The report predicts offshore banking will fall by 5%

The offshore banking sector in the Channel Islands is in decline, according to a new report.

IBM Business Consulting Services claims offshore banking is dying because of changes in tax and increased secrecy.

The survey by the company has found that, after decades of complacency while profits rose, private banks are facing rising costs and a drop in margins.

The report includes Jersey and Guernsey and predicts offshore private banking in the islands will decline by 5%.

In contrast, IBM says private banks in the onshore sector in major European countries, including the UK, France and Germany, will increase their operations by 10%.

The study claims changes in tax and secrecy laws are causing the decline.

The financial managers who responded said that, while offshore banking may show an 8% increase in growth by 2005, it could still lag far behind onshore operations which are predicted to grow by 25% during the same year.