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Jersey, Guernsey's Credit Ratings Downgraded

by Jason Gorringe, Lowtax.net, London
16 February, 2016

Credit ratings agency Standard and Poor's has downgraded Jersey and Guernsey from AA+ to AA, alongside decisions for other small sovereign territories, after reconsidering how resilient small territories can be to external factors.

The Jersey Government noted the decision, stating that "despite no material change having occurred since S&P's last review in November 2015, [it has] conducted the recalibration as a way of addressing [its] concerns that small sovereigns such as Jersey were receiving the same rating (AA+) as larger countries. This view reflects S&P's assumption that smaller countries are more susceptible to global economic factors. S&P conducted a review across the class at the same time so that the outcomes could all be published on the same day."

The Government said Jersey's short-term rating remains at A-1+, noting that this is the highest rating it is possible to achieve. It however said that another consequence of the exercise was to label Jersey's outlook as "negative," in common with the outlook that was assigned to the UK. It stated: "This reflects the uncertainty and therefore potential effect on the island's economy of Britain exiting the EU. This outlook statement is an indicator of a potential downgrade should this happen and should Jersey's economy be affected in the way that they anticipate."

Commenting, Jersey's Treasury and Resources Minister, Alan MacLean, said: "While we understand that credit rating agencies are liable to take a particularly risk-averse view, we are disappointed with this recalibration exercise. It is good that Jersey has retained one of the highest possible ratings but we do not accept the rationale behind the change. The European Commissioner for Economic and Financial Affairs, Taxation, and Customs, Pierre Moscovici, recently declared us to be an 'important partner' in the fight against tax evasion, fraud, and abusive tax avoidance. Our standards of regulation and transparency are justly recognized to be very high, and we have been recognized for our implementation of the Common Reporting Standard on automatic exchange of information, and our support of the BEPS program, alongside EU member states."

"It is important that the reasons for this recalibration are well understood. The rating does not reflect a decline in our economy or a worsening of our position. Their opinion around the likelihood of Brexit, for example, is not within our control, and there are many speculative views on that issue. I have every confidence that our economy will continue to grow, regardless of the outcome of that referendum."

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