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Regulation
Government pledges more to remain competitive
ous FSC bill of only say, £33,000 increase quite a lot and there are some licensees now paying 500-600% more, but for the very largest ones it represents a semi-insignificant amount compared to the size of the business”, Mrs Barrass reported.
“There has also been very little dis- agreement on the underlying methodology that should form the basis of the fee calculations, and little dispute over the level of operating costs of the FSC.” Feedback from the industry has resulted in reduced cost for ‘passporting’ services throughout the EU, a cornerstone of Gibraltar’s promotional message to attract new firms and inward investment from Switzerland, South Africa and Asia in particular.
Some 118 firms have a total of 1,048 ‘passports’ from Gibraltar into other jurisdictions and “in general the level of oversight supervision activity substantially increases where cross border activity is concerned”. A further 39 passports are in support of an overseas branch, also to be supervised.
Potential to dete
The government was anxious to see financial services remain competitive. “The industry has highlighted that there is the danger that higher regulatory costs may lead to the movement of financial activity to jurisdictions with what is perceived as more competitive regulatory fees, and that in addition this could deter potential new business,” a FSC report declares.
Part of the FSC remit is to protect consumers and safeguard the reputation of Gibraltar, whilst supporting “the safe growth of the industry”. Picardo pointed to a new Innovate & Create team that the FSC said provides “a single point of contact for people with new ideas or products in financial services”.
Promising further consultation, Picardo told business professionals: “We are on course to deliver an entirely new set of Financial Services legislation in the coming 12 months, which we believe will make doing business in Gibraltar easier, not just for the firms, but of course for the Regulator too.”
Support for financial services is being strengthened at a time when the possibility for Gibraltar to leave the EU, as the result of a successful Brexit vote in June, would leave the territory struggling to maintain growth. (See News, P6)
Ray Spencer
Gibraltar’s financial services sector is to have the cost of regulation subsidised by government at a cost of around £3m over the next four years amid concerns that the jurisdiction might otherwise appear uncompetitive
In a surprise move, Chief Minister Fabian Picardo revealed in April that following a year-long widespread consultation with
the territory’s 480 regulated financial entities and intermediaries, the government is to more than double its planned contribution to the Financial Services Commission (FSC) over the four years to 2019-20.
He told a meeting of industry professionals: “There is a significant cost to regulation, which in a small jurisdiction like ours, can be challenging to meet. Our regulatory burdens are the same as they are for France, Germany or the United Kingdom.”
The Government has “invested heavily” in the sector that accounts for around a fifth of the economy to soften the financial burden of regulation, but had planned to reduce the £1m contribution it made in 2015-16 to become only £600,000 (around 10 % of the FSC operating budget) in the current 2016-17 year. Thereafter there would have been no subsidy.
Now the State will maintain a £1m contribution and instead of having a 10% across the board increase in fees for licensees in 2017-18, “serious and significant adjustments” have been made to limit the industry’s share to £5m, and in each of the following 3 years it will rise by no more than 4% overall with the government making up the difference.
“We aim to reflect the fixed cost of regulation, which has increased a lot as a result of the financial crises”, explained Samantha Barrass, FSC chief executive. “In Gibraltar we regulate more sectors than any other of our comparators – Malta [with an operating budget of €12m], Jersey, Guernsey, Luxembourg and Ireland.”
The FSC regulates 12 sectors in all, including insurance, funds, trust and company service providers, consumer credit
and mortgage providers, occupational pension schemes, as well as the Gibraltar Stock Exchange.
“Frankly, we are a combination of the UK’s Financial Reporting Council, Financial Conduct Authority, Prudential Regulation Authority (PRA) and the Pensions regulator all rolled into one and we have to implement all of the same Directives and Directives from the EU”, Mrs Barrass explained.
Gibraltar regulates 12 sectors - more than others, says Samantha Barrass, Financial Services Commission chief executive
She added: “The FSC has the widest remit and the highest number of sectors to regulate and supervise.” Changes to the way of charging for FSC services was “to achieve a fair and transparent fee-setting policy” when the historic approach to raising fees meant “some sectors were more than meeting their regulatory costs and others were not”, as well as making sure that regulatory fees were generally more capable of reflecting the costs of regulation.
Fees up and down
The significantly changed fee structure supports a £6m FSC operating budget that has not altered this year, and is projected to go up by 1% a year. The level of fee increase varies significantly between sectors; funds and some trust and company service providers for example, see lower than expected contributions.
However, “a large insurance company - that would probably pay £7-800,000 to the PRA in the UK, and possibly up to €1.5m to the Irish regulator - will have seen its previ-
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