alongside the likes of Jersey and Guernsey in the ranks of offshore
finance, is continuing to redefine its offering to wealth managers,
fund administrators and others as it adapts to life within the
EU. Dan Jones reports.
A normalising of relations with neighbours and an increased
openness to the demands of EU membership have seen the jurisdiction
of Gibraltar undergo a significant transformation over the past
decade, and senior officials are keen to talk up their commitment
to the cause.
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“Regulation is a major driving contributor to the success of
Gibraltar,” says David Purdy, chief operating officer at
Gibraltar’s Financial Services Commission.
In a year which has seen an increasing focus on the activities of
low-tax jurisdictions around the globe, Gibraltar’s decision to
build its reputation on the back of an attentive yet flexible
regulatory environment seems increasingly wise, but is also a
likely consequence of the fact that, according to Purdy, “any
reputational knocks are felt throughout the financial system like
an earthquake”.
Among the companies regulated by the FSC in Gibraltar is Capita
Financial Group, the FTSE-100 listed firm. The asset management
outsourcing group has a presence in the UK, Ireland, Jersey and
Guernsey as well as Gibraltar, with a total of £30.58 billion
($59.1 billion) of assets under administration (AuA). In Gibraltar,
Capita has £2 billion worth of funds under administration, a figure
which has risen by 40 percent since Capita moved into the
jurisdiction through the acquisition of Global Fund Administration
in 2007.
This growth is expected to continue apace in 2008, according to
Chris Addenbrooke, CEO of Capita. “We are seeing substantial growth
and expect another £600 million in funds to come in to Gibraltar in
the next six months,” he comments. Capita believes the total value
of the fund administration market in Gibraltar stands at around
£3.3 billion.
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By GlobalDataThe financial centre’s EU membership has furthered the realignment
of Gibraltar that began a decade ago and has now transformed the
jurisdiction into one which is more certain of its identity both
politically and economically. On a diplomatic level, this has
resulted in the easing of the tensions with neighbouring Spain that
for so long overshadowed all other activity in the region.
More normalised political relations are just one piece of the pie,
however. ”Gibraltar is a very interesting jurisdiction,” says Eric
Barnett, CEO of SG Hambros Private Banking. “It’s become very
prosperous over the past ten years. It’s radically different now to
how it was ten years ago and compared to 20 years ago it’s from a
different planet. It’s prosperous, well-regulated and part of the
EU, so it has some interesting angles to it”.
Other private bankers speak of EU membership enabling them to set
up offices in major financial centres such as London with a minimum
of hassle while James Tipping, Gibraltar’s Finance Centre director,
believes the move has also enabled Gibraltar to forge mutually
beneficial links with Switzerland. “For the Swiss, Gibraltar has a
canton-like feel to it, because we are very small and hopefully
able to assist”.
Tipping says Gibraltar’s status offers Swiss firms a way to
complement their businesses within an EU jurisdiction, but does not
see Gibraltar’s role in relation to other financial centres, such
as the Isle of Man and Monaco, in terms of outright competition.
“Competing [with such centres] is the wrong word – what we want is
for Gibraltar to be considered an option for financial
services”.
Peter Caruana, chief minister and Gibraltar’s head of government,
is at the forefront of this shift, and is keen to further emphasise
the jurisdiction’s commitment to both regulation and a prosperous
financial services environment. “We have an agreement with the UK
to match their regulatory standards in cases where these standards
are higher than the EU’s,” he notes.
The last 12 months alone have brought with them a significant
alteration to Gibraltar’s tax policy. Caruana announced last year
that it was abandoning the zero-10 strategy, which allowed for all
companies to pay zero tax, with the exception of financial services
firms, which pay 10 percent. The move followed intensive
negotiations with the European Commission, and Gibraltar now sees
itself as a low-tax rather than a zero-tax jurisdiction.
A similar if far less widely publicised move saw the FSC withdraw
from the Offshore Group of Banking Supervisors (OGBS), an
organisation of offshore financial centres established in 1980 that
includes jurisdictions such as Jersey, Guernsey and the Cayman
Islands. Officials in Gibraltar say the organisation was too
offshore-focused in view of the territory’s continuing
realignment.
The private banking market itself is unsurprisingly dominated by a
host of UK wealth managers.
The most recent entrant is Close Brothers, which joined forces with
investment firm Marrache Group to launch Close & Marrache in
March 2008, while other players in Gibraltar include Lloyds TSB,
which recently relocated its offices to a new luxury apartment
complex in the north of the jurisdiction, and Banque Jacob
Safra.
SG Hambros, meanwhile, has just purchased ABN AMRO’s private
banking operations in Gibraltar.
SG Hambros’ Barnett describes the business as a “good fit”, and
noted that the opportunity to buy the business came up as a result
of the ongoing changes at ABN AMRO, which was purchased by the
Royal Bank of Scotland/Fortis/Santander consortium for €70 billion
($100 billion) in 2007. The move follows SG Hambros’ purchase of
ABN’s London unit in September 2007, but Barnett does not envisage
any further ABN acquisitions.
ABN’s Gibraltar operation has around £700 million in assets under
management according to Barnett, and the purchase “will in very
rough terms double our business” in the jurisdiction. “We now have
critical mass in this area – it makes us one of the leading, if not
the leading, private bank in Gibraltar,” he says of the deal.
“We’ve been in Gibraltar since 1981. It’s a small jurisdiction but
one that’s been growing quickly over the past few years, and our
business has been growing quickly too,” Barnett adds.
