Established three and a half years ago, the Gibraltar International Bank has confounded its critics and beaten expectations by clocking up a profit in 2018; and, with deposits continuing to grow to a current £750 million, it is set to weather any storms or turbulence expected to surge in the wake of Brexit.
‘So far, despite the genuine concerns expressed, Brexit has had no negative effect on us,’ Lawrence Podesta, the bank’s CEO told Reach. ‘We’re going from strength to strength to the extent that there is a continuous demand for account openings and business opportunities.’
There is uncertainty about the position of customers of the Danish Jyske Bank, which recently announced that it was selling its operation in Gibraltar which it acquired from the oldest Gibraltarian bank, AL Galliano Bankers in 1987.
Jyske customers must be wondering whether it will be taken over in such a way that their accounts can be maintained. As for GIB, its profits and deposits continue to rise and the bank also plans to introduce a string of new services before the end of the year… though, for the time being these cannot be disclosed.
Given the Gibraltar International Bank’s focus on customer service for the ‘man/woman in the street’ they are likely to be well in reach of the average customer’s pocket.
In recent years the contraction in ‘high street’ retail banking that had served Gibraltar businesses and individuals since before World War II threatened to create a financial vacuum as Barclays, and then Lloyds withdrew their across-the-counter services. The situation was not unique to Gibraltar.
As the financial crisis ten years ago forced financial institutions to re-assess their functions across the Western world, the big retail banks took an axe, rather than a pruning saw or secateurs, to many of their branches.
And as these shut – often outside the cities and thus reducing customer access to banking services – a new breed of ‘challenger banks’ emerged.
Some 70 of these have forced their way into Britain’s banking sector to win the loyalty of small businesses and everyday customers, simply because many of the big banks have failed to do so.
So far the Rock – even after the closure of Barclays – has had too small a potential customer base to attract the attention of the likes of Tesco or Virgin banks.
NatWest ‘cherry-picked’ the Barclays customers looking for a new Gibraltar home, and the Gibraltar International Bank (established largely to counteract Barclays’ closure, absorbed the rest). It also bought Barclays local mortgage book – a move that has brought GIB distinct benefits.
‘Challenger banks have their own problems,’ says Podesta, who explains that these banks were set up as a result of what was perceived to be a void in the retail banking market left by the larger credit institutions.
To some extent this has proved to be erroneous as there are indications that the larger institutions are redirecting their strategy to the home markets and in particular on the mortgage front. This has resulted in some of these challenger banks making losses’.
With regard to the DLT/ Fintech sector Podesta says ‘that it is still difficult to be able to engage with third party correspondent banks who are willing to transact in FIAT currency. The introduction by the GFSC of a regulatory framework for DLT companies goes some way for banks to derive comfort that all necessary checks and controls are in place and ‘due diligence’ and ‘KYC’ are being conducted correctly.’
Podesta adds: ‘We’re fortunate because Gibraltar is a relatively small jurisdiction, we can work closely and swiftly with the regulator (the Gibraltar Financial Services Commission). The issue lies in that regulation does not exists in other countries where these correspondent banks operate and as such, as a matter of policy, do not engage in any DLT/ Fintech business.’
With fewer lenders and a high demand for mortgages – particularly for Government housing projects – whilst there is a need to spread the risk, the way to do so is more limited.
Most regulators of European banks – both at national and EU levels – put a 30 per cent limit on mortgage lending when compared to the rest of a bank’s business.
But with £220 million already lent on mortgages, if GIB is to meet demand for borrowing to cover new purchases of Government-built properties, the 30 per cent cap has been shifted to 50 per cent.
Gibraltar has always had an excellent reputation in terms of mortgage repayments, with banks reporting very small numbers of defaults.
The GIB has brought local banking back to Gibraltar. It reflects a growing trend in other countries where multinational entities have sometimes been found to be lacking in loyalty for local customers, although it has to be said that so far the Royal Bank of Scotland trading as NatWest, which is partly British state owned, also has an excellent local reputation.