Standard & Poor's – Guernsey's credit rating changed

Standard & Poor’s have confirmed that they will be lowering the credit rating of Guernsey and other ‘micro-sovereign’ jurisdictions from AA to AA- with a stable outlook.

This is a result of global economic uncertainty following the UK referendum decision to leave the European Union, and follows the Standard & Poor’s decision to downgrade the UK last week from AAA to AA. It also reflects Standard & Poor’s assumption that smaller countries are more susceptible to global economic factors – for example through the absence of a central bank, which gives larger jurisdictions greater flexibility in monetary policy.

Standard & Poor’s overall view is that Guernsey’s outlook is “stable, reflecting [their] expectation that Guernsey’s key credit metrics will remain broadly unchanged in the next two years.” Their report also says that:

• “Guernsey’s financial sector will continue to benefit from its strong links to the UK, a well-established regulatory framework, Guernsey’s stable internal policy-making response, and a favourable business environment.”
• “Guernsey’s existing relationship with the EU will not be significantly affected by the exit of the UK from the EU.”
• “Guernsey implements key EU directives on tax policy and financial services.”

The change of rating will have no direct impact on Guernsey’s economy or economic performance, or the States of Guernsey bond. However it does confirm that the issuing of the one-off Guernsey government bond in December 2014 was well-timed, given the current global financial uncertainty around BREXIT.

Deputy Gavin St Pier, President of Guernsey’s Policy & Resources Committee said: “It is understandable, albeit frustrating, that credit rating agencies are liable to take a particularly risk-averse view. Our standards of financial and political stability, regulation and transparency are justly recognised to be very high, and the moderate change of rating does not reflect a decline in our economy or any worsening of our position. There remain many speculative views around BREXIT, but I have every confidence that our economy will continue to grow, precisely because of Guernsey’s stability and safe haven status.”