Tuesday, June 28, 2005

Finance light regulatory touch should give Gibraltar an edge in providing some financial services

Gibraltar’s light regulatory touch and relatively benevolent tax regime will give the Rock considerable advantages over the next few years, former UK Economic Secretary to the Treasury Angela Knight said yesterday.

Mrs Knight a former Tory MP and now chief executive of the Association of Private Client Investment Managers and Stockbrokers (APCIMS) was guest speaker at a lunch for local stockbrokers and investment managers.

As regulations and taxes and the costs to clients of financial services continued to rise, lower-tax and lower-cost jurisdictions – particularly off-shore regimes such as Gibraltar and the Channel Islands – would benefit, Mrs Knight said. “But watch out for Brussels – you’ll never know where it’s going to hit you,” she quipped.

As a speaker, Mrs Knight has a commandingly penetrating voice – presumably a relic of the days when she shouted-down hecklers at the hustings – which contrasts sharply with her light and at times humorous touch.

As a Treasury Minister under Chancellor Kenneth Clarke – “everything you’ve read about him smoking only cigars and wearing Hush Puppy shoes is true” she confided – Mrs Knight was “in charge of the national debt” and the Royal Mint as well as financial regulation. And “while I was a Treasury Minister, Barings went bust and and we had the crisis of Mad Cow Disease,” she said with a hint of self-mockery.

Now, she is still involved in financial regulation – but from the other side. As chief executive of the largest private client trade association in Europe, whose members had some £260 billion of clients’ assets under management and last year, operating on over 500 sites, carried out more than 13 million trades, Mrs Knight keeps close tabs not only on the Financial Services Authority (FSA) in the UK but also on the army of Brussels bureaucrats and the mass of new regulations which they create.

Referring to Britain’s relatively new financial watchdog the FSA – a body set up since she left the Treasury – Mrs Knight told her audience: “I’ve a word of advice…don’t go there.”

Clearly, though Gibraltar’s Financial Services Commissioner Marcus Killick was seated at the same table as the former Minister, no one had briefed her on Gibraltar’s use of the UK pattern as our regulatory yard-stick and the fact that by law we are obliged to meet standards as rigorous as those of Britain (even though other EU member states are far less rigorous in the application of rules and directives).

“During my time at the Treasury the industry [financial services] kept saying that there were too many regulatory bodies and asking for fewer of them” she said. “I told them:

"What you ask for is not what you’re going to get.

Sure enough, with the arrival of the new [Tony Blair] government they got the new regulatory authority and we are now regulated too tightly; regulations have become far too detailed; and there are far too many people working there [at the FSA].”

Mrs Knight, who qualified as a chemist and is an engineer by profession, now puts a major part of her working effort into trying to ease her association’s members’ regulatory problems and in “trying for better regulatory operations in the UK” and in dealing with Brussels’ regulations and directives.

Slating the EU decision taken in 1998 to devolve to Brussels much of the financial regulatory structures, Mrs Knight stressed that with all the Commission’s emanations, “the devil is in the detail”. It had been a serious mistake to give responsibility to the European Commission which had no real practical grasp of how different financial systems operated in different member states.

As the first of the main financial directives were handed down the greatest impact would come from the fact that different countries would apply the regulations differently. In Britain these would be applied more strictly than elsewhere in the EU and, accordingly, would involve companies and managers in higher costs.

She pointed out that under Basle II (the Capital Requirements Directive) the general view was that this would only affect banks.

“At least that was the idea, but in fact the directive will affect every financial institution. In the long run, the industry will benefit in producing international [rather than regional or local] wealth management.

Though currently only one local stock-broking firm, Gibraltar Asset Management, is a member of APCIUMS, it is hoped that other asset managers will link with the association as it expands in Europe – possibly through GASIM, I understand.

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