Select from our list of frequently asked questions on offshore bank formation and licensing. Our FAQ’s cover a host of topics, including: bank set up, specialization, jurisdictions to operate in, and the different license types…
The broad definition of an offshore bank is that of a bank that is located in a jurisdiction or country that is different from the jurisdiction or country that the depositor or investor resides in.
Having your own offshore bank allows you to offer banking services to clients worldwide. Setting up an offshore bank in a tax favorable jurisdiction allows you to earn your profits tax free. Setting up an offshore bank is the first step in setting up an onshore bank, as it allows you to offer services to the residents of your country of residence. It also allows you to build up the capital that is required to setup an onshore bank.
Having a banking license entitles you to engage in activities that are connected to banking. Whether it is retail banking, like accepting deposits and lending money to clients, or whether it is specialized private banking that is targeted at people who are wealthy and looking for a good bank to work with, you will need a banking license.
Banking licenses are issued by the regulatory body of the industry in the jurisdiction which the institution is established. There is a relatively long and complicated procedure that goes into a bank license application. This procedure will also depend on the type of license that you wish to apply for. They are general broken down into different categories, and each category has a different specialization, and a different time frame involved in the license application process.
Because of the number of different specialties that banks can engage in, there are also package licenses available, with the main bank license being a license that allows a bank to engage in all of the activities that you would expect a major bank to engage in, including retail banking, merchant acquiring, cash management, fund management and trade finance. Obtaining a license that allows you to engage in all of these activities will generally take the longest, and cost the most, however, you can also apply for a license that has fewer or even only one specialization.
There are 3 major options when applying for a banking license. The first license is known as a Class A, Class I or an un-restricted banking license, which allows you to engage in any activities that a standard onshore bank engages in. The second license is known as a Class B or Class II bank license, this license allows you to engage in any normal banking activities, however you are not able to engage in any form of services agreements with the residents of the country where your bank is licensed. The third license is known as a Class B restricted, or a Class II restricted bank license, and this license allows you to only engage in banking activities with a list of clients that is sent to the bank at the time of your bank license application.
Most banking licenses allow you to engage in all banking activities that a normal bank can engage in. The reason for specialization of banks is that a large number of the services that banks can offer require additional licenses and memberships, and applying for all of these license and memberships is sometimes not worth the amount of money it will cost. Therefore choosing a specialization will save you time and money in the setup procedure.
A bank license is issued to companies that are looking to engage in banking activities. Engaging in any banking services without a valid license is illegal, and will carry criminal charges. Holding a bank license will not affect your banking operations per say, but will rather guide you to engage in the best banking practices.
Incorporation of a company that will apply for an offshore banking license is not a long procedure, however the full license application can take anywhere from 3 months, however most offshore bank licenses are issued in around 6 months.
The cost for a bank license varies from country to country, as there are different procedures involved with each licensing body. The largest cost involved in setting up an offshore bank is the capital requirements of the regulatory body, as a certain amount of the registered capital needs to be held by the licensing body.
The jurisdictions that are listed in our Licensing Jurisdiction page are the most cost effective and time friendly jurisdictions available for the setup of an offshore bank.