Offshore Banking Licenses
in the United Kingdom, Gibraltar,
British West Indies, Dominica, Antigua,
Nauru, Vanuatu, W. Samoa, Bahamas
There are various
possibilities that exist for making application for a banking licence.
Obviously all jurisdictions, both onshore and offshore, have the facility
to grant banking licences to qualified applicants. In general terms, the
onshore jurisdictions impose much stricter requirements on applicants
and consequently the cost of setting up a bank in those jurisdictions
would be greatly increased. The offshore jurisdictions offer some interesting
possibilities because: a) They will allow a bank to operate free of tax
on profit and b) It is possible to set up a bank without the need to maintain
a physical presence within the jurisdiction other than that which can
readily be provided by a service company such as ourselves.
The following looks at a cross-section of the available possibilities
and gives some detail on costs and procedures.
It would be possible to make applications to the Bank of England to set
up a bank in the United Kingdom. Amongst other requirements it would be
necessary to set up an actual office in the United Kingdom staffed by
two responsible executive officers. These officers would necessarily have
to have a detailed knowledge of banking procedures and would therefore
expect to be paid salaries of between 35,000 and 70,000 Pounds Sterling.
Suitable office space would have to be located, administrative support
staff would have to be hired and computer systems would have to be installed
which are sufficiently sophisticated to run all facets of a normal banking
operation. The minimum required capital of a UK bank is 5 million ECU's
(approximately 4 million USD) all of which would have to be paid in and
maintained as unimpaired reserves The typical time from application to
granting of licence would be unlikely to be less than six months and more
likely to be in the order of one year.
The United Kingdom
is typical of many of the onshore jurisdictions and similar standards
would apply in all other European Union countries as standard criteria
have been adopted under the applicable European Union directives on banking.
It is difficult to estimate the costs of setting up a bank in the United
Kingdom but it would be unlikely that these would be less than USD 120,000
and, as described, substantial annual running costs would necessarily
be incurred. Additionally, the worldwide profits of the bank would be
taxable at the normal UK rate of 33%.
Similar costs and procedures would be experienced in the USA, Canada and
other mainstream onshore jurisdictions.
Gibraltar is a full member of the European Union so similar requirements
are imposed on banks incorporated in Gibraltar as those noted above for
UK banks. However, Gibraltar has certain distinct advantages:
a) Banks can obtain exempt status and therefore operate completely free
b) The costs of office space and staff are considerably lower in Gibraltar;
c) There are currently no banking applications pending in Gibraltar so
the time-scale between the application for and granting of a banking licence
can be considerably reduced;
d) We have very good connections with the Gibraltar Government which would
allow us to push this application through as fast as it is possible to
Again, the majority of the costs would be incurred in having to employ
two executive directors/managers with the requisite experience and in
installing the computers and systems which are appropriate for a banking
THE BRITISH WEST INDIES
In the 1970s and 1980s many of the British Dependent Territories were
happy to accept applications for banking licences with a minimum of paperwork
and fuss. Some time ago the United Kingdom imposed increased standards
on these territories so they are now unwilling to receive applications
from anybody other than existing international recognised banks. We therefore
do not think that jurisdictions such as the British Virgin Islands, the
Turks and Caicos Islands, Cayman Islands etc. are worthy of consideration
unless the applicant is a major financial institution.
Dominica is an independent
Caribbean Island which is currently welcoming applications for unrestricted
There is a minimum requirement to retain a paid-up capital of USD1 million
and generally 25% of net profits should be retained in reserve. There
must be a representative office in Dominica as well as two local authorised
agents. Dominica therefore represents a real possibility to obtain an
unrestricted licence without the considerable costs which would be experienced
in most other competitive jurisdictions. The capital requirement is higher
than that which is experienced in some of the Pacific rim Islands but
Dominica is one of the few places where an unrestricted licence is available
with relative ease.
Antigua is another independent Caribbean Island which had welcomed applications
for a banking licence which would be unrestricted (except from a prohibition
on doing business with residents of the Caricom area)
There is a requirement to have a paid in capital of USD 5 million but
no requirements regarding capital reserves or loan ratios are imposed
and no physical presence on the island is needed which cannot be provided
by a management company. However the Antiguan Government recently tightened
up their licensing procedures and increased the minimum capital and licence
Nauru offers the possibility of setting up a bank with no requirement
for local directors or any local presence apart from a registered office
and company secretary in Nauru. These services would normally be provided
by our organisation.
Nauru will accept applications for unrestricted licences or for in-house
type banks but in practice the authorities are unwilling to grant unrestricted
licences to anybody other than an existing bank and would also impose
a requirement that the applicant set up an office and associated infrastructure
in Nauru. The capital requirements for an in-house bank are low - USD
100,000 - and the time scale is in the order of one to three months.
A Nauru in-house bank is prohibited from dealing with anybody other than
associated companies and individuals but it would be possible for your
client to set up a finance company which conducted a broader range of
activities. For example, the bank could deposit monies with the finance
company which could then make loans to third parties. Any literature which
was drafted could make clear reference to the fact that the finance company
was a wholly owned subsidiary of XYZ Bank Ltd and contain further detail
about the bank.
This is another jurisdiction which has indicated it is willing to receive
applications for both unrestricted and restricted licences. The minimum
criteria laid down is that each type of bank requires a paid in capital
of USD 150,000 but in practice it is unlikely that an unrestricted licence
could be obtained by offering this minimum required level of capitalisation.
An application we were recently involved in for an unrestricted licence
required that USD 500,000 was kept as cash reserves. This application
was from an existing bank which added to the credibility of the application
but the existing bank was registered in another offshore jurisdiction
rather than one of the better regulated onshore jurisdictions.
In our opinion Western Samoa is one of the better offshore jurisdictions
which currently offer restricted offshore banking licences. Unrestricted
licences are not obtainable by anybody other than existing banks and require
a minimum paid up capital of USD 10 million. This will probably be unattractive
to most applicants. Restricted licences require a minimum paid up capital
of USD 250,000 but the operations of the bank must be run through a local
trust company such as ourselves. This does mean that an element of third
party control and involvement in the affairs of the bank is required but
this has the advantage that local expertise is readily available.
The Bahamas are an independent member of the British Commonwealth and
a major financial centre in their own right. The Bahamas welcomes applications
for both unrestricted and restricted banking licences.
The minimum capitalisation for an unrestricted licence is US$1 million.
This type of licence can be obtained by private individuals but only if
they are able to show that they have substantial high net worth. Restricted
licences are more readily granted to financial institutions.
A restricted licence enables the holder to provide banking and/or trust
services only to a specified class of associated individuals or companies
who would normally be named in the licence or in a schedule attached to
the licence. The minimum paid up capital is only US$100,000.
Both type of banks must maintain reserves in cash, or near cash, equal
to 20-25% of deposits.
In summary, our recommendations are:
For a restricted licence - Western Samoa, Nauru or Bahamas.
For an unrestricted licence - Dominica if cost is an issue, Gibraltar
if cost is unimportant.
Irrespective of the jurisdiction in which your clients decide to proceed
it will be necessary for them to produce:
1) References from a leading bank, leading firm of lawyers and leading
firm of accountants on each shareholder and each director.
2) Police clearances.
3) Evidence to satisfy the authorities that the shareholders/promoters
of the bank have substantial wealth and assets.
4) A detailed business plan which outlines the type of business that the
bank will undertake, the way in which that business will be handled by
the bank and estimates of turnover for the first 3 years. This is perhaps
the most important document.
5) Evidence that the required minimum capital is available.
6) Curriculum Vitaes on all directors and shareholders which should show
some expertise in running a financial institution/bank.
This is the minimum required documentation. The list is not necessarily
As can be seen, some authorities will require that local directors be
employed who are actually going to run the bank. In all jurisdictions
it is always helpful if a local director who has banking expertise attaches
his name to the application especially if the other directors are unable
to show any relevant experience. We can provide such directors upon request.
Ultimately the choice of jurisdiction will depend largely on what business
you wish to undertake in the name of the bank and whether or not you wish
to set up a physical presence in the jurisdiction of incorporation.
To request additional information or an application please write to us
and best regards,