Formation of a Bank, Bank License, Asset management company, Offshore Bank License, Bank License Cayman Islands, Offshore Bank Belize, Offshore Bank License St. Vincent, Bank License Germany, Bank Liechtenstein, Bank License Germany

Bank License – Formation of a Bank

Bank license: Service of our law firm

Resumen breve sobre el tema fundación de un banco

Our Law-firm incorporates banks, financial services institutes in the EEA (e.g. U.K., Germany, Switzerland and Liechtenstein), U.S.A. and Offshore (Cayman Islands, Belize and St. Vincent).

Further we set up New Zealand financial services institutes with licence to operate bank business (OFC/FSP) and Swedish Credit Union.

For a S.W.I.F.T connection you always need an A-licence-bank.

On your request we can offer a broad list of services needed to set up a bank with S.W.I.F.T:

  •  Incorporation of the company of the bank
  • Apply for admission to hold an  appropriate licence
  • Setup of a place of business at the jurisdiction of your bank
  • Recruiting of fit & proper personnel for the management of the bank according to international banking law
  • Connecting to a rating agency (Rating, Basel II & III), e.g. Moodys, S&P
  • Connection to Society for Worldwide Interbank Financial Telecommunication (S.W.I.F.T., appointments at S.W.I.F.T.), Swift-Code and IBAN
  • Connection to deposit guarantee fund
  • Banking Law (general terms and conditions of the bank, credit agreements, due diligence, compliance, etc.)
  • Representative offices or branches in other countries
  • Tax planning and routing of dividends e.g. by setting up a holding

Banks within the European Economic Area (EEA) have to proof an minimum initial capital of EUR 5 million in some countries this might be even more (e.g. Liechtenstein, Spain, Luxemburg). Less minimum initial capital is needed for e-money institutes or banks in countries abroad EU/EEA like Cayman Islands. One option could be to setup a bank in a foreign country with a representative office or a branch in other countries including EU/EEA.

Although there are differences in the banking acts for example by the initial capital, but there are general rules in almost every country:

  • As a rule two fit and proper directors are needed of whom one has to be resident in the country where the bank has its permanent place of establishment. A “fit & proper” director is defined in most banking acts as a person who has
  • honesty, integrity and reputation;
  • competence and capability; and

financial soundness.

  • A place of management in a business-like manner is needed, i.e. offices have to be rented etc.
  • The form of the company hast to be a corporate entity, often a Public Limited on Shares / Corporation.
  • The initial capital has to be paid up.
  • No banking business may be transacted, except by a person who is in possession of a valid licence granted by the Authority authorising him to carry on such business.
  • Auditing by independent certified accountants
  • Evaluation by an independent rating agency (e.g. Moody’s, Fiths, S&P, Euler-Hermes,…).
  • Membership in a deposit guarantee funds.

In the range of banking regulation the laws of the country apply where the bank has its place of establishment as well as the laws of the countries to whom the services are offered. However, banks within the EU/EEA may offer their services throughout the whole EU/EEA without separate licensing in each country of this region.

Furthermore the following facts of case have to be considered as a rule: Banks under the control and government of public administration and/or the regarding central bank may offer their services in other countries without anew licensing. If necessary, this might be only a duty of disclosure is needed or a simplified approval process. Legal fees for the application of a bank licence depend on the efforts and services needed.

In general these fees are around GBP 25,000.00 to 49,000.00. In addition fees for government bodies, financial & monetary authorities and central banks will apply. Also third party costs have to be in line of a budget: S.W.I.F.T, internet-banking systems, deposit guarantees fund, rating agency, notary public, etc. pp.

Formation of a Bank , 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 and III-Accord and as such must commission an auditing firm. 

E-Money Institutes:

Contrary to this, some countries (for example Germany and the U.K) know the terms E-Bank (EMI). “ClickandBuy” for example is an E-Money-Institute. E-money is electronically (including magnetically) stored monetary value, which is:

  • represented by a claim on the issuer;
  • issued on receipt of funds for the purpose of making payment transactions;
  • is accepted by a person other than the electronic money issuer; and Types of e-money include pre-paid cards and electronic pre-paid accounts for use online.

The minimum initial capital for an EMI starts at EUR 350,00 e.g. in the U.K., Malta, Germany and Ireland, which are preferred locations within the EU.

Investment Bank:

An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client’s agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions, and provide ancillary services such as market making, trading of derivatives, fixed income instruments, foreign exchange, commodities, and equity securities. Unlike commercial banks and retail banks, investment banks do not take deposits. The equity capital required for investment banks are, as a rule, lower than that of a full-service bank (equity capital for an investment bank in the EU/EEA is approximately EUR 730,000.00).

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.