Two major developments in Gibraltar’s financial services sector during the first half of this year will further enhance the jurisdiction’s strength and reputation as a player in global finance, with new offerings of both local and international appeal. The Rock’s first stock exchange GSX Ltd, applied for a license from the Financial Services Commission in February, and the establishment of the Government-backed Gibraltar International Bank provide exciting investment facilities both for High Net Worth Individuals and overseas investors in both the EU and US.
Linked to the London Stock Exchange and with the possibility of other ties to the giant Nasdaq bourse, GSX - a readily simple acronym - initially will trade in funds allowing them to ‘build a public track record’ easily accessible and providing an indication to shareholders as well as potential investors to see how specific funds are performing. As many as 100 funds could be listed.
GSX is also expected to attract a flow of Swiss funds in the wake of changing tax and management regulations there. Several have already indicated plans for a change of domicile to Gibraltar.
The two main players behind the establishment of GSX, Nick Cowan and Marcus Wohlrab, have impressive records on the international financial stage. Cowan (currently the CEO of GSX and a professional trader at NJC Trading) is a former head of equities and global head of equity trading at ING Barings as well as managing director at Bear Stearns in the UK. Wohlrab, a respected Experienced Investor Fund director, has been executive vice-president at EASDAQ and a director at NASDAQ International.
As well as attracting a significant number of Swiss funds, the new bourse is likely to have a strong appeal to US investors when, later this year, the Gibraltar government signs a FATCA agreement with Washington to disclose financial transactions - so allowing US taxpayers to place assets legitimately in non-US financial institutions or other non-US entities as their assets will no longer be concealed from the US tax authorities. As a result, FATCA will be introduced into Gibraltar legislation. The UK government have adopted a similar scheme for the UK’s Crown Dependencies and Overseas Territories (known to some as ‘Son of FATCA’). Gibraltar signed an agreement with the UK under this scheme in November last year, though unlike FATCA, there is no withholding tax.
And there will be a further boost in US investor interest in March with the launch of a new Chamber of Commerce directed at US businesses and investors - though not a branch or off-shoot of the American Chamber of Commerce in Washington. There will be further stimulus in May when a Gibraltar trade mission including funds and other financial services experts visits the US.
GSX is the third – but first successful - attempt to establish a Gibraltar stock exchange. A first attempt in the 1990s failed to get off the ground and a subsequent second attempt also failed
Plans for the new bank – the Gibraltar Investment Bank – which will have a start-up capital of £15 million of government funding were disclosed last year in the wake of Barclays Bank’s decision to retain only its large corporate and private banking operations in Gibraltar, while closing its large, but less profitable, retail section by October this year. The Rock’s three other high street banks – RBS, NatWest and Jyske – are clearly unable, and in many cases reluctant, to absorb all of the 17,000 retail accounts of Barclays customers, including many of the smaller shops catering to Gibraltar's growing tourist industry. (This has been hit recently by the border friction with Spain but efforts are proving successful to increase lucrative cruise ship visits.)
The bank is already licensed, has acquired premises and has begun recruiting staff. Some of these have already been drawn from the experienced tranche of Barclays employees who have been or are still to be made redundant. Gibraltar also has a wealth of highly experienced university graduates who see time spent in banking as an important step into other areas of Gibraltar's burgeoning finance sector.
For, although Gibraltar is clearly facing challenges - from FATCA, from British proposals to alter its approach to tax on internet gaming, and from the constant stream of financial rules and directives emerging from Strasbourg and Brussels – it has been able to escape most of the damaging effects of the economic downturn which have lashed other jurisdictions.
In the past Gibraltar has shown its ability to adapt to crises and maintain a competitive position in every circumstance and these two new institutions (GSX and the Gibraltar International Bank) are poised to ensure further successes and growth.
Michael Castiel, Partner, Hassans, Gibraltar
