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Gibraltar: Law of Offshore

Licencing and Supervision

The Banking Ordinance 1992 (as amended) repealed the previous distinction between 'A' onshore and 'B' offshore licences, and introduced a single banking licence. Thus Gibraltar licensed banks can in theory take advantage of 'passporting' opportunities and branch out across the EU and EEA without the need for further authorisation (except for notification).

The minimum capital required for the issue of a banking license in Gibraltar is (at the time of writing) EUR5m, in line with EU requirements, and the supervisory regime follows EU and Basle Committee guidelines. In considering the issue of a banking license, the Commissioner applies a number of guidelines, including the following:

  • Directors, controllers and managers to be fit and proper persons: the Commissioner takes into account probity, experience, skills, judgement and likely degree of diligence; good reputation and the absence of a criminal record are also important; and the nature of a person's other business interests is also considered;
  • 'Four eyes principle': the Commissioner will want to be assured that at least two individuals contribute on a continuing basis to the formation and execution of policy, so that every signifcant decision reuslts from the exercise of at least two persons' judgement;
  • Business to be conducted in a prudent manner: applicants for a license are required to provide sufficient information about the proposed business and its conduct and development, including the availability of capital to support planned levels of lending or investment, for the Commissioner to be able to form a view of the stability of the institution; it is normally unlikely that a new banking formation will be able to achieve the right level of credibility unless it has the support of an existing and soundly-based bank;
  • Paid-up capital and reserves will be adequate to protect the interests of depositors; large exposures to a single entity are a major negative factor;
  • Liquidity must be maintained at a satisfactory level in relation to the schedule of liabilities;
  • Adequate provision is and will be made for bad and doubtful debts and for contingent liabilities;
  • There will be adequate accounting and other records and control systems to ensure stability and predictability in the business;
  • The necessity that the institution itself will behave with the highest professional, ethical and business standards;
  • The Head Office needs to be in Gibraltar - meaning that the majority of board meetings will take place there, and that the management and direction should be exercised there; regular influence on managerial decisions by a dominant shareholder would be a negative factor, especially if the shareholder was not resident in Gibraltar.

In 2004 the Financial Services Commission promoted amendments to the Criminal Justice Ordinance 1995 which require auditors, external accountants, tax advisors, real estate agents, notaries, legal professionals, dealers in high value goods and casinos as well as providers of company managerial services, professional trustees, insurance intermediaries and insurance managers to comply with the anti-money laundering systems of control. The FSC seeks to update the Know Your Customer systems of financial institutions with a more risk based approach and to provide more user-friendly guidance for the industry.



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