than ever before. However, community banks work best when they are part of
a wider eco-system of banks and should be considered complementary to larger financial institutions. As a
country develops the needs of businesses become more sophisticated and they need to access expertise and
capital which is often beyond the reach of community banks.
There is an extensive body of research which contends for the presence of international banks in developing
markets because they bring a range of benefits including financial stability, knowledge and technology
transfer, tried and tested risk management frameworks, robust corporate governance arrangements and
high standards of consumer protection. Foreign banks can also be an important catalyst in stimulating
exports in developing countries by providing links to larger and more developed markets.
The presence of international banks also enhances the reputation and credibility of a country as noted in the
recent Standard & Poor’s rating opinion for the Falkland Islands. Having a branch of a large international
bank also means that depositors money benefits from the safe harbour of being placed with a large, well-
capitalised institution with a diversified business mix and with recourse to a lender of last resort (central
bank). During the global financial crisis, many smaller community banks encountered funding difficulties
and were not able to access the support mechanisms from the large central banks.
Larger international firms are also able to leverage support and expertise from within their wider network,
particularly in relation to specialist areas of credit underwriting, compliance and technology support. A
domestically owned community bank will often struggle to compete for and to retain expertise, if indeed the
requisite skill set is even locally available. Community banks can therefore struggle to stay abreast of
contemporary banking developments which could ultimately impact the customer experience.
Community banks established in small island-based economies are also likely to find it more challenging to
secure and sustain correspondent banking relationships. As already highlighted, the significant de-risking

which has taken place means that correspondent banks are tightening their due diligence criteria or
imposing higher minimum volume requirements. This can potentially impact the customer experience for
island-based community banks. It should be noted that, of the adopted peer group in this review, St Helena
and the Cook Islands are the two jurisdictions with a local bank. Even so, the Cook Islands’ community bank
is found in the context of having two other international banking groups with a full service offering. Most of
the studied jurisdictions seem to have adopted the strategy of preferring the presence of an international
bank within their territories.
It is also noted that St Helena has had its own community bank since 2004 which has delivered a number of
innovations including the launching of internet banking and a local card merchant service. However, the
Government of St Helena and Ascension are exploring how they might either attract an international bank
or financial institution who can introduce greater international connectivity. It was remarked in interviews
that St Helenians regard the Falkland Islands as more favourably placed because of the presence of an
international bank in the form of SCB.
5. The commercial lending market is not functioning as it ought to in the Falkland Islands –
established and profitable businesses with acceptable collateral are struggling to secure the
lending to enable them to grow and diversify.
It is not appropriate within this report to comment on specific cases raised by businesses during the
interviews. There will always be sound reasons why a commercial bank will not lend money to a specific
business and its circumstances – they will understandably wish to avoid the reputational risk of having to
enforce their security in a small community. SCB’s commercial lending criteria are detailed in Appendix 3.
However, a pattern clearly emerged during the interviews conducted - established businesses across a
variety of sectors with a profitable track record and acceptable collateral cannot secure loans with SCB.
There is a perception in the market that SCB are not ‘open for business’ and the size of their commercial
lending book, at just £600,000 or 0.4% of total deposits, lends credence to this perception. This does not
appear to be an issue related to demand – the FIDC has a loan book of ~£2.5 million outstanding. Typically,
it would be usual to expect a development agency to have a smaller share of the total lending market
compared to the commercial banks but here they have a total book several times the size.
FIDC would be expected to focus their efforts on supporting start-up businesses or on those businesses that
have high growth potential but cannot yet evidence a sufficient track record to secure senior debt from a
bank. SCB require a business to be able to provide them with three years financial accounts in order to
consider a lending proposal. However, it is clear from the interviews conducted that FIDC will also support
more established businesses when SCB have declined facilities so as to make sure that viable businesses are
getting the funding support they need.
A number of businesses noted that FIDC provide their lending on more favourable terms than SCB with
interest rates being more keenly priced. In these circumstances there is little incentive for businesses to
borrow from SCB on commercial terms which therefore makes transitioning from FIDC support to the bank
challenging. Equally, it is clear that FIDC, given their mandate, strive to be as proactive and supportive as
possible of businesses that have the potential to contribute to the economic development of the Islands.
Given the time constraints in conducting this work it has not been practicable to undertake a deeper dive
into the underlying reasons for SCB’s stance in relation to commercial lending. However, it is noted that SCB
do not presently run a relationship manager service for their commercial banking customers and do not have
experienced commercial lending managers on island. At other banks the commercial relationship manager
plays a key role in ensuring that banks understand their customer’s businesses, the key risk drivers and how
they best structure lending proposals to meet their borrowing needs.
Finally, one other issue was raised on a number of occasions in terms of SCB supporting the fisheries sector
with their upcoming fleet renewal programme. Many of the long-established fishing companies and their
joint venture partners have or are in the process of placing orders for new vessels. These assets represent
an attractive funding opportunity and at present the Spanish banks are cornering this market. It is
understood that SCB have considered a number of loan proposals but it is not a sector in which they have
experience of lending to. A lack of expertise and track record in a sector can lead to having to allocate higher

levels of capital against such lending which can impact the profitability of facilities. A lack of expertise can
also lead to poorly structured facilities and credit problems. However, given the growing scale of the fisheries
business perhaps market-based or co-investment credit solutions might be explored with the support of
SCBs corporate and investment bank.
6. The size of the Falkland Islands market and lack of scale means Standard Chartered Bank cannot
reasonably be expected to provide the breadth of products and services found in larger markets.
The focus of all stakeholders should be on securing access to ‘brilliant banking basics.
The business model for large international banks hinges on operating at scale in order to drive operating
efficiencies. The financial crisis of 2008 led to policymakers requiring banks to both boost the levels of capital
and liquidity reserves in order to make them more resilient to shocks. This has served the sector well and
has ensured they continue to support their customers and the economy during the Coronavirus pandemic
and amidst the recent geopolitical turmoil.
However, the extraordinary policy responses of quantitative easing and a much longer than anticipated era
of ultra-low interest rates have meant that banks have been forced to aggressively pursue greater operating
efficiencies as they seek to deliver an acceptable return to their shareholders. Consequently, there is little
scope for product customisation and banking products are becoming more commoditised as a result. Many
large banks are also withdrawing from business lines and countries where they do not enjoy sufficient scale.
In addition, there is a far greater regulatory scrutiny on the conduct of credit business on a cross border
business with banks cognisant of the potential of regulatory and enforcement action should they
inadvertently fall foul of local consumer protection rules and requirements.
In the Falklands context this inevitably means that not all banking products can be offered in a sustainable
or cost-effective fashion. By way of example, the size of the market means it is just not feasible to set up and
offer a credit Card or charge Card product to individuals or businesses in the Falkland Islands. It is also
noteworthy that larger Island territories, including those with significant international finance centres, are
finding that their residents can no longer access credit products on a cross-border basis.
SCB do offer these products in other markets and the question was raised in a number of our interviews as
to why they cannot just extend them to also include the Falkland Islands? However, the unique nature of
SCB’s entry into the Falkland Islands is a factor which should be considered here. They are set up as a branch
of the Standard Chartered Bank in London. The bank does not provide high-street banking services in the UK
– it instead focuses on multi-national corporates and financial institutions. It would not be practicable nor
cost effective for SCB to extend these products from another region which operates to a very different
regulatory and legal framework.
7. The regulatory framework and architecture needs updating to reflect the contemporary banking
landscape. In addition, the Government needs to also play a key role in leading by example in the
wider digitisation of the economy including in its delivery of public services.
The banking ordinance in the Falklands dates back to the late 1980’s – a situation not out of keeping with a
number of the territories surveyed in this study. For the Falklands arguably, it has not been a priority because
it does not need to concern itself with the prudential oversight of SCB given it is regulated primarily by the
Prudential Regulation Authority and Financial Conduct Authority in the UK. The regulation of banks has
changed markedly over the past three decades with the introduction of the Basel Capital Accords, depositor
compensation schemes, recovery and resolution regimes for banks, and notable consumer protection
measures. Clearly, not all of these are necessary for the Falkland Islands. However, it would be advisable for
FIG to consider bringing forward a revised package of banking legislation. This will ensure that the Islands
are keeping pace with international standards in this area and also should be considered a foundational
element should another financial institution consider operating in the Islands.
It is anticipated that there will be greater digitisation in the Falkland Islands. The business community is
keen to leverage the digital economy where it can – the advent of digital/mobile banking is eagerly
anticipated and will build on the switch to card payments. SCB, as the Islands’ only financial institution, and
FIG lie at the heart of the Falkland Islands community. How they each progress on embracing the digital
economy will inevitably set the tone for the wider business community. Both institutions should set out their

strategic plans for delivering their services digitally. These plans will also need to include measures to ensure
that vulnerable individuals remain able to access vital services and not fall victim to financial fraud. There
might also be value in FIG and SCB running joint educational campaigns focused on anti-fraud measures to
reduce the incidences and impact of digital fraud.
8. There are opportunities for collaboration with other British Overseas Territories to raise
awareness of the British Overseas Territories, the shared challenges faced in relation to banking
and to build new capabilities on a shared basis.
Awareness of the British Overseas Territories, what they are, their relationship with the United Kingdom
and the challenges they are facing is lacking. In the banking fraternity the assumption might be that they are
all international finance centres with a read across being made from the Caribbean territories. As a result,
territories such as the Falkland Islands, St Helena and Ascension, and South Georgia may be regarded as
higher risk territories which could be a factor in framing appetite for UK based banks to offer services on a
‘remote’ basis. We know that a number of firms operating in the Falklands do have legacy relationships with
UK banks and whilst these banks have indicated they are content to maintain their existing arrangements
they are not inclined to open new accounts for them.
For those territories which do not have an international finance centre it might be useful to work together
to raise awareness with politicians in the UK, perhaps through relevant All-Party Parliamentary Groups and
the UK Overseas Territories Association. This outreach might also usefully extend to include a number of the
key trade bodies including UK Finance. By working collectively, there is a greater propensity to help educate
key UK stakeholders about the unique character, identity and challenges facing the islands and the British
diaspora who live there.
A number of the Territories need to update their banking legislation and regulatory architecture. A number
have banking legislation which has not been updated for some considerable time and now needs to reflect
the latest international standards in terms of Basel prudential accords, consumer protection, and recovery
and resolution. The scale issue is not just a challenge that commercial banks face – operating regulatory
architecture to cover relatively small populations inherently causes diseconomies of scale and accessing
specialist expertise can be cost prohibitive.

Section 8: Structural options and proposed initiatives
This part of the report sets out the key recommendations and initiatives which stakeholders can consider
exploring in order to boost the provision of banking services in the Falkland Islands. Three overarching
structural options have been considered and analysed.
A series of proposed initiatives are then outlined. To help guide prioritisation, the initiatives have been
assessed on a portfolio basis to determine their cost/ complexity to execute and their anticipated impact.
Detailed below are a summary of the initiatives, the rationale for them and narrative on their potential
impact. A number of these initiatives will benefit from working groups being formed comprised of the key
stakeholders to explore the issues and a potential approach to implementation.
Analysis of structural options

Based on the work and benchmarking completed, there are three structural options / approaches open to
the key stakeholders in order to improve the provision of banking services in the Islands:
(i) Work with SCB to facilitate improvements to their existing service provision – this might also entail
considering whether there needs to be financial support/incentives for addressing certain issues;
(ii) Seek to bring in another financial institution either physically or virtually to compete with SCB; and
(iii) Establish a domestically owned and operated national bank to replace SCB.
Set out below is an analysis of each of these structural options in terms of their advantages and
disadvantages.
Work with SCB to facilitate improvements to their existing service provision
Summary of option
§ The key stakeholders work with SCB to make improvements to the overall service proposition
including the launch of online/mobile banking and improving the availability of commercial finance.
Consideration to be given to providing support and/or incentives to fund service improvements.
Advantages
§ This option preserves the existing SCB presence and retains an internationally recognised and
systemically important financial institution in the Falkland Islands.
§ Leverages SCB’s wider business in terms of capabilities and expertise including risk management,
compliance and the safety of customer deposits.
§ Significant heavy lifting has already been undertaken by SCB in terms of remediating their book of
customers in terms of KYC / due diligence and also upgrading their back-office platform which is
considered a key enabler of digital/mobile banking.
§ There are a number of initiatives which do not require a significant technology spend and associated
risk which would potentially improve the overall customer proposition and experience albeit they
rely on SCB having the appetite and desire to explore them.
Disadvantages
§ Limited scope to customise the products and services to reflect the unique needs of the Falkland
Islands.
§ Relies on SCB to allocate the funding and resources to progress a number of the initiative’s including
the introduction of the digital/mobile functionality required.
§ Technology cost will be benchmarked against other investment priorities – efforts to improve the
profile of the Falkland Islands with SCB senior stakeholders may improve prospects of success.

§ Support / contribution from FIG may be required to incentivise SCB into addressing some of the
service shortcomings. Other options to be considered include launching a commercial lending
equivalent of the JGMS.
Seek to bring in another financial institution either physically or virtually (i.e. fully digital basis)
Summary of option
§ Seek expressions of interest from other financial institutions in the UK and further afield to gauge
appetite to serve the Islands market – either with a physical presence or on a virtual (fully digital
neo-bank) basis.
Advantages
§ Bringing in a new financial institution either physically or virtually would solve a number of the
challenges in terms of service provision e.g. digital/mobile banking as a new entrant would seek to
enter the market with a contemporary banking offering.
§ The presence of another competitor in the market might add additional incentive to SCB to ‘up their
game’ in terms of service provision.
§ Opportunity to collaborate or partner with other BOTs e.g. St Helena and Ascension who are also
seeking to attract another firm to sit alongside their existing domestic bank. Being able to serve
multiple markets might stimulate additional interest.
Disadvantages
§ Highly dubious that a market the size of the Falklands can realistically support two banks operating
in direct competition with one another – might also prove to be a catalyst for SCB to exit the market
as they are no longer the ‘only show in town’.
§ A neo-bank operating virtually in the Falklands is unlikely to have appetite to provide credit products
given lenders typically need an on-ground presence to ensure a prudent approach to underwriting
and monitoring their facilities. Provision of service to vulnerable customers would also need to be
considered.
§ Any bank operating virtually in the Islands would hold their deposits outside of the jurisdiction which
would support further ‘capital flight’ and FIG would lose the tax revenues associated with this
activity.
Establish a domestically owned and operated national bank to replace SCB
Summary of option
§ Set up a domestically owned and operated national bank with the existing business of SCB
transferring to the new bank
Advantages
§ A new national bank’s products and services could be customised to reflect the unique needs and
character of the Falkland Islands community. It could be set-up on an omni-channel basis to provide
up to date digital capabilities with a smaller traditional branch presence to ensure needs of
vulnerable community members are met.
§ The cost and complexity of setting up the technology platform of a new bank has reduced significantly
following the advent of ‘banks in a box’.
§ Opportunity to explore collaboration with other territories e.g. Saint Helena and Ascension –
reshaping of Bank of St Helen to also serve the Falklands.
Disadvantages
§ The Falkland Islands would lose the presence of an internationally recognised banking brand.
Notwithstanding, the current service challenges the presence of SCB has served them Islands well.

§ Capital of ~£20 million would be required to set up a new national bank including ~£5 million of set-
up costs. Sourcing private capital to support a venture of this nature likely to be a challenge
necessitating partial government ownership.
§ Securing new correspondent relationships for a new bank may prove difficult given the levels of de-
risking seen and these underpin the customer proposition and ability to make payments.
§ Lack of local expertise/skills required to operate a fully-fledged bank will necessitate senior
management being hired outside of the Islands. Hiring of this nature is not without its challenges.
§ FIG would need to overhaul the banking legislative framework and also put in place an independent
regulator to oversee the bank including the prudential safety and soundness of the firm. The ability
to rely on the PRA in the United Kingdom to undertake this would not be available. The new bank
would not have access to a ‘lender of last resort’ and Bank of England support during market and
idiosyncratic stress.
Recommendation
Based on the research undertaken, benchmarking completed and the current market landscape it is
considered Option 1 represents the soundest way forward for the Islands. Retaining an international bank
in the form of SCB but with an improved service proposition will bring the Falklands into line with the peer
group jurisdictions. It is considered unlikely that sustaining two banks in the Islands is a realistic prospect
given the small population. Establishing a domestically owned national bank will potentially solve some of
the current service issues but runs the risk of creating other challenges which could be the detriment to the
Falkland Islands community.
Portfolio of initiatives
In the context of option 1 being the favoured recommendation, a number of initiatives for consideration by
the stakeholders are set out below. They have been assessed based on their cost/complexity to execute and
their likely impact. A high-level summary of each initiative is then also detailed. It is recommended that the
high impact initiatives are explored in further detail through a dedicated working group.

1. Explore migrating the SCB Branch onto a UK sorting code
Description of initiative
§ SCB to explore the feasibility of extending their existing agency banking arrangements with NatWest
to enable the Stanley branch to become, in effect, part of the UK bank network. This would see the
Stanley branch on par with the Jersey branch of SCB which already has a UK sorting code and would
enable same day and lower cost payments to be made by Faster Payments, BACS and Direct Debit.
Cost & Complexity High Level of Impact High Suggested priority High
Rationale & further information
§ A common frustration voiced by all businesses was the cost and time it takes to transfer money to
and from the UK. At present the branch operates only on the SWIFT payment platform which means
that payments are expensive, prone to routing delays/errors and can take days to process.
§ Having a branch operating with a UK sorting code gives a bank the option of enabling it for the
following payment types: Direct Debits, Faster Payments, CHAPS transfers, Cheque & Credit Clearing,
and BACS payments.
§ Standard Chartered Bank are not a direct participant in the UK payment schemes reflecting their
status as a non-clearing bank. Instead they use NatWest who act as their agent and sponsor them as
an indirect participant. Standard Chartered London has a sorting code issued by NatWest and is
enabled for all of these payment types.93
§ It is noted that SCB Jersey branch has a UK sorting code issued by NatWest and it has been enabled
for Direct Debits, Faster Payments and BACS payments.
§ Discussions have been held on a ‘no names’ basis with PayUK and NatWest to understand whether
there are any technical specifications/constraints which would prevent the Falkland Islands from
being eligible – they have both confirmed there are no technical impediments. It is possible to enable
sort codes for certain types of payment only as SCB have done for their Jersey branch.
§ NatWest provide agency and correspondent banking to a range of financial institutions including
Gibraltar International Bank and Starling.
§ Should the Stanley branch be able to utilise a UK sorting code it would significantly reduce the cost
and friction of sending payments to/from the UK. Square payments could be made directly to SCB
bank accounts in Stanley.
§ Payments in other currencies would continue to be routed via SWIFT albeit it is understood
payments to and from the UK represent a significant component of current payment traffic.
Key dependencies
§ NatWest would need to be comfortable with the risk profile of the Falkland Islands as a jurisdiction
to enable them to extend their existing agency arrangements with SCB. They will also wish to assess
the commercial aspects of the arrangements in terms of payment volumes.
§ SCB would also need to secure funding and project resource to roll out this capability. Ideally, this
would be achieved ahead of or alongside the roll out of digital/mobile banking.
§ Customers might need to be issued with new bank account numbers and sorting codes to reflect the
new arrangements.
2. Commercial Lending Workshops
§ A series of workshops between SCB, FIDC and FIG to ‘deep dive’ the challenges related to the
commercial lending marketplace and why it is not properly functioning at present.
93 All information relating to Standard Chartered’s agency arrangements has been derived from sources in the public domain including PayUK
websites.

Cost & Complexity Medium Level of Impact High Suggested priority High
§ The commercial lending marketplace is not functioning properly at present with SCB’s total
commercial lending book standing at a negligible 0.4% of total deposits. FIDC are having to step in
and provide lending facilities to established, profitable businesses which have solid collateral to
pledge in support of their facilities.
§ The series of workshops would explore: (i) Rationale and challenges for SCB in making commercial
lending available - e.g. risk appetite, legal/security issues, lack of local experience/expertise; (ii) The
role and mandate of FIDC and how does it work more effectively with SCB – e.g. alignment on loan
underwriting approach/terms, how to transition borrowers from FIDC to SCB; and (iii) Ideas and
solutions to boost supply – e.g. a commercial lending equivalent of JGMS, a Falklands equivalent of
the UK’s Enterprise Finance Guarantee Scheme, reforms to Companies Act / insolvency regime
required.
Key dependencies
§ Input and commitment required from SCB, FIDC and FIG. It is suggested that workshops are also
supported with wider subject matter experts from SCB to help find and shape solutions.
3. Raise Falkland Islands profile within executive levels of SCB
§ It has been over 20 years since SCB Executive visited the Falkland Islands. The upcoming 40th
anniversary of the branch represents an opportunity to hold a dinner in London with the bank’s
senior management, Governor and FIG to celebrate their commitment and ongoing support.
Cost & Complexity Low Level of Impact High Suggested priority High
§ The last SCB executive visit to the Islands was in 2001 (not including visits from the Jersey
management team). Given the findings in this report and the current challenges being experienced
by customers it is recommended that senior stakeholders from the Falkland Islands look to engage
at executive level.
§ The forthcoming 40th anniversary represents an ideal opportunity to re-engage with executive level
management to celebrate their commitment to the Islands and to secure their buy-in/commitment
to the investment and resources required to address some of the operating model challenges.
§ It is proposed that an intimate dinner be held in London attended by the CEO of FIG, the Governor,
the FCO (ideally political level) and invitations extended to the Chair and CEO of Standard Chartered.
The Local CEO should also be invited to attend and to ensure appropriate briefings are prepared.
§ The dinner would also represent an opportunity to understand more about the wider SCB strategy
and how the Islands fit into those plans.
Key dependencies
§ Buy-in from the relevant stakeholders required including Government House, FIG and SCB.
4. Introduce relationship managers for businesses
§ As digital/mobile banking is rolled out, reposition some of the existing team resources into new roles
within the branch which support customers with financial health checks and roll-out a relationship
manager service for businesses.

§ Businesses in the Falkland Islands are growing in sophistication as the Island’s economy continues
to flourish. Their financial needs are also growing more complex particularly those larger businesses
who have international reach and are seeking to explore opportunities to diversify.
§ Commercial banks, including SCB in Asia, have dedicated teams of relationship managers whose role
is to meet customers at their businesses, get to know them and to explore how the bank can best
support them with their growth plans. Relationship managers are there to deliver product solutions
from the wider bank including financing, ESG advisory, cash management, trade finance and
investments.
§ Initial training would be required from an experienced commercial banker to upskill existing team
members to take on these new roles. These new roles would also provide a greater level of career
progression within the Falkland Islands for SCB colleagues. Having on the ground RMs would also
help address the current challenges with commercial lending which are being experienced.
§ Opportunities to retool colleagues in the branch to focus on brand accretive activities such as
undertaking financial health checks with customers to explore how they can save money, improve
their budgeting and meet their saving goals. These colleagues could also be engaged in community
outreach in the form of financial literacy seminars and workshops.
Dependencies
§ Dimension SCB appetite to explore creating these roles and supporting the redeployment of
resources.
§ An expatriate commercial banker would also be required in the initial stages for 12/18 months in
order to provide training and to establish the RM proposition.
5. Explore setting up a Fintech ‘Sandbox’ network with other British Overseas Territories
§ Explore the feasibility of partnering with like-minded BOTs to establish a regulatory sandbox to
attract fintech firms who want to test their products and services in a live but controlled
environment. As an alternative option, explore joining an established network such as the Pacific
Regional Regulatory Sandbox.
§ Small island economies struggle to attract innovators because of the higher costs related to
geographical and infrastructure challenges. Fintech firms will want to road-test their products and
services in a ‘live’ environment before scaling up. Having access to a number of small test populations
might be attractive for early stage trials.
§ There would need to be suitable guard rails in place to screen fintech applicants and to ensure that
products are suitable for the participating territories. However, this initiative might attract financial
innovation which otherwise would not be available. It also provides a controlled and safe
environment for policymakers to undertake evidence-based research which is a useful tool in
understanding the risks associated with new financial products.
§ The new sandbox could target products and services focused on a broad spectrum of areas including
financial inclusion, improving digital and financial literacy, new tools for small and medium
enterprises, and products with a social or environmental impact. The sandbox could also seek to
engage with UK based fintechs who are looking to conduct live trials of new products and services
into a ‘British’ market.
Key dependencies
§ A feasibility study is recommended to understand whether demand exists amongst fellow BOTs and
to develop a proposal for consideration. The study could also review case studies from the existing
networks and projects to understand the lessons learned.

6. SCB & FIDC to introduce Green Mortgages
§ SCB and FIDC to introduce ‘Green Mortgages’ which reward customers with discounted mortgage
rates for purchasing homes with an Energy Efficiency rating of A or B. Customers taking out home
improvement loans would also be eligible.
Cost & Complexity Low Level of Impact High Suggested priority High
§ Banks across all regions are introducing ‘green products’ which encourage/incentivise customers to
change their behaviours and carbon footprint. It is noted that SCB already do this in regions of Asia.
§ Customers are able to obtain a significant discount on standard mortgage interest rates (up to 1%
discount is not uncommon) should their homes meet either an A or B rating for energy efficiency.
Existing mortgage customers can also access these discounts should they undertake home
improvements.
§ Valuations would need to include an opinion on the energy performance of a property and whether
it meets a defined set of criteria to meet an A or B rating.
Key dependencies
§ Work to be undertaken by [FIDC] to understand whether this capability exists within the surveyor
community within the Falkland Islands and whether it can be sourced. An enabling framework will
likely be required.
7. ‘Break the glass’ contingency planning
§ FIG to undertake contingency planning in relation to setting up a domestically owned and operated
bank. This would ensure that a level of planning has been undertaken should SCB ever signal their
intention to exit the jurisdiction.
Cost & Complexity Medium Level of Impact Low Suggested priority Medium
§ Given SCB continues to trade at a significant discount to book value there continues to be media and
market speculation that they remain vulnerable to a bid from a larger bank who sees value in their
Asian and African network. This poses a potential risk for SCB’s operations in the Falklands.
§ Ultimately, a bid may not emerge or might be successfully defended by SCB Senior Management.
However, as has happened previously in SCB a defence strategy might require divestments of
businesses/units which are not deemed to be core. Likewise, a new owner might choose to exit sub-
scale markets including the Falklands.
§ Given the experience in Gibraltar of Barclays exiting after more than 150 years in country it is
recommended that FIG undertake a level of planning to dimension what would be required to take
on SCB’s operations in the Falklands by creating a national bank. The Gibraltar government are
known to have started planning for the set-up of Gibraltar International Bank well before Barclays
exit was announced to the market.
§ Scope of this work might also be extended to consider wider coverage across the British Overseas
Territories and may benefit from support from FCDO.
Key dependencies
§ FIG resources to support the scoping and execution of the work. Securing expertise could be
challenging.
§ Support may also be desirable from FCDO should a wider scenario planning exercise be considered
desirable.

8. Update the banking legislation and regime
§ FIG to introduce an updated set of banking legislation which would consider introducing consumer
protection measures – regulation of consumer lending and the principle of all firms engaged in
financial services having to act in the best interests of their customers at all times.
Cost & Complexity Medium Level of Impact Medium Suggested priority Medium
§ The banking legislation is outdated having been last updated in 1987. It lacks references to the Basel
Capital Accords and the requirements regarding bank solvency, capital and liquidity requirements,
funding and leverage requirements, recovery and resolution standards. This should be updated to
reflect international standards albeit in a way that is proportionate to the Falkland Islands context.
§ Consideration should also be given to introducing consumer protection features which have been
longstanding in the UK but are now also being introduced in the Crown Dependencies e.g. regulating
the provision of consumer finance.
§ With a de-facto monopoly situation in the Falkland Islands in terms of banking provision,
consideration should be given to introducing a formal requirement for the bank to undertake
customer satisfaction surveys which should be published. There might also be a case for examining
whether a general ‘consumer duty’ should be introduced which would require all firms engaged in
financial services to ensure that their products are designed and delivered in a way that puts the
consumer’s interests first.
Key dependencies
§ FIG resources to develop an updated policy approach in this area. It is anticipated that a revised
policy approach and proposals would be put out to public consultation.
9. Fisheries credit fund solution
§ Explore with SCB, FIG and the Fisheries Association the feasibility of developing a co-investment fund
which would provide asset finance for the fishing industry as they undertake their programme of
fleet upgrades.
Cost & Complexity Medium Level of Impact Medium Suggested priority Medium
§ The Falkland Islands fishing companies as part of their joint-venture arrangements are undertaking
a significant programme of fleet renewal. This lending is largely financed by Spanish banks who have
a long-standing provenance in this market.
§ Explore, with the support of SCB’s investment bank, the feasibility of establishing a Falkland Islands
based co-investment / credit fund which would provide asset finance to the joint-venture companies
against a suitable package of security and loan covenants.
§ The loans would be originated by SCB who would continue to retain a participation (say 20%) in
order to ensure interests are aligned. Remaining investors would be comprised of credit investors
(pensions, insurance companies) and could also include FIG and/or other Falkland Islands investors.
§ A structure of this nature might reduce the amount of ‘capital flight’ and ensure that the Falkland
Islands benefits from this financing activity.
Key dependencies
§ Further exploratory work would be required by all stakeholders to dimension the level of demand
and SCB appetite to support with structuring and origination.

§ Other considerations would include reviewing Falkland Islands legislative regime to understand
whether there are any technical impediments to setting up a structure of this nature and perfecting
suitable security over the assets.
§ Work would need to be undertaken to determine investor appetite for the notes and whether
alternative structures might be a better fit e.g. credit linked notes.
10. Set up an independent regulator
§ FIG to lead on setting up an independent financial services regulator who would be responsible for
the oversight/management of the financial sector including financial/economic crime matters.
Cost & Complexity High Level of Impact Low Suggested priority Low
§ It is recognised that establishing a financial services regulator would yield no tangible improvement
in the proposition for banking customers in the Falkland Islands. Instead it should be considered as
an enabler for maintaining the reputation of the Islands and a commitment to meeting international
standards.
§ Having the appropriate regulatory architecture in place might become vital in the event that another
bank wanted to operate in the Islands or if it was necessary to set up a domestically owned and
operated bank in the future.
§ Setting up the architecture would be a significant undertaking and carry a high level of costs. Hiring
suitably experienced staff would also be challenging. It is recommended FIG explore partnering with
other BOTs to share regulatory infrastructure, as seen in the Caribbean and Pacific regions.
Key dependencies
§ FIG to consider extent of ambition and whether any early stage planning would be prudent to
ascertain the need and associated timing.
11. SCB set up and operate a ‘mobile bank’
§ SCB to set up a ‘mobile bank’ which would take the bank to customers outside of Stanley on a similar
basis to the Scottish banks who serve the remote Scottish Highlands and Island communities (the
Bank of Scotland van is pictured below).
Cost & Complexity Low Level of Impact Low Suggested priority Low
§ Customers who are not based in Stanley might benefit from being able to
use a ‘mobile bank’ which would follow a set route at an agreed frequency.
§ The mobile bank is in effect a van which is driven by a member of staff and
then ‘pitches up’ at community centres or village halls.
§ It is recognised this represents a low impact / low priority given the
relatively small number of businesses and people living in Camp (outside of Stanley).
§ The introduction of digital/mobile banking would improve the service provision for those in Camp
and should be the primary focus.
Key dependencies
§ A suitable vehicle would need to be fitted out by SCB to include appropriate security/tracking
measures. A fixed route and timings would need to be devised which is communicated in advance for
customers.

Appendix 1: Terms of reference
Overview
The Falkland Islands Chamber of Commerce (the “Chamber”) is commissioning a project to review the current
provision of banking services on the Falkland Islands. The project will benchmark the current banking proposition
with comparable jurisdictions to gauge whether the current service provision is in line with the contemporary
expectations of stakeholders, given recent technological and regulatory developments in the banking sector.
At the project’s conclusion the Chamber will be able to understand: (i) how the current provision of banking
benchmarks against a cohort of comparable jurisdictions; (ii) the challenges, constraints and opportunities faced
by both the current service provider in the Falkland Islands and other service providers in other similar
jurisdictions; (iii) what measures and initiatives (including investment required) can be undertaken to improve
the service provision by the existing provider; (iv) the current banking landscape including regulatory and
technological developments which may shape the banking provision for the islands; and (v) an outline of
initiatives which may support the retention of a greater level of savings and investment within the Falkland
Islands.
The project will deliver the Chamber and its key stakeholders a target blueprint which will enable them to develop
the local banking system to better support local residents, businesses, NGO’s and the government with their
growth aspirations. The project will also give some preliminary guidance and advice in relation to the steps,
investment required and key considerations/risks that would need to be considered in order to operate a
domestically owned bank, in the event the existing service provider is unable to commit the investment required
to boost the service provision.
Deliverables and strategy
Key Deliverables Proposed strategy to deliver

To review the banking services
§ Understand the primary needs of customers and how these
available in the Falkland Islands to
are currently met through a series of face to face interviews.
1. Government, businesses, NGOs, and
§ Desktop review and interviews / mini-workshops with
individuals and to examine whether
existing service providers (e.g. SCB and GIB).
these are adequate for their needs.
§ Develop a peer group of internationally comparable
jurisdictions based on population, density, geography and
economic profile.
To advise what services might
§ Research the banking proposition across this peer group,
reasonably be expected in a community
2. mapping how this compares to services in the Falkland
of this size and location, given the
Islands.
restrictions on available infrastructure.
§ Outline the regulatory and technology architecture in the
peer group jurisdictions (telecoms, government policy) and
how the Falkland Islands benchmarks.
§ Articulate the constraints and challenges faced by the
To advise how the Chamber might go existing service provider and measures/steps which could
about implementing improvements to be taken by key stakeholders to unlock further investment
3.
the banking services available using the in the customer proposition.
existing players and infrastructure. § Provide a SWOT and risk analysis of these options for the
key stakeholders.
§ Outline the changing nature of the banking system in light
of digitisation and the advent of virtual “neo-banks”.
To advise on potential future global
§ Provide an overview of the evolving regulatory
developments that may further change
4. expectations and international standards e.g. Basel III,
the landscape of “banking” and whether
recovery and resolution, depositor compensation and anti-
they may be appropriate for the Islands.
money laundering/financial crime expectations for the
industry and what this might mean for the Falkland Islands.

§ Other relevant developments including the advent of
alternative providers.
To suggest banking / finance models § Provide an overview, based on the cohort of comparable
which may unlock additional jurisdictions, of initiatives which could be considered with
5. investment and financing opportunities a view to boosting savings and investments being invested
within the local economy including locally in the Falkland Islands including “green” investment
“green” investment opportunities. opportunities.
§ Provide a small number of case studies and advice based on
High level overview of the key the peer group jurisdictions to inform the Chamber and key
6. considerations and risks of operating a stakeholders on what might be required in terms of
domestically owned bank. investment, architecture and the key risks associated with
developing a domestically owned bank.
Project summary
Key Dates
§ Project commencement - 1 December 2022.
§ Desktop research – 1 December 2022 – 1 January 2023.
§ Interviews/workshops to begin - w/c 10 December 2022.
§ Proposed field trip to the Falkland Islands – 7 January 2023 – 14 January 2023.
§ Final report issued in draft for review - 31 January 2023.
§ Review meeting with the Chamber - w/c 6 February 2023.
§ Final report issued - 15 February 2023.
Key Assumptions/dependencies
§ Access to and appropriate availability of key stakeholders to support the proposed project timelines
including: (a) the existing service provider Standard Chartered; (b) a number of island-based businesses
in order to understand their banking needs; and (c) relevant government officials (as appropriate).
Reliable and timely access to relevant information from stakeholders.
About Queenstown Strategic Advisors
A boutique advisory firm specialising in financial services with 22 years’ experience in the financial services
industry having worked with one of the UK’s largest banks. Over 15 years’ experience operating in international
finance centres and small island economies advising firms on their strategic and commercial development plans
in light of evolving regulatory requirements.
Recent engagements include: (i) supporting a financial services firm engaged in a confidential M&A transaction
by developing detailed profiles of the target acquirers and a framework to enable the shareholders of the business
to select a preferred bidder based on achieving the optimum outcome for their existing clients, staff and
shareholders; and (ii) advising on and leading a legal entity restructuring for an international bank to comply with
new European regulatory requirements.
Extensive experience working constructively with the regulators and government in the Channel Islands, Isle of
Man, Luxembourg, Gibraltar and the United Kingdom including negotiating a series of authorisations for new
banking entities. Experienced chair of an industry technical working group focused on prudential regulation,
recovery and resolution, and banking reform.
Experienced participant in government and industry working groups to support the development of the banking
sector in small island economies. Comfortable operating at senior management and board level, with a proven
ability to develop actionable solutions for institutions operating in small island economies to enable them to
support their community’s ambitions and thrive whilst meeting increasing regulatory expectations and
requirements.


Appendix 2: Sources of information
History of banking in the Falkland Islands
A. J. Mitchell (SCB) to A. E. Palmer (FCO), 26 January 1983, FCO7/4680, Falkland Islands Rehabilitation:
Banking Services, National Archives, Kew, London.
Christopher Hum (FCO) to Peter Weller (SCB, London), 5 March 1986, FCO7/5518, Falkland Islands
rehabilitation: Banking, National Archives, Kew, London.
David Broad. “Briefing Note – Falkland Islands: Standard Chartered Bank.” 3 October 1986, FCO7/5518,
Falkland Islands rehabilitation: Banking, National Archives, Kew, London.
Duncan Campbell-Smith, Cross Continents – A History of Standard Chartered Bank (London: Allen Lane, 2021).
Executive Council Paper – Amendment to Joint General Mortgage Scheme, 9 December 2020, Falkland
Islands.
Foreign & Commonwealth Office, Economic Survey of the Falkland Islands – September 1982 (London: Foreign
& Commonwealth Office, 1982), 1-4, accessed December 5, 2022,
https://www.nationalarchives.gov.fk/jdownloads/Trade%20and%20Industry/R-TRA-ECO-1-
Foreign & Commonwealth Office, Volume 1: Economic Survey of the Falkland Islands – July 1976 (London:
Foreign & Commonwealth Office, 1976), i-vii, accessed December 5, 2022,
7.%20Economic%20Survey%20of%20the%20Falkland%20Islands%20Volume%201%20of%202%20Res
ources%20and%20Development%20Potential%20July%201976%20-%20The%20Rt%20Hon%20Lord%
20Shackleton.pdf
Foreign & Commonwealth Office, Volume 2: Economic Survey of the Falkland Islands – July 1976 (London:
Foreign & Commonwealth Office, 1976), 22, accessed December 5, 2022,
Frances Coppola, “Standard Chartered Bank’s Long History of Financial Crime,” Forbes, 10 April 2019,
https://www.forbes.com/sites/francescoppola/2019/04/10/standard-chartered-banks-long-history-of-
financial-crime/
Gordon W. Jewkes (Governor) to D. Broad (FCO), 27 March 1986, FCO7/5518, Falkland Islands
John H. Cosson (SCB, London) to Simon Armstrong (FIDC), 19 September 1985, FCO7/5518, Falkland Islands
Marc Rubenstein, “The Bank that Never Sold,” Net Interest (substack), 13 January 2023,
https://www.netinterest.co/p/the-bank-that-never-sold.
M. F. Smith (Government House, Stanley) to A.E. Palmer (FCO), 21 July 1983, FCO7/5518, Falkland Islands
Michael McWilliam (SCB) to R. Fearn (FCO), 30 June 1982, FCO7/4680, Falkland Islands Rehabilitation:
Normal Black (SCB, Stanley) to Richard Wagner (FIG), 27 August 1992, FCO7/9459, Falkland Islands:
Standard Chartered Bank, National Archives, Kew, London.
Overseas Development Agency, Banking Facilities in the Falkland Islands – March 1980 (London: Overseas
Development Agency), 1, accessed January 9, 2023,

http://www.nationalarchives.gov.fk/jdownloads/Utilities%20-%20General/R-UTI-GEN-1-
2.%20Report%20by%20Robin%20A%20V%20Benbow%20Overseas%20Development%20Agency%20o
n%20banking%20facilities%20in%20the%20Falkland%20Islands%20-%20March%201980.pdf
P. N. Hayes (Bank of England) to P. R. Fearn (FCO), 26 July 1982, FCO7/4680, Falkland Islands Rehabilitation:
P. N. Hayes (Bank of England) to P. R. Fearn (FCO), 19 August 1982, FCO7/4680, Falkland Islands
Rehabilitation: Banking Services, National Archives, Kew, London.
Record of Call by Lord Barber on Lady Young in the House of Lords, 22 October 1986, FCO7/5518, Falkland
Islands rehabilitation: Banking, National Archives, Kew, London.
Richard Wagner (FIG) to Graham Bradshaw (Bank of England), 7 September 1992, FCO7/9459, Falkland
Islands: Standard Chartered Bank, National Archives, Kew, London.
Stephen Morris & Emma Dunkley, “Why Standard Chartered remains a target despite its latest suitor walking
away,” Financial Times, 6 January 2023, https://www.ft.com/content/77c5e742-fc3c-4fdd-a5d1-
96865e5cccb9
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https://www.sainthelena.gov.sh/wp-content/uploads/2021/09/Stats-Bulletin-8-2021-GDP.pdf.
St Helena Government. “St Helena energy strategy.” 2019. Accessed December 2022 at
https://www.sainthelena.gov.sh/wp-content/uploads/2019/11/161025_St-Helena-Government-Energy-
Strategy-FINAL-October-2016.pdf.

St Helena Government. “St Helena’s sustainable economic development plan 2018-2028.” Accessed
December 2022 at https://www.sainthelena.gov.sh/wp-content/uploads/2022/03/Sustainable-Economic-
Plan.pdf.
St Helena Government Statistics. “Utilities.” 2021. Accessed December 2022 at
https://www.sainthelena.gov.sh/st-helena/statistics/the-economy/.
St Helena Government. “St Helena 10-year plan 2017-2027.” Accessed December 2022 at
https://www.sainthelena.gov.sh/wp-content/uploads/2012/08/10-Year-Plan-20-January-2017.pdf.
Saint Pierre and Miquelon

Primary sources
Conselier Juridique de IEDOM. Yves Coquelin de Lisle. January 2023. Email exchange.
Secondary sources
ADEME. “L’ADEME Saint Pierre et Miquelon.” Accessed January 2023 at https://www.ademe.fr/direction-
regionale/saint-pierre-et-miquelon/.
AFD. “Saint Pierre and Miquelon.” Accessed January 2023 at https://www.afd.fr/en/page-region-
pays/saint-pierre-and-miquelon.
Groupe BPCE. “Caisse D’Epargne CEPAC.” Accessed January 2023 at https://groupebpce.com/annuaire-des-
entreprises/cepac.
Groupe BPCE. “Caisse D’Epargne Ile-de-France.” Accessed January 2023 at
https://groupebpce.com/annuaire-des-entreprises/ceidf.
IEDOM. “Évaluation de PIB de Saint Pierre et Miquelon en 2015.” 2015. Accessed at
https://www.iedom.fr/IMG/pdf/evaluation_du_pib_spm_22032018.pdf.
IEDOM. “Institut d’émission des départments d’outre-mer.” Accessed January 2023 at
https://www.iedom.fr/IMG/pdf/plaquette_iedom_2015_version_anglaise.pdf.
Le Banque Postale. “Solutions citoyennes.” Accessed January. 2023 at
https://www.labanquepostale.fr/particulier/solutions-citoyennes.html.
Public Expenditure and Financial Accountability program. “Collectivité Territoriale de Saint Pierre et
Miquelon: Evaluation de la performance du systeme de gestion des finances publiques.” 2022. Accessed
January 2023 at https://www.pefa.org/sites/pefa/files/2022-04/PM-Apr22-PFMPR-
Public%20with%20PEFA%20Check.pdf.
The Banks EU. “Coopérative immobilière des îles Saint-Pierre-et-Miquelon: Deposit Guarantee.” Accessed
January 2023 at https://thebanks.eu/banks/13746/deposit_guarantee.
Banking sector outlook

Secondary Sources
J.D. Power, “US retail banks struggle to differentiate, deliver meaningful customer experience as economy
sours,” press release, 7 April 2022. Deloitte, “2023 banking and capital markets outlook,” November 2022.
Financial Stability Board, “G20 cross-border payments roadmap,” November 2023
https://www.fsb.org/work-of-the-fsb/financial-innovationand-structural-change/cross-border-
payments/
PWC, “The FCA’s new consumer duty: Raising the bar on consumer outcomes,” August 2022,
https://www.pwc.co.uk/industries/financialservices/understanding-regulatory-developments/fca-
proposes-new-consumer-duty-in-paradigm-shift-for-firms.html

Chris Hallam et al, “European Banks – Adjusting to Fintech 2.0,” Goldman Sachs, September 2022.
Setting up a domestically owned bank

Jason Napier et al, “Big banks and the bigtech, fintech & digibank incursion. What is at stake?” UBS Q-Series
(June 2019).

Appendix 3: Standard Chartered Bank lending criteria

Core commercial lending guidelines:
§ Net profit after tax must have been positive in 2 of the last 3 years;
§ Net Current Assets must have been positive in 2 of the last 3 years;
§ Shareholder funds must be in surplus in the latest financial statements; and
§ Net cash after operations must have been positive in 2 of the last 3 years.
There is flexibility to consider underwriting outwith of these guidelines on an exceptional basis depending
on the circumstances of each borrower.


Review of Banking Services in The Falkland Islands

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Review

Review of Banking Services in the Falkland Islands | 2

Review of Banking Services in the Falkland Islands | 3

Review of Banking Services in the Falkland Islands | 4

Context and rationale for the review

Approach and methodology

Review of Banking Services in the Falkland Islands | 5

Summary of principal findings

Review of Banking Services in the Falkland Islands | 6

Review of Banking Services in the Falkland Islands | 7

Review of Banking Services in the Falkland Islands | 8

Conclusions and key recommendations

Review of Banking Services in the Falkland Islands | 9

Review of Banking Services in the Falkland Islands | 10

Shackleton Economic Survey recommends a commercial bank is set-up

i-vii, accessed December 5, 2022, https://www.nationalarchives.gov.fk/jdownloads/Trade%20and%20Industry/R-TRA-ECO-1-

22, accessed December 5, 2022, https://www.nationalarchives.gov.fk/jdownloads/Trade%20and%20Industry/R-TRA-ECO-1-

January 9, 2023, http://www.nationalarchives.gov.fk/jdownloads/Utilities%20-%20General/R-UTI-GEN-1-

Review of Banking Services in the Falkland Islands | 11

Review of Banking Services in the Falkland Islands | 12

accessed December 5, 2022, https://www.nationalarchives.gov.fk/jdownloads/Trade%20and%20Industry/R-TRA-ECO-1-

Review of Banking Services in the Falkland Islands | 13

An early case of ‘buyer’s remorse’ at SCB?

Archives, Kew, London.

Archives, Kew, London.

Review of Banking Services in the Falkland Islands | 14

Archives, Kew, London.

Archives, Kew, London.

Review of Banking Services in the Falkland Islands | 15

SCB approach their tenth anniversary in Stanley and seek a long-term

Banking, National Archives, Kew, London.

National Archives, Kew, London.

Review of Banking Services in the Falkland Islands | 16

A public – private innovation is launched with SCB in 1996 which boosts

National Archives, Kew, London.

Archives, Kew, London.

Review of Banking Services in the Falkland Islands | 17

Review of Banking Services in the Falkland Islands | 18

Is SCB destined to always be the bridesmaid but never the bride?

Review of Banking Services in the Falkland Islands | 19

Review of Banking Services in the Falkland Islands | 20

Figure 1: GDP per capita (FK£)

Source: Falkland Islands Government

Journal of International Affairs, 2-4.

Review of Banking Services in the Falkland Islands | 21

Figure 2: Sector drivers of economic performance (FK£)

Fishing and aquaculture Mining and quarrying Public administration

Source: Falkland Islands Government

Overview of the banking sector

Review of Banking Services in the Falkland Islands | 22

47 Falkland Islands Development Corporation. 2021 Annual Report, https://www.fidc.co.fk/about-us/annual-report

Review of Banking Services in the Falkland Islands | 23

Wise (previously Transferwise)

Review of Banking Services in the Falkland Islands | 24

Source: Bank of International Settlements, Bank of England

Review of Banking Services in the Falkland Islands | 25

Source: Bank of International Settlements, Bank of England

Understanding the banking needs of Falkland Islanders