“The Safe Keeping Account” – A Comical Act?
by Roy Clinton MP
Mr Bossano introduced various amendments to the Savings Bank Act in the last meeting of Parliament, thus completing his transformation of the Gibraltar Savings Bank from a Victorian Savings Bank to a national Development Bank in all but name. These amendments created among other things the “Safe Keeping Account”, whose terms may at first appear comical but with them is a serious statement of intent that cannot be ignored.
Prior to and throughout the 2015 Election campaign the GSD sought to highlight the increased risk to the money held by the old style Savings Bank as an alternative source of funding for Government projects. Mr Bossano notably took great offence at the GSD’s accusation that the GSLP/Liberals had taken £400 million out of the Savings Bank to fund their manifesto via Credit Finance Company Limited. His argument was that in order to pay attractive rates of interest the Savings Bank had to seek high yielding investments and there was nothing wrong in doing that despite the inherent risks.
In a self-serving attempt at political entrapment Mr Bossano has amended the Savings Bank Act to create a fee paying, zero interest, zero risk “Safe Keeping Account” with the rationale that it was something that I and the GSD were suggesting which is of course complete nonsense. This change to the Act, which was introduced with no prior notice at the committee stage of the Bill, is frankly a red herring that ironically only serves to highlight the higher risk attached to the interest bearing deposits and debentures with the Savings Bank
The real seismic change however, is a new clause that has been inserted in the Act that directs that in making investment decisions: "preference shall be given to investments that will maximise the social and economic development of the community"
This can be contrasted to the wording (long gone) in the original 1935 Act, which stated the exact opposite: “moneys in the Savings Bank shall not be applied in any way to the purposes of the Colony.”
This means quite simply that the money raised by the Savings Bank has to first and foremost be invested for Gibraltar’s benefit. Mr Bossano can now say to both the Opposition and savers that he is only doing what the Savings Bank Act now directs in investing money in entities such as Credit Finance Company Limited and GSBA Limited. If anyone is unhappy with that they can simply not invest or take out a ‘Safe Keeping Account’.
Overlaying all this is of course the unlimited Government guarantee covering all money raised by the Savings Bank. This guarantee is underwritten by the tax payer in the event of a loss, while depositors relying on the guarantee can in theory sleep easy. The risk to the taxpayer is that something might go wrong with one of Mr Bossano’s investments, none of which as he admitted in Parliament has a market value as such. They are illiquid (cannot be easily sold) and by their nature higher risk in order to generate the returns required.
I have tried to get some understanding of the professional management expertise of Credit Finance Company Limited. It has no employees of its own and in Parliament Mr Bossano initially refused to identify who made decisions in investing its £400 million which is all held by Treasury. Mr Bossano then told Parliament ultimately such decisions were made by the ‘outfit’ dramatically indicating those on the Government benches: what real financial and risk assessment experience do they have?
With no evidence of a professional management team with experience of private equity or credit risk Credit Finance Company Limited is at best making amateur decisions based on a political agenda. GSBA Limited is another such (unaudited) entity that holds £11 million of Savings Bank money of which £ 4.7 million was paid to Credit Finance to buy the building housing Treasury and Mr Bossano refuses to explain what is being done with the remaining £ 6 million.
I sincerely hope that the investments made by Mr Bossano never result in a loss to the tax payer and to that end we have to place our trust in the Financial Secretary, the Accountant General and the Principal Auditor as custodians of the public purse. I must however thank Mr Bossano who at least now, albeit theatrically, has had the political courage to amend the Act to reflect the reality that the intention in respect of the money held in the Savings Bank is to primarily use it for Government projects and nothing else.