Turks and Caicos: Law of Offshore
The industry is governed by the Banking Ordinance 1979 and the Banking (Amendment) Ordinance 1989. Supervision is exercised by the Superintendent of the Financial Services Commission.
Two types of banking licence can be granted:
- National Banking Licence: This licence is granted for banking activities to be carried out locally with islanders and other residents and will only be granted to the branches or subsidiaries of banks which have an established track record and which are subject to effective consolidated supervision by their home supervisory authority. Exceptionally a national banking licence may also be granted where the bank is predominantly locally owned.
- Overseas Banking Licence: This licence is granted for banking activities which are to be carried on outside the Turks and Caicos Islands. The holder of such a licence cannot accept deposits from or lend to residents of the Islands. An application for such a licence will only be considered from:
- The branches or subsidiaries of banks with an established track record and which are subject to effective consolidated supervision by the overseas banks home supervisory authority
- Banks which although not subsidiaries are closely associated with an overseas bank and which by agreement will be included within the consolidated supervision exercised over the overseas bank by the overseas banks home supervisory authority
- Wholly owned subsidiaries of major corporations where the objective of the subsidiary is to undertake in house treasury operations which are fully consolidated within the published financial statements of the parent company.
Applicants for banking licenses must provide references and evidence of 'a sound knowledge of banking'. A company must have a minimum of two directors. A business plan must be submitted providing at least the following information:
- the proposed commercial activities and business objectives, including the type and source of business contemplated;
- the initial assets, and anticipated assets and liabilities over a 2-year period;
- qualifications and experience of proposed management and senior personnel;
- anticipated customer base;
- prudential policies and control systems;
- reasons for choosing the Islands as an operating base.
Set capital requirements have been abandoned and there are no prescribed reserve levels, but financial capacity must be maintained according to the following criteria:
- generally, a 10% capital ratio should be the target;
- dividends, loss provisions and reserves should be sourced from retained earnings;
- attention will be paid to the design and control of credit policy, to the nature and volume of business, and to the composition of liabilities.
- reserves should normally represent 5% of liabilities and liquidity should equate to 25% of deposits;
- no borrower should represent exposure of more than 25% of capital, and any loans exceeding 10% of capital should be reported to the Supervisor.
Towards the end of 2012, the Financial Serices Commission held discussions with the banking industry with a view to revising the Banking Act. The Commission also drafter Corporate Governance Guidelines, which, at the time of writing, is still under review.