Gibraltar
Bank Deposits
The
banking sector is well established in Gibraltar
in both the offshore and local market with
assets in the vicinity of GŁ8.3 billion.
The advantages of offshore banking in Gibraltar
include its favourable tax status, the lack
of exchange controls, excellent communications,
stable government, and EU membership.
NB:
The EU's Savings Tax Directive, which came
into force on 1st July, 2005, means that
for all citizens of EU member states there
is an exchange of information between the
Gibraltar authorities and the individuals'
home tax authorities in regard to payments
of interest and other returns on savings.
The Directive does not however apply to
payments to corporate bodies.
Much
of the banking activity in Gibraltar is
directed to asset management for high-net-worth
individuals, not least because Gibraltar
has tried hard to attract such people with
special tax regimes. See Personal
Taxation for details of these schemes.
A number of Gibraltar-based banks offer
Internet banking services.
Banking
in Gibraltar is regulated by the Financial
Services Commission
under The Banking Ordinance 1992.
A
substantial amount of subsequent legislation
has kept Gibraltar up with current EU regulatory
standards. The
Commission introduced important changes
to the way it supervises locally incorporated
banks and non-EEA branches in 2002. Within
this time the FSC had been rolling out a
risk based approach to supervision, where
the supervisory team evaluates an institution
in terms of the risks posed to an institution
in the way it does business or the type
of business it is in. This new approach
to supervision was designed to focus supervisory
resources on the areas deemed to be high
risk for an institution in order to ensure
that the right controls and procedures are
in place to mitigate the risks or where
corrective action is required by an institution.
As
regards financial services regulations,
Gibraltar aims to match UK standards. An
example of this is the local money laundering
legislation which implemented the EU Directive
and was extended as in the UK to encompass
all crimes. Accordingly, all banking supervision
regulations are the same as those in the
UK and procedures for opening an account
are much the same.
In
March, 2006, a team of International Monetary
Fund personel arrived in Gibraltar to conduct
an investigation into the workings of the
jurisdiction's financial system. The ten-strong
IMF team focused their investigation on
the banking and insurance sectors.
The
object of the review was to measure Gibraltar's
laws against 49 principles designed to protect
financial centres against money laundering
and terrorist financing. The last such IMF
investigation in Gibraltar took place five
years previous.
The
conclusions of the IMF review were published
in May 2007, and endorsed Gibraltar’s
robust regulatory environment, according
to the jurisdiction's government.
TheIMF
team conducted an extensive review of the
Financial Services Commission’s regulatory
and supervisory practices in the fields
of Banking and Insurance, as well as a jurisdiction-wide
review of the Anti-Money Laundering and
Terrorist Financing Regime, which also included
the FSC, as well a large number of enforcement
agencies and Government Departments.
In
all three areas Gibraltar was found to be
meeting international standards, and was
found to be ahead of many onshore - and
much larger - finance centres.
However,
the report made a number of recommendations
for further improvements, which were accepted
by the government and the FSC. The government
said that most of these had already been
identified and were being actioned.
The
identity of bank account holders in Gibraltar
is confidential and is only disclosed by
the bank if they are ordered to do so by
the Courts when investigating serious criminal
activity.
See Offshore Tax
Regimes and Law
of Offshore for further details
of the regulatory regime and of the offshore
taxation regimes for banks.
Under
EU 'common passport' legislation any branch
of an authorised EU bank may establish itself
in Gibraltar subject only to notification
procedures. Likewise a Gibraltar-licensed
bank may set up branches elsewhere in Europe.
Most of the banks established in Gibraltar
are branches of major UK, European or US
banks.
A deposit protection policy was brought
into effect by the Gibraltar Deposit Guarantee
Board in line with EU directives in this
area (see Law of
Offshore).
Most
Gibraltar banks offer special rates of interest
to wealthier private depositors under the
heading of private banking. Minimums have
fallen to as low as around $10,000 in many
cases, although some firms still maintain
more traditional entry levels of $100,000
or higher before offering special treatment
to their clients.
Some
care is needed when approaching a 'private
banker' or a bank offering customised relationship
management (there are lots of expressions
all amounting to the same thing). What matters
is the structure of the bank. This is not
to say that one kind of bank is necessarily
more reliable than another, just to understand
why the bank is offering personal attention,
and what it hopes to gain from it.
Some
banks are little more than front ends for
investment funds. They may be safe enough,
but are they objective? Perhaps it is best
to look for a bank that is trying to make
money out of private banking as an activity
in itself, rather than just using it as
a scoop for customers for its financial
products. If you just want a bank that will
give you a good rate of interest without
deduction of withholding tax, then the choice
is simpler.
Private
banking doesn't just mean investment: banks
like to lend money, and especially to richer
people. This raises the question of how
a private banker is going to get rewarded.
Depositing money with a bank is reward enough,
of course, whether into the bank or into
one of its financial products, but private
banking when it has an advisory nature and
is not accompanied by lending or borrowing
may be fee-based. Provided the sum involved
is large enough to justify the fee costs,
an advisory private banking relationship
is probably a good way to go. The bank will
get the benefit from time to time of being
able to offer bridging finance, or of holding
large amounts in transit etc. It can hope
for more substantial involvement with you
in future. But the immediate relationship
is between financial adviser and client.
For
a fuller treatment of offshore banking,
see www.investorsoffshore.com.
