Friday, January 21, 2005

Caruana warns against unjustified erosion of Gibraltar Finance Centre

Pratt Report into FSC

Gibraltar Government esterday welcomed the Pratt Report – a review into the workings of the local Financial Services Commission (FSC) – but said that it exceeds its statutory remit.

In a statement to the Chronicle, Chief Minister Peter Caruana warned that no part of the report should be used by anyone “for purposes extraneous to the requirements of our laws,” or for the erosion “without genuine regulatory justification of our competitive attractions as a finance centre.”

Mr Caruana defended the legislative competence of the House of Assembly and argued that there should be no impairment of the Gibraltar Government’s ability to achieve the required regulatory standards “in a way that suits Gibraltar’s interest, even if the UK does it in a different way.”

A Gibraltar Government spokesman said:

We welcome the Pratt Report’s endorsement of the Financial Service Commission’s performance, but consider that in other respects, the Report exceeds its statutory remit. We are not surprised by the ringing endorsement of the very high standards of supervision of financial services in Gibraltar by the Financial Services Commission. The growth in our finance centre has, in large part, been built on the global industry’s appreciation of the Gibraltar Government’s commitment to high standards of Regulation.

In 1989 the Gibraltar House of Assembly legislated the Financial Services Commission Ordinance. By Section 12A of the Ordinance the Gibraltar Parliament empowered the Governor to appoint persons to conduct such reviews of the Financial Services Commission to ensure that regulatory standards were maintained at the high level established and required by the House of Assembly in local Financial Services legislation. Under Section 12A such reviews are limited to the supervisory activities of the Financial Services Commission in relation to financial services to which European Community laws apply.

In the firmly held view of the Gibraltar Government the terms of reference issued to Mr Pratt, and therefore the Pratt Report itself, go very substantially beyond what is authorised and permitted by Section 12A. Indeed, in the Government’s view, the Pratt Report then compounds this further by exceeding even those terms of reference in several areas of the Report.

The Gibraltar Government will seek the views of the Financial Services Commission and of the financial services industry before forming a view about the relevant recommendations of the Report, that is those that genuinely relate to the question whether the FSC is regulating to the standard required by the laws of Gibraltar. The Government is considering proposing a review of these issues by a Select Committee of the House of Assembly.


Commenting on the Pratt Report, Chief Minister and Minister for Financial Services Peter Caruana said:

In its relevant parts this report confirms what the government and the industry in Gibraltar already knew, namely that the Financial Services Commission regulates our financial services industries to very high standards, which in our view more than match UK standards. The Government thanks the Financial Services Commissioner, Marcus Killick, all members of the Commission, and indeed the FSC staff for their hard work and commitment in achieving this excellent regulatory environment.

However, the Government, the House of Assembly and indeed the finance industry, will, I am sure recognise and uphold the importance of preserving the policy and legislative competence of the Government and parliament of Gibraltar and of ensuring that no part of this report is used by anyone for purposes extraneous to the requirements of our laws, such as (for example) the erosion without genuine regulatory justification of our competitive attractions as a finance centre or our ability to achieve the required regulatory standards in a way that suits Gibraltar’s interest, even if the UK does it in a different way.

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