INTERNATIONAL BANKING LAW AND REGULATION - A I

GIBRALTAR

A. THE BANKING SYSTEM

I. INTRODUCTION

The Banking system in Gibraltar is based largely on the United Kingdom model whilst at the same time, by necessity, incorporating its own particular legislative and regulatory provisions. The implementation of the Banking Ordinance 1992 ("the Ordinance") brought Gibraltar's banking legislation into line with EC Banking Directives and in particular the Second Banking Co-Ordination Directive (Council Directive No. 89/686/EEC on the co-ordination of laws, regulations and administrative provisions relating to the taking and pursuit of the business of credit institution and amending Directive 77/780/EEC). Subsequent legislation has kept Gibraltar banking law and the regulation of financial institutions abreast of EU developments.

The major implication of the Ordinance was to permit branches of EU authorised banks to set up in Gibraltar without the need for further authorisation procedures. Similarly, Gibraltar licensed banks can branch out into Europe provided that the notification procedures between the relevant supervisory authorities are carried out. The Ordinance also removed the previous distinction between "A" and "B" licenses for "onshore" and "offshore" business, and provides for a single banking licence.

A further and subsidiary aim of the Ordinance was to give those persons charged with the regulation and control of the banking system and pertinent institutions greater regulatory and monitoring power. This was deemed necessary particularly in the light of the BCCI collapse. However, despite these concerns, Gibraltar continues, at present, to find itself without some form of deposit protection scheme, at least until the implementation in Gibraltar of the Deposit Guarantee Directive (94/19/EEC) which is expected in early 1996.

The Ordinance is administered by the Commissioner of Banking, who is also the Financial Services Commissioner appointed under the Financial Services Commission Ordinance 1989, with the day-to-day supervision being carried out by the Banking Supervisor.

The Ordinance is arranged into twelve parts:

Part I

- Preliminary provisions - includes the definition of "deposit" and "deposit-taking business".

Part II

- Control of deposit-taking businesses - includes provisions as to who may carry on a deposit-taking business and exemptions thereto; repayment of unauthorised deposits; profits from unauthorised deposits.

Part III

- Administration - deals with the appointment of a Commissioner of Banking and Banking Supervisor; maintenance of a licences register and various administrative provisions.

Part IV

- Licenses - includes provisions for the criteria for granting licenses; application, duration, variation and conditions of licenses and capital requirements.

Part V

- Duties of licensees and Gibraltar subsidiary institutions - includes provisions imposing obligations and restrictions on licensees and subsidiary institutions.

Part VI

- Objections to controllers - includes provisions for the restriction of the sale of shares and disposal thereof.

Part VII

- Supervision of deposit-taking business - includes provisions for the provision of information, inspections of premises and documents and investigations.

Part VIII

- Cancellation of licenses - deals with the grounds of cancellation; directions on cancellation and the return of licenses.

Part IX

- Prohibitions and notifications relating to recognised institutions - includes provisions for the prohibition and restriction of European institutions on the acceptance of deposits; limitations of authorisation of European authorised institutions and the prohibition and restriction of relevant investment business.

Part X

- Appeals - appeals to, and the powers of, the Supreme Court.

Part XI

- Miscellaneous provisions - includes provisions on the restriction of the use of the words "bank" and "trust"; winding up of authorised institutions and offences under the Ordinance.

Part XII

- Transitional provisions - includes provisions for existing licensees and for the repeal of the Banking Ordinance 1983.

Since the implementation of the Ordinance, subsequent community directives, such as the Solvency Ratio Directive (89/647/EEC), the Own Funds Directive (89/299/EEC), the Large Exposures Directive (92/121/EEC) and the Consolidated Supervision Directive (92/30/EEC) have been introduced via administrative notices pursuant to the Commissioner's powers under Section 16 of the Ordinance. Gibraltar's current solvency ratio for all Gibraltar registered operations is 10% or such higher rate as the Commissioner may require (2% above Basle minimum requirements) and is calculated in accordance with Basle/EU recommendations (see Administrative Notice No.1, 25th September 1992).

There are at present approximately 30 banks established in Gibraltar with major players represented by the likes of Barclays Bank Plc, National Westminster Bank Plc, Lloyds Bank Plc, Hambros Bank Limited and Credit Suisse (Gibraltar) Limited to name but a few, most of which have both a domestic and offshore presence. Total deposits as at September 1995 stood at £2,686 million as compared to a figure of £167.9 million in December 1984, clearly demonstrating Gibraltar's growth as a reputable and competitive finance centre.

International Banking Law Part A - I - II - III - IV - V - VI - VII
International Banking Law Part B - I - II - III - IV - V
International Banking Law Part C - I - II - III - IV - V
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