Provision of Financial Services – Formation of a Bank – Offshore Bank License

Formation of a Bank – Bank License – Offshore Bank License

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Bank License – Asset management company: Offshore Bank License Vanuatu

Offshore Bank License: Basic Considerations regarding the Formation of a Bank (Deposit Bank)

International banking law is an extremely complex legal practice area. “Forming a bank on the fly” is a contradiction in itself. Please consider that many dubious providers offer their services via the Internet, these providers are neither tax accountants specialized in international tax law or attorneys specialized in bank law, nor do they have sufficient knowledge and expertise in the area of national and/or international law. So-called “bank formations” by such providers are seldom worth the paper on which the supposed license is documented. We provide services to clients who have already lost more than 100,000 Euro to such providers, in which cases a bank formation was not realized. When forming a bank – or a financial services company with the approval for providing bank services domestically and internationally – there are numerous laws that must be complied with in the seat country in which the bank is to be formed, as well as compliance with the domestic laws of the “provider country”.

Key issues include among others:

What objectives are being pursued with the formation of a bank?
Which services is the bank to offer?
In which countries are the bank services to be offered and in “which form”?
Where is your “permanent residence” (location of unrestricted tax liability); Where do the shareholders reside in terms of tax liability?

A Brief Overview of the Terminology

Asset Management Company:

Asset management companies may receive funds from third parties, invest such funds, and distribute profits from such investments as defined by (term). An asset management company is, however, not a bank as defined by the respective provisions (may not offer any bank typical services), and consequently an asset management company is not a deposit bank. Examples of asset management companies: Asset Management Company Liechtenstein, Asset Management Company Panama or Belize.

Bank:

Banks are defined as deposit banks, which may offer bank typical services (invest and distribute third-party funds, provide loans, lawful currency, etc…). Banks as defined by (term) are, as a rule, subject to the supervision and oversight of the relevant agency and/or the country’s Central Bank. As a rule, the banks must comply with the Basel II Accord and as such must commission an auditing firm.

E-Money Institutes and Investment Bank:

Contrary to this, some countries (for example Germany) know the terms E-Bank and/or Investment Bank. “paypal” for example is an E-Money-Institute. The equity capital required for such financial services companies are, as a rule, lower than that of a full-service bank (equity capital for an investment bank in Germany is approximately 730,000 Euro, for an e-Bank is 1 million Euro).

Financial Services Companies with Bank Services License

These financial services companies may offer bank typical services. Typically such financial services companies may only offer their services to customers outside of the seat country, consequently the term “offshore financial services company with a license for bank services” is utilized. The New Zealand Financial Services Company is an example of this. These institutes are, as a rule, subject to the supervision and/or oversight of the relevant oversight agency or the country’s Central Bank.

Offshore Bank:

The term offshore bank is not defined and for this reason is utilized to describe a number of institutes. It can be defined as: deposit banks as defined by (term), which can only be active outside of the seat country, in other words “offshore”. Such an institute can be subject to the oversight and supervision of the relevant agency and/or Central Bank or not. Deposit banks are often defined as an offshore-bank, which is subject to the supervision and oversight of the respective agency and/or the country’s Central Bank and may offer bank services in the seat country, however the offshore-bank’s seat country is located in typical tax-havens.

General Information on Banking License, Provision of Financial Services, Asset Management Companies

The license prerequisites are very different in individual countries, in particular the required equity capital of the bank and/or the asset management company. The basis – more specially, the formation of a stock corporation according to the law of the seat country, supplemented by the installation of an ordinary place of business in the seat country is recommended. The stock corporation then applies for the license on behalf of the asset management company and/or bank (deposit bank).The New Zealand Financial Services Company can be an excellent alternative. A New Zealand Bank (correct term: New Zealand Financial Services Company with a license for bank services) can offer bank services globally to private individuals and companies via the Internet without restrictions on the number of customers, the amount of deposits, or the number of currencies. However, the New Zealand Financial Services Company with a license for bank services is not subject to the supervision and oversight of the country’s Central Bank. This fact has consequences with regard to the presentation of the services in other countries, consequently loans cannot be attained at the Central Bank and a correspondent bank is always required, i.e. the bank does not have its own SWIFT code etc….

The fee schedule for forming a bank and/or asset management company is based on the seat country and the services provided.

Legal Basics – Terminology: Bank

International banking law is an extremely complex legal practice area. In simplified terms it can be described as follows: Financial service companies in terms of a deposit bank, which is subject to the supervision and oversight of the respective Central Bank and/or other state regulatory authorities and have the corresponding license, to offer the corresponding financial services to third parties, are referred to as a “bank” as defined by (term). They may offer bank services as defined by (term) to domestic natural and legal entities and, as a rule, also to “individuals” outside of the seat country of the bank (restrictions/limitations can however exist within the national law of the “other countries”). The respective license requirements are stipulated by the financial services laws/bank laws of the respective countries. In most countries adequate funds i.e. equity is required (for example Switzerland requires 5 million Swiss Franks, the US requires 5 million US dollars and 10 million US dollars collateral deposited with the FED, Germany requires approximately 5 million Euro, Cayman Island requires approximately 350,000 Euro, Belize requires 1.3 million US dollars etc…). In addition, most bank laws regulate the requirements placed on bank management – the so-called “professional qualifications” (professional education/studies in the field of banking, management experience in banking, perfect police certificate for good conduct, credit report, etc…), the existence of a qualified place of business, General Terms and Conditions, and auditing and accounting provisions.

In addition, some countries offer the possibility of forming a financial services company with a license for bank services, without being subject to the supervision and oversight of the respective Central Bank (for example the New Zealand Financial Services Company with a license for bank services). These institutes, as a rule, may only offer bank services outside of the seat country and are therefore often referred to as “offshore banks”.

Contrary to this some countries know the term E-Bank and/or Investment Bank. “paypal” for example is an E-Money-Institute. The required equity capital of such financial services institutes are, as a rule, lower than that of a full-service bank (an investment bank in Germany requires approximately 730,000 Euro, e-Bank requires 1 million Euro).

What differentiates a bank formation domestically as opposed to internationally?

A “Full Service Bank” is, as a rule, understood to be a bank, which is formed and licensed according to the financial services laws of the respective country, bank services as defined by (term) permit the offering of services to residents, and as a rule, are subject to the supervision and oversight of a government organ and/or the country’s Central Bank. If – and under which conditions – such a bank is then permitted to offer its services in other countries, is regulated by the bank laws of the “provider countries”.

Offshore Bank License Vanuatu

Typical objectives for obtaining an offshore banking license are as following:

To optimize payments.
To improve tax planning opportunities.
To avoid excessive regulations of banking activities from National or Central Banks of different countries.
To provide safety of funds and enhance the performance of the investment through your own Offshore Bank License.
Safety of funds and the performance of the investment through your own bank.
To provide asset protection through the use of offshore bank accounts.

By owning your own Offshore Bank License you can legally engage in activities not available to many onshore banks, such as:

Take deposits and make loans worldwide (including back-to-back loans).
Offer payment services.
Issue payment tools such as credit/debit/cash cards.
Service the growing global business based offshore using the internet.
Issue bank guarantees.
Issue letters of credit.
Offer global internet banking.
Issue your own bank instruments (e.g. bonds & securities).
Issue bank references.
Place funding offshore through your own bank.
Structure an offshore loan system from your offshore bank.
Own your onshore business assets by your offshore bank (asset protection).

The tax planning and asset protection measures using your Offshore Bank License may be far superior to those available onshore. In addition, you can service your onshore clients via your Offshore Bank License thus easing the regulatory stronghold in which you may currently experience. Your own offshore bank presents you with opportunities for profit and tax savings not otherwise available to you.Confidentiality in relation to the incorporation and the conduct of business of an International Banking licensee has been preserved by the Confidential Relationships Preservation (International Finance) Act, 1996 and by the International Banks Act 1996.

No exchange control restrictions applicable to offshore transactions.
No stamp duties of any kind on any transactions.
No corporation tax, no income tax, no withholding tax, no capital gains tax.
No estate, inheritance, succession duties.
Political independence and stability.
Skilled work force.
Duty free importation of equipment and fixtures for use in offshore banking business.
Excellent International Banking Laws.
Excellent telecommunications.
Trained Lawyers, Bankers, Accountants.
Low crime rate.
Conducive natural environment.

CLASSES OF LICENSE:

The following are the licenses which are issued under the International Banks Act 1996:

A Class I Offshore Banking License entitles the Licensee to engage in offshore banking generally outside the country.
A Class II Offshore Banking License entitles the Licensee to engage in offshore banking with persons named, or groups specifically described in a written undertaking.

REQUIREMENTS:

Local domestic company or an International Business Company (IBC) must be incorporated under the laws of the State of Saint Vincent and the Grenadines.The prescribed minimum capital requirement for a class 1 license is US$500,000.00 and for a class 2 license is US $100,000.00.There must be at least two directors, one of whom must be a resident. The directors are required to be natural persons.A principal office and place of business in the State. A registered agent who must be resident within the state and who must not be the resident director.

A class 1 license applicant must deposit US $100,000.00 cash or purchase Government or securities of equal value.

A class 2 license applicant must deposit US $50,000.00 cash or purchase government bonds or securities of equal value. Application fees are US $1,000.00 for Class 1 license and US $750.00 for Class 2 license.

Narrative description of principal’s experience in banking business and character references together with other such particulars as may be prescribed.

Indemnity insurance coverage may be required based upon the nature and type of the business to be carried on by the licensee.

Our Law Firm incorporates banks, financial services institutes in the EEC (Germany, Switzerland and Liechtenstein), USA and Offshore (Cayman Islands, Belize and St. Vincent). Further we set up New Zealand financial services institutes with licence to operate bank business (OFC).