Offshore Bank License 2015
12 February, 2015
Offshore bank licenses are back in 2015. Pressure from the United States and uncertainty over FATCA meant very few licenses were issued from 2012 to 2014. And, those that were granted licenses found it nearly impossible to open correspondent accounts.
Not that FATCA is the law of the land, offshore bank licenses are being issued again. A new bank license will be tough to get, but the risks are well defined and the path forward clear.
Offshore Bankers Hate Uncertainty
There's nothing a central banker hates more than uncertainty. No one knew what to expect when FATCA hit the Caribbean like a Hurricane. We did not know how it would be administered nor could we quantify the costs of compliance. Most importantly, we did not understand the risks associated with accepting US clients... nor the risks we already had on our books from existing accounts.
Back in 2012, I posted an article called Offshore Banking Licenses go the way of the Dodo. Basically, I said offshore bank licenses were extinct, never to be seen again. Fortunately, I was wrong and the offshore banking industry is making a comeback all be it under the watchful eye of the US IRS.
Of course, the industry has been forced to fall in line, report US clients and transactions, and generally become responsible global citizens. So long as you're willing to play ball, you may now open an offshore bank.
The US waged all out war on the offshore banks, and it crushed many under its boot along with a good number of its own citizens. While the collateral damage was significant, billions in new tax dollars flowed in and the industry was reshaped in Uncle's image.
Now that the battle is over, new licenses will become available. And more importantly, correspondent relationships for those newly minted banks will be opened.
Best Offshore Bank License Options in 2015
Here are the best offshore banking jurisdictions (alphabetically):
- St. Kitts & Nevis
- St. Vincent & the Grenadines
- Vanuatu (Republic of)
Each of these countries specializes in a different type of international banking license and each has its own requirements some of which can be found in the statutes and some you only learn of with experience.
For example, Cayman Islands may be the best jurisdiction for an investment or wealth management bank, at least if cost is no option, because of its world image. Also, experience tells me Belize might be the best for a FATCA compliant general deposit taking bank. And then I know that Vanuatu is the most common captive jurisdiction and that licenses in Dominica have the lowest capital required, but acquisition costs are higher than other jurisdictions.
Then there are the varying regulatory regimes to consider. While most of the options above are regulated by their respective central banks, some are controlled by a regional authority. For example, St. Kitts and Dominica are both members of the Eastern Caribbean region, operate under the EC dollar, and report to the EC central bank.
And then there may be different license types and different requirements for each. For example, some allow three classes of bank: captive, international, and general. Others have only one class of license.
Ready to apply? You may only qualify for a general license with a higher capital requirement. That's because certain countries allow anyone with enough cash to apply for a general license and limit international licenses to subsidiary banks. In other words, some countries will only grant an international banking license to applicant that already has a general license from another country.
Finally, there are reserve requirements to consider. A bank focused on international lending might prefer a jurisdiction with lower reserve ratios than a bank focused on deposit taking.
So, which is the best offshore banking license for you? I have no idea, but I can figure it out for you. To determine best, I need to review your objectives and compare them to those of the issuing country. If we find a match, then we can apply for a license.
Step 1 is to consider capital requirements...
Offshore Bank License Capital Requirements in 2015
A small offshore bank will require capital of $ 1 million to $7 million. Some countries expect this to be deposited with the central banks while others allow it to be in your correspondent account and apply a counterparty risk discount.
Capital requirements are one of the areas where you need to have a good understanding of the various jurisdictions before applying for a license. This is because the amount of capital required may be significantly higher than the amount listed in the statute.
For example, one of my favorite offshore bank licensing jurisdictions says it will accept applicants with $3 million in capital. Based on my experience, I can tell you that the actual amount required in 2015 will be at least $5 million.
Obtaining an offshore bank license in 2015 is possible, but requires a solid understanding of the industry and the issuing countries. If you would like to purchase an existing bank or license, or you would like to form a new offshore bank, please contact me at (619) 564-4062 or send an email to Christian Reeves at firstname.lastname@example.org.
For more information on my company, check out www.premieroffshore.com
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