Banking operations in Gibraltar are governed by the Banking Ordinance 1992 which brought Gibraltar's banking legislation in line with the EU First and Second Banking Co-ordination Directives. The Ordinance is administered by the Commissioner of Banking. A major implication of the new legislation is that branches of authorised EU Banks may set up in Gibraltar without the need for further authorisation procedures. Similarly Gibraltar licensed Banks may also branch out into Europe.
SUBMISSION OF FORMAL APPLICATION
Except for branches of authorised EU Banks, applicants must submit a formal application form together with supporting documentation setting out the nature and scale of the business the applicant intends to carry on and details of the arrangements for its management. In addition and as part of the application process individual directors, controllers and managers are required to complete a questionnaire relating to their background, business record and experience.
CRITERIA FOR GRANTING OF BANKING LICENCES
The Banking Ordinance 1992 also sets out the criteria applied for the granting of licences:
- The applicant must enjoy a "high reputation and standing in a financial community".
- The Commissioner of Banking must be satisfied that every person who is a director, controller or manager of the Bank is a fit and proper person to hold that position.
- The applicant must provide certain minimum levels of service to the public or money markets.
- Minimum share capital requirement is ECU 5 million or foreign currency equivalent.
- Licensed Banks must maintain a solvency ratio of 10%.
- Payment of the annual licence fee currently £5,000.
TAXATION OF BANKS
Gibraltar licensed banks and branches of foreign banks are eligible to apply for a qualifying certificate entitling the bank to pay tax at a prescribed rate of between 2% and 35%. Usually the rate prescribed for Banks is of 5%. The main condition applying to the issue of the qualifying certificate (See Qualifying Companies insert) is that the bank may not trade or carry on business in Gibraltar with Gibraltarians or residents of Gibraltar. It may however trade with exempt, qualifying and other non resident companies and individuals. Banks wishing to do business with Gibraltarians and Gibraltar residents are subject to taxation on their profits at the normal corporate rate of 35% in common with local trading companies.
ADVANTAGES OF GIBRALTAR
There are some thirty banking licences in issue at present the majority of which are either subsidiaries or branches of International banks of repute. Two licensees operate as private banks. Applicants have been attracted by a number of factors such as:
- Favourable tax status for offshore banks.
- Stable government and status within the European Union.
- Good geographical location and attractive fiscal regime for offshore investors provide for an excellent customer base for offshore banks in Gibraltar.
- No exchange controls.
- Good communications.
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