The tiny island where rich South Africans keep their money

Wealthy South Africans are increasingly moving their money offshore without emigrating from the country, taking advantage of the international operations of local banks. 

All of the traditional Big Four banks – Absa, Standard Bank, Nedbank, and FirstRand (FNB) – have offshore banking operations, enabling clients to access transactional banking and savings products outside of South Africa. 

Most of these operations are housed on the Channel Islands of Jersey and Guernsey. Located off the coast of France, they are not part of the United Kingdom (UK) or the European Union (EU). 

Crucially, this ensures that they can give clients access to both the financial markets in the UK and the EU through various agreements and enable clients to transact internationally. 

FNB recently celebrated the 10-year anniversary of its international banking and savings operations in Guernsey, revealing strong growth in the bank’s offshore offering. 

What began as a strategic initiative to support the international banking needs of South African clients has become an extensive banking platform. 

From offering transactional accounts, the bank’s Guernsey operations now allow individuals to save and invest globally in hard currency through a traditional banking product suite and offshore unit trusts domiciled on the island.  

This offering is becoming increasingly popular, with wealthy South Africans looking to move money out of the country without emigrating. 

The creation of a full banking suite means that this has expanded from wealthy individuals to private banking clients, with an increasing number of South Africans engaging with offshore banking. 

“Our global offering has become an indispensable enabler for clients seeking to tap into global wealth opportunities through a secure and trusted integrated financial services platform”, Aneesa Razack, CEO of FNB Guernsey, said. 

With a rapidly evolving global landscape, the desire for cross-border solutions has seen growing demand among high-net-worth individuals (HNWIs), Razack said.  

Market volatility, currency depreciation, geopolitical instability, and changes in tax trends have all prompted South Africans to turn to international banking to hedge risk while still living in the country.

A combination of increased local uncertainty and technological improvements have opened up offshore banking to more South Africans. 

“Today, 30%-50% of affluent South Africans’ portfolios are held abroad, and we’re witnessing a significant increase in clients seeking ways to externalise their wealth and hedge local risk without physically emigrating,” Razack said. 

Not only the super wealthy

Offshore banking was traditionally the preserve of the extremely wealthy in South Africa who could open bank accounts in foreign jurisdictions. 

This effectively protected their wealth from local governments and gave them access to international financial markets. 

However, over the past decade, this offering has become increasingly available to relatively lower-income South Africans.

FNB’s offering is a case example of this, initially set up 50 years ago as an international trust and fiduciary service for wealthy South Africans. 

More recently, the bank has expanded its offering to include traditional transactional and savings accounts, which its South African clients can access. 

It revealed that now over 20% of FNB’s private banking client base actively utilises its offshore service, with it aiming to deepen the penetration. 

Close to all of FNB customers engage in some cross-border money flow, representing a sizeable opportunity for the bank’s offshore operations. 

Leveraging Guernsey’s globally respected regulatory framework and political stability, the bank offers a suite of foreign currency savings and transactional accounts in pounds, dollars, and euros. 

South African private banking clients are also increasingly making use of offshore investment vehicles, with FNB’s Guernsey offering now reaching £1 billion. Only 10% of this comes from local Guernsey clients. 

“Generational wealth and accessibility have helped shift perceptions from exclusivity to inclusive, value-driven wealth management,” FNB Private CEO Sizwe Nxedlana said. 

To meet customer demand, FNB is currently looking at offering lending solutoins to clients who bank with its Guernsey unit. 

This would enable it to accelerate its growth and enable South African clients to gain access to financing in hard foreign currency. The lending offering is set to begin with secured credit and Lombard lending