Legal basis for banking requests

Introduction

The Financial Services (Banking) Act 1992 provides the legal framework for the supervision of deposit takers who provide banking services in or from within Gibraltar either as a Gibraltar incorporated legal entity or a branch of a deposit taker authorised in either EEA State or a third country.

The Financial Services (Banking) Act, however, only covers the authorisation to conduct deposit-taking business.  Most banks and branches operating in Gibraltar are also licensed to conduct investment and/or fiduciary services business and readers should be aware of the information sharing capabilities of the FSC under that legislation.

Provisions to obtain information

The powers to seek and obtain information from "relevant persons" are vested in the Commissioner of Banking, the Banking Supervisor or any other person appointed by the Banking Supervisor to act on his behalf (known under the Act as the "Authorised Officer").  The definition of relevant person under the Financial Services (Banking) Act are very wide, namely:

1. any person who is or has been an authorised institution;
2. any person who is or was either a subsidiary or a parent controller of an authorised institution or an undertaking with which an authorised institution is or was closely linked;
3. any person who has a liability to any other person in respect of a deposit received in the course of carrying on a deposit-taking business;
4. any other person or body whom the Commissioner or Banking Supervisor believes or suspects on reasonable grounds to be carrying on deposit-taking business in or from within Gibraltar, or who is carrying on such business in or from within Gibraltar;
5. any subsidiary or parent controller of any person referred to in 3 or 4;
6.  any person from whom, by virtue of the provisions of Article 56.7 of the Banking Consolidation Directive, the Commissioner or Banking Supervisor may require information for the purposes of the verification provided for in that Article;
7. any person who is in possession or control of any document belonging to or relating to, or any information relating to, any deposit-taking business carried on by a relevant person specified in any of sub-paragraphs 1 to 6.

Section 60 of the Financial Services (Banking) Act permits the Authorised Officer to seek and obtain the information himself or to appoint an accountant or other professional with relevant skills to report to him with the information.  The powers to compel the production of information are also drafted widely and include the ability to take copies and question directors, controllers and managers of the institution as well as as extending the list above to holding companies, subsidiaries or persons closely linked with persons in possession of relevant information.

Assisting supervisory authorities

Section 60A of the Financial Services (Banking) Act extends the powers to obtain information from a relevant person by relevant supervisory authority.  However, before such powers can be exercised by the supervisory authority the following conditions must e met:

• the authority must prove that it is exercising material supervisory functions, and
• the authorised officer (Commissioner or Banking or Banking Supervisor) must be satisfied that the request is made for the purposes of material supervisory functions.

Material Supervisory Functions are defined as:

• functions which correspond to those of the Commissioner or Banking Supervisor; and
• any other functions which the supervisory authority has in respect of a credit institution or e-money institution under which the Commissioner or Banking Supervisor may be required to provide information under a Community obligation.

It is permitted to appoint an officer or agent of a supervisory authority to exercise the powers under this section directly as the "Authorised Officer" if the request has been previously communicated to the Commissioner or Banking Supervisor.

Power to conduct inspections on behalf of another supervisory authority

Wide powers are granted to the Authorised Officer under section 61 of the Act to inspect premises, produce and take copies of documents etc.  In the case of a branch of a European bank, the Authorised Officer may exercise these powers on behalf of the supervisory authority as requested by it provided that the authorised officer is satisfied that the requests are made in the performance of any function corresponding to those of the Commissioner or Banking Supervisor.

Confidentiality Provisions of Information Obtained and Disclosed under the Financial Services (Banking) Act

As a general rule all the information obtained under the Financial Services (Banking) Act is confidential and may not be disclosed.  Section 82 of the Financial Services (Banking) Act deals exclusively with the criminal offences for breaching such requirements.  However sub-section 10 permits disclosure in the following circumstances:

• of any information that is permitted or required under the Act; or
• of any information to or by any person concerned with the administration of the Act, for the purposes of carrying the Act into effect; or
• of any information by the Commissioner or Banking Supervisor, or by any officer on the staff of the Commissioner, to any person qualified in law, accountancy or valuation or any other matter requiring the exercise of professional skill, in order to take advice from that qualified person for the purposes of the Act; or
• of any information with the consent of the person to whom it relates; or
• of any information that is a matter of public record or knowledge; or
• of any information with a view to the institution of, or otherwise for the purposes of, any criminal proceedings whether under the Act or otherwise;
• of any information in relation to any proceedings arising out of the Act;
• of any information in connection with any winding-up or administration proceedings under the Companies Act in respect of an authorised institution or former authorised institution except for information relating to a person (not being a controller of the institution concerned) who to the knowledge of the person making the disclosure is participating in an attempt to secure the survival of the institution as a going concern;
• of any information by the Commissioner or Banking Supervisor given in connection with the Deposit Guarantee Scheme Act 1997;
• by the Commissioner or Banking Supervisor of any information, being information relating to the nature or conduct of the business of an authorised institution or the business of any other relevant person, to any authority responsible for the control or supervision of institutions carrying on the business of banking, financial services or insurance in any other country where it appears to the Commissioner or Banking Supervisor -
  • that the person to whom the information relates carries on or proposes to carry on or has or proposes to acquire an interest in any deposit-taking business in that country; and that the disclosure of the information would assist that authority in its prudential control or supervision of deposit-taking institutions in that country; or
  • that the disclosure of the information is necessary for supervision of a deposit-taking institution to be effected on a consolidated basis in accordance with Banking Consolidation Directive or any successor thereto:

  Provided that the Commissioner or Banking Supervisor shall disclose information in accordance with this paragraph only where he is satisfied that the authority is subject to restrictions on further disclosure at least equivalent to those imposed by the Banking Consolidation Directive and by this Act.

• of any information in the form of a summary or collection of information, in such a manner as not to enable information relating to any particular person to be ascertained from it.

Section 86A imposes restrictions on the onwards disclosure of information received by a supervisory authority as prescribed by Article 30 of the Banking Consolidated Directive.  Namely:

1. The Member States shall provide that all persons working or who have worked for the competent authorities, as well as auditors or experts acting on behalf of the competent authorities, shall be bound by the obligation of professional secrecy. This means that no confidential information which they may receive in the course of their duties may be divulged to any person or authority whatsoever, except in summary or collective form, such that individual institutions cannot be identified, without prejudice to cases covered by criminal law.
   Nevertheless, where a credit institution has been declared bankrupt or is being compulsorily wound up, confidential information which does not concern third parties involved in attempts to rescue that credit institution may be divulged in civil or commercial proceedings.
2. Paragraph 1 shall not prevent the competent authorities of the various Member States from exchanging information in accordance with this Directive and with other Directives applicable to credit institutions. That information shall be subject to the conditions of professional secrecy indicated in paragraph 1.
3. Member States may conclude cooperation agreements, providing for exchanges of information, with the competent authorities of third countries or with authorities or bodies of third countries as defined in paragraphs 5 and 6 only if the information disclosed is subject to guarantees of professional secrecy at least equivalent to those referred to in this Article. Such exchange of information must be for the purpose of performing the supervisory task of the authorities or bodies mentioned.
   Where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement.
4. Competent authorities receiving confidential information under paragraphs 1 or 2 may use it only in the course of their duties:
5. - to check that the conditions governing the taking-up of the business of credit institutions are met and to facilitate monitoring, on a non-consolidated or consolidated basis, of the conduct of such business, especially with regard to the monitoring of liquidity, solvency, large exposures, and administrative and accounting procedures and internal control mechanisms, or
   - to impose sanctions, or
   - in an administrative appeal against a decision of the competent authority, or
   - in court proceedings initiated pursuant to Article 33 or to special provisions provided for in this in other Directives adopted in the field of credit institutions.
6. Paragraphs 1 and 4 shall not preclude the exchange of information within a Member State, where there are two or more competent authorities in the same Member State, or between Member States, between competent authorities and:
   - authorities entrusted with the public duty of supervising other financial organisations and insurance companies and the authorities responsible for the supervision of financial markets,
   - bodies involved in the liquidation and bankruptcy of credit institutions and in other similar procedures,
   - persons responsible for carrying out statutory audits of the accounts of credit institutions and other financial institutions,
   in the discharge of their supervisory functions, and the disclosure to bodies which administer deposit-guarantee schemes of information necessary to the exercise of their functions. The information received shall be subject to the conditions of professional secrecy indicated in paragraph 1.
7. Notwithstanding paragraphs 1 to 4, Member States may authorise exchanges of information between, the competent authorities and:
   - the authorities responsible for overseeing the bodies, involved in the liquidation and bankruptcy of credit institutions and other similar procedures, or
   - the authorities responsible for overseeing persons charged with carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment firms and other financial institutions.
   Member States which have recourse to the provisions of the first subparagraph shall require at least that the following conditions are met:
   - the information shall be for the purpose of performing the supervisory task referred to in the first subparagraph,
   - information received in this context shall be subject to the conditions of professional secrecy imposed in paragraph 1,
   - where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement.
   Member States shall communicate to the Commission and to the other Member States the name of the authorities which may receive information pursuant to this paragraph.
8. Notwithstanding paragraphs 1 to 4, Member States may, with the aim of strengthening the stability, including integrity, of the financial system, authorise the exchange of information between the competent authorities and the authorities or bodies responsible under law for the detection and investigation of breaches of company law.
   Member States which have recourse to the provision in the first subparagraph shall require at least that the following conditions are met:
   - the information shall be for the purpose of performing the task referred to in the first subparagraph,
   - information received in this context shall be subject to the conditions of professional secrecy imposed in paragraph 1,
   - where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement.
   Where, in a Member State, the authorities or bodies referred to in the first subparagraph perform their task of detection or investigation with the aid, in view of their specific competence, of persons appointed for that purpose and not employed in the public sector, the possibility of exchanging information provided for in the first subparagraph may be extended to such persons under the conditions stipulated in the second subparagraph.
   In order to implement the third indent of the second subparagraph, the authorities or bodies referred to in the first subparagraph shall communicate to the competent authorities which have disclosed the information, the names and precise responsibilities of the persons to whom it is to be sent.
   Member States shall communicate to the Commission and to the other Member States the names of the authorities or bodies which may receive information pursuant to this paragraph.
   Before 31 December 2000, the Commission shall draw up a report on the application of the provisions of this paragraph.
9. This Article shall not prevent a competent authority from transmitting:
   - to central banks and other bodies with a similar function in their capacity as monetary authorities,
   - where appropriate to other public authorities responsible for overseeing payment systems,
   information intended for the performance of their task, nor shall it prevent such authorities or bodies from communicating to the competent authorities such information as they may need for the purposes of paragraph 4. Information received in this context shall be subject to the conditions of professional secrecy imposed in this Article.
10. This Article shall not prevent the competent authorities from communicating the information referred to in paragraphs 1 to 4 to a clearing house or other similar body recognised under national law for the provision of clearing or settlement services for one of their Member States' markets if they consider that it is necessary to communicate the information in order to ensure the proper functioning of those bodies in relation to defaults or potential defaults by market participants. The information received in this context shall be subject to the conditions of professional secrecy imposed in paragraph 1. The Member States shall, however, ensure that information received under paragraph 2 may not be disclosed in the circumstances referred to in this paragraph without the express consent of the competent authorities which disclosed it.

Offence for breaching confidentiality provisions

A person who discloses any information obtained by him under the Act is guilty of an offence and is liable on conviction on imprisonment for two years and to a fine of £20,000.

Confidential information relating to customers

Authorised institutions, and their controllers and subsidiaries, and institutions of which they are controllers are permitted to exchange between each other information necessary to facilitate supervision of institutions on a consolidated basis in accordance with the Banking Consolidated Directive.