The Gibraltar Savings Bank at present is providing the same services that have been provided in the past but is operating out of a new building that is the headquarters of the bank, in anticipation of its expanding role. The bank now operates from that building whereas before it used to operate from the Treasury Building situated in John Mackintosh Square - The Haven. So, in effect, the service that is being provided is better, but what is available to people making use of the bank are the ordinary accounts, where you need 7 days notice, which pays 2% interest and a number of other instruments, such as debentures and bonds which pay different rates of interest depending on how long the money remains in the bank.
The money can be put in bonds which have a one year fixed period and pays 3 ½ % interest rate or a five year fixed period which pays 5% or a ten year fixed period which pays on average 6 ½%. The ten year period is one which starts at a low rate of interest and the money can be withdrawn on the anniversary of the day it was deposited. The longer it is left in the bank the higher the interest rate. “So this is the only new thing the bank is doing; it is called an accumulator bond in which you deposit your money for one year and the rate of interest is 2%. And for every year after that the percentage increases by 1%. So in the 2nd year it increases to 3%; in your third year it increases to 4%; in your fourth year it increases to 5% and so on until the tenth year is reached and your increase is 11% interest. If the percentage of all the years is added up and divided by 10 it is 65% in10 years which is an average of 6 ½% per annum,” says Joe Bossano, whose brainchild the Savings Bank has been ever since he was Chief Minister over 16 years ago.
The advantages of investing in the Gibraltar Savings Bank and its future plans
The advantage is that it is a rate of interest that is superior to anywhere else, where the money is left there for 10 years without being able to withdraw it. If the money is needed at any time then the opportunity is there to withdraw the money once a year. And that is the only new thing the bank has done so far.
What is planned for the future as from 1st April this year is to start offering current accounts to both individuals and businesses. The idea is to make this very competitive and extendable to people to be able to compete with other banks. The only condition on the current accounts will be that for an individual a minimum of £10 has to be left deposited in the account. A business account will have to have a minimum of £100. The bank will pay interest on the balance that is deposited in the bank on the current account and there will be no bank charges.
The money deposited in GSB is more secure than any other bank in the sense that banks are covered by European Legislation and therefore only something like £80,000 of the money is guaranteed. In the Savings Bank the guarantee is provided by the Government and there is no limit. The law says, since the bank started in the 19th century, that any failure of the bank to pay interest or pay back the money when it’s due has to be met 100% by the Government, the Government being the owner of the bank. The bank does not have a share capital. Therefore the guarantee is higher than any other bank. The bank is not involved in investing outside Gibraltar. The money is either in Gibraltar or in UK Govt Stock and Bonds and in the Bank of England. The GSB is not dealing with investing abroad which other banks are; for the safety net of the EU is not enough to cover losses of over £80,000.
So ultimately the highest guarantee that can be provided is guaranteed by the state. In Gibraltar it is a legal requirement. The GSB, therefore, makes it compulsory.
The GSB prospects for the future
The GSB will mostly be attracting local small businesses. With the GSB all current accounts will operate electronically. Initially a visa card will be issued that can be used to withdraw money from the GSB or at any other ATM. Later on that Visa card may be used anywhere in the world. So, in effect, a current account in the GSB has the privilege of the money being able to be withdrawn anywhere in the world, and there will be no charges because it is not a credit card but a debit card, where you cannot withdraw more money than there is in the account. And businesses must leave a minimum of £100 before withdrawing the rest of the money. Individuals can withdraw all their money with the exception of £10 which must be left in the account so there is always a credit balance and the account does not operate in the red.
“We hope to be in the 1st phase on the 1st April this year. When we start doing that the first thing needed is the computer programme which already has been identified costing in the region of half a million pounds. And initially, to put it to the test it is going to be carried out with the three or four hundred trainees that are at the moment in the training companies under my dept where they are already being paid monthly. So in order to test that the system works well before outside customers are taken, for a number of months the wages of the trainees will be paid automatically. This in itself will improve efficiency and productivity because if at the moment 300 or 400 people are paid through transactions elsewhere it is not as easy or as smooth as having a situation where the trading company has as account in GSB and the trainees have an account there. Then automatically every year the money is taken from one account and placed into the other. Thus the trainee is paid up, there’s an account for the Govt and automatically the tax on the trainees gets paid back into the account; therefore the money never leaves the bank. The money is being electronically moved from one account to another.”
Bossano has complete confidence that the bank will be a success
Bossano personally believes that if the GSB is able to deliver that kind of development, not only will it provide an efficient service to the public and to the business community which will be very competitive but it will actually improve and increase productivity in Gib collectively (because there will be less people spending time with all the paperwork). So it has an economic advantage globally and an individual advantage in the service provided to the customers at very little cost. The interest will be low but it will still be better than anywhere else dealing with a current account.
“I know that there are a lot of people interested in using the bank even before we are ready. We have been approached by both the Chamber of Commerce and the Federation of Small Businesses and people in the Finance Centres who have clients that are finding too many difficulties in opening bank accounts in Gib. The bank accounts in the Savings Bank have always been properly regulated. They were regulated since time immemorial even before the other banks were subjected to regulations from the EU or anywhere else. And just because there has been a change of Govt it doesn’t mean that the regulations have stopped operating. So people have nothing to worry about with the bank. But, in any event, if the totally and unjust criticism which are partisan and political and self-serving not based on facts, deter people from using the Savings Bank, the criticism will not be a success, because there is such a long queue waiting to use the bank that nobody is going to be persuaded not to use it by Mr Feetham.”