The IFC Economic Report speaks to Paul Astengo on how Gibraltar is developing as an international finance centre and what the future holds for the ‘Rock’.
IFC: How is the financial services sector in Gibraltar developing and how important is it to Gibraltar’s economy?
Paul Astengo: The three main pillars of contribution to our economy from financial services are asset management and funds, insurance and private clients. The financial services sector contributes approximately 23% per cent of Gibraltar’s GDP making it a very important cornerstone of our economy.
Gibraltar’s insurance industry has expanded from just 12 licensed insurers in 1993 to 56 licensed insurers writing new business today. In 2011, the total gross premium income that was written by insurance companies in Gibraltar was £3.2bn, and these companies held assets worth over £7.5bn. Gibraltar motor insurers currently write 16 per cent of the total UK motor market.
There are 16 banks and building societies currently licensed in Gibraltar, employing more than 500 people. They range from large global institutions to specialist private and investment banks and building societies. They are able to provide a full breadth of solutions to their clients’ needs in all areas of banking.
Almost 100 experienced investor funds have been established in Gibraltar since the Financial Services (Experienced Investor Funds) Regulations 2005 came into effect in August 2005. The government introduced new Financial Services (Experienced Investor Fund) Regulations in 2012, which allow large funds to use reputable and substantial administrators based in jurisdictions of equivalent standing to Gibraltar.
The continued and growing investment in the human and financial resources available to Gibraltar Finance, which markets Gibraltar as a financial services centre, is testament to the importance of this sector and of the perceived benefits that will accrue.
IFC: What is Gibraltar’s unique selling point as an IFC?
PA: Gibraltar is a self-governing and self-financing parliamentary democracy within the European Union. Gibraltar’s EU membership provides passporting rights in banking, investment services, insurance, insurance mediation and reinsurance across all EU and European Economic Area countries and access to a market of 500 million people. Gibraltar offers a competitive low tax rate within the EU. This, together with the fact that there is no wealth tax, no VAT, no inheritance tax and no capital gains tax makes it a very favourable jurisdiction in which to do business. It has become a catalyst for the development of the wider region.
IFC: How has Gibraltar and its financial services sector come through the global recession of recent years?
PA: The simple answer is largely in excellent shape. Gibraltar as a whole is buoyant and we have bucked global trends. Gibraltar is Europe’s success story. This does not mean that we are complacent. We are making significant investment, reinvesting the fruits of our success, across all areas of our economy not least in the marketing activity of Gibraltar Finance as the onshore, European finance centre of choice. In the last 12 months we have added four senior executives to the team charged with increasing the business that is done in and from Gibraltar.
IFC: Which areas of the sector are experiencing growth and which less so?
PA: Gibraltar has an extensive and diversified service-based economy. The principal contributors to its economic base are financial services, maritime services, e-gaming, communications and tourism. It is forecast to grow from £1.1bn to £1.65bn between 2011 and 2015, and the government of Gibraltar has maintained a budget surplus throughout the recent economic slowdown that has affected much of the developed world. Our economy has often been described as ‘running on all cylinders’. That’s something we’re immensely proud of. The Finance Centre, banks, trust and company managers, insurance and reinsurance companies, funds, (both investment and alternative) together with high quality ancillary services such as accountancy, legal practices, communications and information technology providers have all made Gibraltar the first class international business hub that it is today.
IFC: What sets it apart from other jurisdictions carrying out similar operations in other parts of Europe?
PA: There are two elements to this reply. Comparing ourselves to our direct competitors not in the European Union Single Market I would have to say the fact that we are within gives us very specific leverage. To those with whom we compete within the single market undoubtedly our regulation, reputation and speed to market is our stock in trade. The fact that we have consciously evolved into a mainstream, onshore, European finance centre serves us well in both cases.
IFC: Gibraltar has recently become a full signatory to the Multinational Memorandum of Understanding of the International Organization of Securities Commissions (IOSCO) — what impact will this have on the jurisdiction?
PA: We set our stall out to be a responsible and professional member of the cross border financial services community. There is in Gibraltar undoubted political support for this and industry will to remain very firmly on this path. As a result of choosing this we are required to participate in a wide range of initiatives like the MMoU with IOSCO, we do so readily and with a desire to participate fully. This adds to our existing credentials as an established and respected IFC, such as our being on the OECD instigated white list and being IMF reviewed.
IFC: Gibraltar has signed an IGA with the UK, how important is FATCA to Gibraltar?
PA: Gibraltar remains wholly committed to this form of initiative. We have nurtured a culture of compliance and FATCA is a very important demonstration of how we embrace integration into an onshore, compliant and mainstream financial centre. I would draw a parallel with the significant achievements in entering into the TIEAs as testament to this.
IFC: Is automatic tax information exchange good for the wealth management industry and IFCs?
PA: Yes undoubtedly so. We are only interested in developing a transparent and collaborative business model. We have already signed 27 TIEAs for example. We signed our IGA with the UK in November 2013 and will shortly sign a similar arrangement with the USA. The multilateral Convention on Mutual Administrative Assistance in Tax Matters was extended to Gibraltar with effect from 1st March 2014. In addition, Gibraltar has TIEA-equivalent arrangements with all EU member states under the provisions of the Directive 2011/16/EU on administrative cooperation in the field of taxation, which came into effect on 1 January 2013.
IFC: Are the regulatory demands being made on IFCs excessive when compared to other ‘mainstream’ financial centres?
PA: Not at all, Gibraltar is regulated to the highest EU and UK standards. We do this because we believe that we are part of the mainstream community and want to continue being so; we have moved away from the ‘offshore’ environment. In addition initiatives such as FATCA apply across all developed markets and do not discriminate between onshore and offshore centres.
IFC: How important are new markets outside the EU to Gibraltar– such as Asia, Africa even Latin America?
PA: Gibraltar is alive to any new opportunities that become available. We have a very intense programme of events and visits programmed for 2014, more than at any other time.
Our traditional markets are the UK and Switzerland and these continue to serve us well. We will be at the main industry conferences and forums, GAIM, Fonds 14, Trans Continental Trust, Captive Live, Pay Expo 14, AIRMIC and BIBA among them - so very much a pan European footprint. In addition we will continue with our flagship and hugely successful Gibraltar Day in London later in 2014. It is our intention to take this formula and replicate it in other jurisdictions.
We have identified specific high value opportunities of working in partnership with a number of jurisdictions including for example Johannesburg, Bermuda, Hong Kong, Singapore, Geneva, Zurich and New York. We are conscious of the need to maintain a high level of focussed activity, build on the foundations that have been established over the time that the finance centre has been in existence and take our message to those areas where we can offer some real benefit and value.
IFC: What does the future hold for Gibraltar as an IFC?
PA: We firmly believe that we are well positioned to take advantage of our strengths and drive growth for the long term sustainable benefit of our stakeholders. The world has been in a difficult place but there are signs that it has come out of intensive care and is on the road to recovery. Our conscious evolution to an open, transparent, collaborative mainstream finance centre has paid dividends.
As always we will face the challenges that present themselves from time to time but continue to be dynamic, flexible and leverage on our three main virtues reputation, regulation and speed to market. There is a raft of refreshed or new legislation coming into force over the next few months covering a wide range of areas. This includes for example an entirely revamped Companies Act to a range of pension and private client initiatives that local industry have identified as absolutely essential to our continued growth and success. We remain committed to attracting quality players and are not in the market of quantity for quantities sake.
The type of company that should look to Gibraltar is one that cares as much for its own reputation as we do of ours. Gibraltar is open for business and we look forward to giving a warm Mediterranean welcome to new entrants while continuing to grow the excellent relationships we enjoy with our existing stakeholders.