Gibraltar’s Financial Watchdog Faces Scrutiny Over Independence and Accountability
A recent review has raised concerns about the Gibraltar Financial Services Commission (GFSC) and its relationship with government, citing potential conflicts of interest and a lack of transparency.
The Review’s Findings
The review, conducted by an independent expert, recommends that the GFSC develop a Memorandum of Understanding (MOU) with the Government of Gibraltar to establish clear guidelines on its relationship and responsibilities. This would set out specific areas where government may be involved in supervisory decisions, such as risk tolerance and financial stability, authorisation, supervision, and enforcement.
The review also suggests that the GFSC’s reporting line should be changed from the Minister of Commerce to the Minister of Finance, which could help reinforce the separation of regulation and promotion. However, this proposal is conditional on the current arrangement being maintained until the next statutory review in five years.
The Need for Transparency and Accountability
The review highlights the need for greater transparency and accountability within the GFSC. The Board should be more involved in operational issues, particularly those involving authorisation, remediation actions, and enforcement decisions, according to the report.
Response from the GFSC and Government of Gibraltar
The UK-based Chairman of the GFSC has welcomed the review’s findings, saying that the agency is committed to maintaining its independence and effectiveness. The Government of Gibraltar has also expressed its support for the review’s recommendations, stating that it is committed to ensuring the integrity and effectiveness of the GFSC.
New Measures to Increase Transparency and Accountability
The Chief Executive of the GFSC has announced plans to introduce new measures aimed at increasing transparency and accountability. These include publishing a quarterly newsletter to keep stakeholders informed about the agency’s activities and introducing a new system for reporting complaints and concerns.
Key Recommendations
- Develop a Memorandum of Understanding (MOU) between the Government of Gibraltar and the GFSC to establish clear guidelines on their relationship and responsibilities.
- Change the GFSC’s reporting line from the Minister of Commerce to the Minister of Finance, conditional on the current arrangement being maintained until the next statutory review in five years.
- Increase transparency by publishing a quarterly newsletter and introducing a new system for reporting complaints and concerns.
- Improve accountability by involving the Board more closely in operational issues.
Background
The Gibraltar Financial Services Commission (GFSC) was established in 1999 to regulate Gibraltar’s financial sector, which is a significant contributor to the island’s economy. The agency has been praised for its effective supervision of financial institutions and markets, but concerns have been raised about its close ties to government and potential conflicts of interest.
The review was conducted by an independent expert at the request of the Government of Gibraltar.