A Time for Reflection
Who is to blame for the crisis? Banks certainly were a major contributor to it and they are still contributing to it.
Firstly, they lent vast amounts of money to customers who carried a high risk of default in their repayments. Secondly, the banks are now reluctant not just to lend money to customers but also lend money between themselves. Therefore, aggravating the situation even further.
One could ask the simple question of why the banks were allowed to act in such an irresponsible manner. The directors should have been played a more active role. They were the ones who could have questioned the strategies being pursued. The lack of diligence on their part not only gave a “free hand” to the implementation of these strategies but encouraged a reckless behaviour which led to dire consequences.
Further regulation on the banking industry is not the answer but invariably be the knee jerk reaction of many governments for political reasons as their actions may determine their electoral prospects when voters are called to pass judgement.
The buck stops with those in a position of ultimate authority, that is the directors. The directors have dismally failed in their duty to act in the best interest of the shareholders and they will be held to account. The directors should, as a normal course of business, examine, review strategies and actions being followed by those implementing the strategies. Strategies may prove lucrative in the short term and profit may well outweigh the risks involved. However, if ill founded strategies are followed in the long term and actions to implement these remain unchecked, it will cause the unnecessary pain that we are living through at the moment. As we almost witnessed the virtual collapse of the banking system, such strategies are not just disastrous to banks or the banking industry, but the economy as a whole.
Lessons have been learnt by all stakeholders, all of us. The banking industry has suffered a major blow and its image is badly tarnished. So let us hope that the industry emerges from the crisis with a new resolve to follow and promote good and sound business ethics.
Welcome news was received in Gibraltar before Christmas by Europe’s Court of First Instance. The Court delivered a favourable ruling which confirmed Gibraltar’s fiscal independence. The case came about as Gibraltar and the United Kingdom disagreed with the European Commission’s claim that Gibraltar was part of the United Kingdom for tax purposes.
The ruling is a watershed in Gibraltar’s development as an independent and separate jurisdiction to the United Kingdom. The ramifications of the ruling will be enjoyed by present and future generations of Gibraltarians as economic prosperity can continue unhindered from the threat posed by the European Commission. Gibraltar is therefore a jurisdiction in its own right.
The date of the introduction of the 10% corporate tax rate for all Gibraltar companies as announced by Peter Caruana, Gibraltar’s Chief Minister , is yet unknown but it is now a certainty in the wake of the ruling of the Court of First Instance. The tax rate is very competitive and among the lowest offered by jurisdictions in the European Union.
Despite the economic turmoil, “every cloud has a silver lining” and there are always new opportunities to explore. It makes good sense, especially at the start of a new year, to review your assets and reassess their position in terms of cost savings and wealth creation.
Fiduciary can offer solutions in providing structures were assets can be held in a tax efficient manner. These structures can involve the use of companies, foundations and/or trusts. There a number of reputable jurisdictions which offer attractive vehicles and Fiduciary can assist in setting up a suitable structure bespoke to the client’s needs.
Foundations and trusts can relieve the client from the burden of succession planning. Fiduciary can assist in devising structures involving foundations and trusts that will give the client confidence and comfort knowing that his assets will be administered and distributed efficiently and professionally on his passing.
The effects of the financial crisis will be widely felt as it is likely that the crisis deepens. But there is light at end of the tunnel and Fiduciary can assist you to weather the storm.