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Podesta, who has experience of working in	intermediary introducers - accountants, private and retail banking and originally	lawyers and company managers – GIB has
opened a cash centre in central Main Street with eight staff so businesses can deposit money and also arrange collection from shop premises.	With five ATMs in three locations, GIB is planning two more. “Whilst not a significant revenue earner, provision of ATMs is a convenient service for clients,” Podesta acknowledges.
To ease things further, NatWest, Jyske and GIB agree there is scope in the territory for another retail bank, but consider it unlikely to happen. Eccleston illustrates the issue: “One of the obstacles for newcomers is the Deposit Guarantee Scheme (DGS),which protects up to €100,000 per person on an aggregated basis, and the requirements for it.
Deposit guarantee obstacle
“In the UK if you are a member of the Financial Services compensation scheme, you are one of hundreds of banks, so your pre-funding in line with the EU Directive is minimal, but here in Gibraltar when you are one of few participants that is quite an obstacle in terms of set-up cost and pre-funding.”
Eleven authorised credit institutions contribute to the Gibraltar DGS that requires pre-funding to reach 0.8% of deposits by 3 July 2024 via nine annual contributions and GFSC’s Resolutions Unit reports: “We are on target.”
Costs have been hit in other areas too, Bjørløw emphasises: “We need more volume today to run a bank because of extra costs of compliance and regulation that have a huge impact on the whole business. In 2002 Jyske had one compliance officer in Gibraltar; today we have a department of ten people, with risk control and compliance capability.”
Despite rising costs in a competitive environment, the retail banks all say they remain committed to Gibraltar. GIB declared a £6m loss in its launch year, but plans for profitability by early 2019.
Podesta warns that EU Basle 3 regulations mean there is a need to keep a close watch on asset-to-loan and capital adequacy ratios. “The more successful we are, the more capital we have to put to one side as assets are capital weighted. In all probability, there will come a time when we will have to ask the shareholder [the government] for more capital, not because the business has physically eroded, rather the contrary, and reserves would, by necessity and regulation, have to be increased.”
trained with Barclays locally. Deposit balances are above expectation
at £300m, which gives GIB leeway for lending, an initial area of concern. As Podesta reveals: “The lending book has grown at a steady pace, which is fine by us, because we still haven’t reached the 50% loan-to-deposit ratio. We did, initially, cater for the government housing scheme projects; we committed to assist with mortgage lending for half of the overall housing schemes, about 450 flats involving some £22m in mortgages, and that
was comfortably financed.” But the bank has also provided another £27m in mortgages for other customers.
Eccleston concludes that NatWest still has high levels of concentration risk, because of a shortage of local mortgage providers. “We are running at a very high level. In the UK you would never have any one bank having a 40+% concentration risk, but we have in housing.” However, there are limited loan defaults: “Gibraltar is a well-performing jurisdiction in terms of the mortgage book and credit side.”
Easier home loans
Bjørløw submits: “Mortgage availability has eased; it is not difficult to get a mortgage. There is no new huge development coming along, so most demand is coming from people moving on, but now only within Gibraltar.” However, he agrees there is some concern at business loan availability.
“For a big project generally amongst Gibraltar banks there is a probably a shortage of funds and there is also the possibility of limits on lending for certain types of business (housing, for example) and even locations (individual developments) as a result of concentration risk for some banks at some times,” Bjørløw suggests. “We have financed some small housing projects; we as a bank don’t want to get involved with a project that is only half finished, so we are quite conservative on credit risk.”
Being Danish-owned, Jyske says it has a different approach to business than typical British banks, which means 95% of decisions being taken locally rather than by teams external to the jurisdiction.
Using a network of 29 approved local
attracted accounts from mainly international clients not based in Gibraltar.
“Historically it has been a huge market and it gives an extra edge to the retail operation, even though we are here logically to service the local community of around 30,000 people –a considerable, but limited market”, observes Podesta, whose staffing has reached 78. “There is a necessity to engage in international business for the extended growth of the bank.”
Loan enquiries have come from the UK, “which we are looking at carefully, although it is a side- step to our main operation”, Podesta states, emphasising: “GIB will not engage in any loan proposition for Spain or elsewhere in Europe, because we would need to understand fully the complexities of a different regulatory environment.”
Convenient ATMs “not a significant revenue earner”, says Lawrence Podesta, GIB chief executive
Cash use problematic
One	of	the	biggest	problems
for	local	retail	banks	is	that “Gibraltar is very much a cash-based society and many customers want to cash cheques – we are probably the only part of Europe that issues so many cheques and there is a cost to
that”, relates Eccleston. Until 2015, there was a local clearing
system, but rising costs and improving operational efficiencies led to each bank arranging for its cheques to be processed on their behalf by a correspondent UK clearing bank, a process that takes seven days!
“All NatWest customers are being encouraged to use electronic means – Automatic Teller Machines (ATMs) if neces- sary, and also on-line banking and mobile apps. For younger people, using cheques and cash is not the way things are done today”, she observes. “Going digital and using the internet is the way forward.”
There are 12 ATMs on The Rock. As Bjørløw makes clear: “Cash handling and cash points are an enormous cost; Jyske has only two ATMs.	If I go to Denmark, I don’t use any cash and instead I use a VISA card or mobile app for payments. I hope we soon will go more and more electronic for bank- ing.”
GIB aims to be a digital bank, with ATMs in its banking hall for cash and cheques can also be deposited.	In April, the State-owned, but independently-run bank
Gibraltar International

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