Gibraltar: 2nd Banking Directive (Hansard, 31 January 1994)

§ The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey)
My Lords, we notified the European Commission on 15th November 1993 that the Government of Gibraltar had made the necessary changes to Gibraltar law for the transposition of the 2nd Banking Directive (89/646/EEC) in so far as it relates to incoming EC credit institutions and Gibraltar banks. Discussions are continuing with the Gibraltar Government with a view to ensuring the effective implementation and discharge of Community obligations in the Gibraltar financial services sector.

§ Lord Merrivale
My Lords, I thank my noble friend for that Answer, but am I right in saying that the UK 1110 position is that Gibraltar is Community territory as far as the other 11 member states are concerned? Therefore, is it not reasonable that the Gibraltar Banking Supervisor should be empowered to inform the Supervisor of a host state that a bank that is established in Gibraltar wishes to set itself up in that member state?

§ Baroness Chalker of Wallasey
My Lords, this is a slightly complicated matter. The 2nd Banking Directive establishes so-called banking "passports" between member states. As Gibraltar is a separate jurisdiction within the UK member state for these purposes, the EC legislation governing the UK's relations with other member states does not automatically apply to the UK's relations with Gibraltar. We are investigating this. There is a further Banking Advisory Committee of the Community in March. When we implemented the 2nd Banking Directive by regulations under the European Communities Act 1972, it was doubted that there were sufficient vires to establish a passport regime between the UK and Gibraltar in those regulations. When parliamentary time allows, we shall bring forward the necessary primary legislation. The whole matter is under discussion at this time.

§ Baroness Blackstone
My Lords, may I ask the Minister a simple and uncomplicated question? Can she tell the House what effect the directive has had on the economy of Gibraltar?

§ Baroness Chalker of Wallasey
My Lords, to the best of my knowledge, it has had very little effect on the economy of Gibraltar up to the present time. We are seeking to ensure that there is proper regulation of financial services in Gibraltar. It is with that in mind that the discussions continue with the Chief Minister of Gibraltar.

§ Lord Peston
My Lords, as we have a little time, may I ask the Minister whether she will educate us? Is it not the case that any bank that is eventually accepted in Gibraltar can then open up anywhere else in the Community? Is not that the case? If it is the case, the question of how well the banks are supervised in Gibraltar is a serious matter; if it is not the case, the matter is less serious.

§ Baroness Chalker of Wallasey
My Lords, what I sought to say in reply to my noble friend Lord Merrivale was that the legislation which governs our relations with other member states does not automatically apply to the UK regulations with Gibraltar. Therefore, the passporting of banking services in one member state, which allows its banks to operate in another member state, does not automatically allow financial services or banking that are begun in Gibraltar to operate in another member state. The noble Lord may know that Luxembourg refused to recognise the Gibraltar licensing system. Others may do likewise.

§ Lord Peston
My Lords, that is why I asked the question. As we are meant to do these things on a European Union basis these days, it is still not clear what determines what happens in such circumstances. We seem to hear the unilateral view, "We do not recognise this", which rather puzzled me the first time 1111 that I came across it. I thought that that could not happen. I thought that "passports" meant "passports". Is the noble Baroness saying that they do not mean passports any more?

§ Baroness Chalker of Wallasey
My Lords, we are clear that Gibraltar-based banks and building societies are eligible to take advantage of the right to passport to other member states in the single market, but other member states do not so agree. At present there is a discussion going on. But if any banking or financial service in Gibraltar is to take advantage of the passporting, the regulations must ensure that the banking or financial service is properly founded and on the same basis as it would be in the United Kingdom itself.

§ Lord Hailsham of Saint Marylebone
My Lords, did I understand my noble friend's earlier answer aright: that this can be put right by primary legislation in the United Kingdom Parliament? If I am right about that, can we not have a rather more rapid programme for parliamentary time, by agreement between the parties, than she seemed to indicate?

§ Baroness Chalker of Wallasey
My Lords, there is a difference of opinion between the Chief Minister of Gibraltar, who has one legal opinion, and Her Majesty's Government, but we have said that we will bring forward primary legislation, if necessary, at an appropriate time. We shall do so as soon as we can, but plenty of discussions are going on at the present time. We want arrangements in Gibraltar, which we are now discussing with the Government of Gibraltar, to ensure that there are the necessary standards of regulation and security in Gibraltar. That can help us to ensure effective implementation and discharge of Community obligations in the Gibraltar financial services sectors. But that will require primary legislation.

§ Baroness Elles
My Lords, does my noble friend agree that the strength of the 2nd Banking Directive of 1989 is that it is the member states who are to give authority for a bank to be set up within the member state, and thereafter a passport can be given from that bank? Surely it must depend upon the United Kingdom's view of what is the position in Gibraltar rather than anyone else's.

§ Baroness Chalker of Wallasey
My Lords, my noble friend is right. That is why I spoke about how the necessary arrangements would be introduced to enshrine sufficient standards and regulations in Gibraltar. That, as I understand it, will be the responsibility of the British supervision. Until that has happened, the next step forward cannot be taken.

§ Lord Elton
My Lords, do I infer from my noble friend's reply to my noble and learned friend Lord Hailsham that the protection available to British investors in Gibraltar is not the same as it would be if they were to invest in this country?

§ Baroness Chalker of Wallasey
My Lords, I am not sure whether my noble friend is referring to one problem that we have, which is mortgage indemnity, which 1112 forms an important part of the financial sector. We are not ready to extend arrangements to Gibraltar until we are fully satisfied about the supervisory and regulatory systems there. That implies what he said in his question.

§ Baroness Blackstone
My Lords, I am sorry to pursue this matter, but we do have a great deal of time. Will the Minister tell the House how the French Government deal with similar issues in relation to Monaco?

§ Baroness Chalker of Wallasey
My Lords, 1 am afraid that the noble Baroness will have to ask a French Minister, because I cannot tell her from this Box at this moment.

§ Lord McIntosh of Haringey
My Lords, does the Minister agree that this has been a model of questioning in your Lordships' House? We have extracted information as questioning has proceeded. Is that not in contrast to a good deal of the way in which your Lordships conduct Question Time?

§ Baroness Chalker of Wallasey
My Lords, the ability of the person answering at this Dispatch Box to give clear advice often depends upon the Question asked in the first place.