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.


UNITED KINGDOM

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

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 of tax;

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 do so.

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 institution.




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

Dominica is an independent Caribbean Island which is currently welcoming applications for unrestricted bank licences.

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

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 fees.




NAURU

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.


VANUATU

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.



WESTERN SAMOA

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.



BAHAMAS

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.


SUMMARY

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 exhaustive.

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 at
 office@dierrepiconsulting.com

Thanks and best regards,
Dierrepi Consulting