ONE of life's more elegant little paradoxes is that offshore banking thrives on crisis. The typical and traditional knee-jerk reaction to sudden events such as the outbreak of war, for example, is to buy into gold. A more sophisticated and longer-term solution is to park one's resources in one of the world's centres famed for its ability to sail smoothly through the roughest storms. Guernsey is one such safe haven. In an important sense, the tiny island is like a swan . . . serenely graceful on the surface, paddling furiously below. Superficially, Guernsey remains a tranquil, private place but, underneath, it has been forced into increasingly aggressive marketing to retain its position in the hierarchy of offshore banking centres. Competition from more recently established newcomers, such as Dublin and Luxembourg, has threatened to erode Guernsey's ranking. The underlying reasons for Guernsey's spectacular growth as an offshore centre are to be found in the combination of its special constitutional arrangements, the absence of social and political upheavals, its extraordinary tax system and prudent regulation. Guernsey is, in essence, a state within a state. Though the British Government takes responsibility for Guernsey's defence matters and foreign relations, the island dwells in a constitutional limbo-land - neither independent, nor dependent. The great benefit is that this ambiguity allows the islanders to manage their own legal system and the economy, including taxation policies, without reference to Westminster or, equally significantly, to any of the European Community's institutions. In the past 20 years, more than 300 banks and other financial institutions have opened for business there.