Gibraltar Seeks To Be European Leader In SPV Services

Joe Garcia, Panorama

08 November 2000

This story is reproduced by kind permission of Panorama at http://www.panorama.gi

The last decade has seen an explosion in the range and volume of derivative products available in the financial markets. And Gibraltar is making inroads into this specialist area. "Gibraltar has the conditions to become the leading jurisdiction for its further development in Europe," says barrister Nigel Feetham of law firm Hassans, who has done much pioneering work locally for the last two years.

The fruits of his endeavours are beginning to show. Deutsche Bank started using the territory last year as a base for securitisation activity, while UBS became the second investment bank to see the attractions of Gibraltar as a special purpose vehicle (SPV) domicile.

Most banks, insurance companies and fund managers now trade in repackaged transactions, which typically involve the setting up of an SPV whereby institutional investors purchase notes issued by the SPV which in turn uses the proceeds of issuance to purchase the underlying bonds the investor wants to get credit exposure to.

Offshore sources recognise the importance played in this field by the Cayman Islands, an SPV jurisdiction for over 10 years. "The reason why the Cayman Islands has traditionally been the preferred choice of location for the setting up of SPVs is because of its geographical proximity to the United States, where structured notes were first developed," said Feetham.

The growing expectation here is that what the USA is to Caymans, the EU can be to Gibraltar. The point is being made that there is increasing attention of investment banks active in the European repackaged market to turn towards European locations - the Channel Islands, Luxembourg and the Netherlands are cited.

Although a newcomer, Gibraltar is being regarded by some as the best choice of location for SPVs , enthuses Feetham. This is because it is, not only part of the European Union and an OECD member, but is also an English common law jurisdiction. "Moreover, unlike other European jurisdictions where an SPV must obtain prior tax clearance, thus creating uncertainty, in Gibraltar the tax status of the SPV is obtained for a 25-year period," he said, adding that he is on the threshold of developing niche products because of the EU connection.

What next for Gibraltar in this field of financial services? A number of new SPVs, including major European and North American banks, are expected to be up and running before the year is out. The stamp of approval given by Deutsche and UBS may have provided the confidence needed by Gibraltar to begin to establish a rock-solid reputation in this highly specialist area.

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