This page was last updated in September 2013
Isle of Man: Bank Deposits
Back to Isle of Man Information: Business, Taxation and Offshore
In this section:
- Isle of Man Offshore Investment
- Isle of Man Investment Funds
- Isle of Man Pension Investments
Isle of Man Bank Deposits
There are currently 33 banks established
on the Isle of Man, and although this figure has fallen
slightly in recent years, the calibre and scale of banking
operations has been showing marked improvement. The Royal
Bank of Scotland International, the Royal Bank of Canada,
Coutts (Northern European HQ) and Merrill Lynch have all
moved to the Isle in the last few years and NatWest has
ring-fenced its offshore business by moving to the Island.
Recently several banks have begun to offer e-banking services
from the island.
Deposits (net of local inter-bank placings)
with Isle of Man deposit taking licenceholders (banks), including
those held with overseas branches of Isle of Man incorporated
banks totalled GBP55.18bn as at 30 June 2013, consisting of
GBP33.91bn sterling deposits and GBP21.27bn non-sterling deposits.
Of the 18 locally incorporated banks four had
actual risk asset ratios between 10% and 15%, nine had risk
asset ratios between 15% and 20% and five had risk asset ratios
of over 20%. (The capital adequacy of Isle of Man incorporated
banks is measured on a risk-weighted basis in accordance with
the Basel Capital Accord.)
The Island's banking industry is dominated by subsidiaries
or branches of the main UK clearing banks and some foreign
banks. The majority of banks in the Isle of Man are engaged
in providing private banking services to UK expatriates
and to foreign nationals. The services offered often extend
beyond deposit taking to establishing and administering
trusts and managing the underlying companies and assets
held by those trusts, including investment management.
Banks are regulated by the Financial Services Commission
under the Financial Services Act 2008. This new legislation,
which came into force on August 1, 2008, consolidated
several pieces of financial services legislation, including
the Financial Supervision Act 1988 and the Banking Act
1998, into one Act and simplified the licensing regime.
The underlying regulations remain largely unchanged however,
although the term 'banking' has been reclassified as 'deposit
A Managed Bank employs the services of another licensed
bank in the Isle of Man, the "Approved Manager",
to provide the day to day management and administrative
functions to it. The Managed Bank may not employ any staff
in the Island without the consent of the Commission and
it must operate from the premises of the "Approved
Manager". Unless otherwise agreed with the Commission,
all banks that were approved under the old legislation
to manage another bank or building society are expected
to hold licences to conduct Class 7 Management or Administration
Prior to the tax and regulatory reforms, for taxation
purposes a "managed bank", in accordance with
the Banking Act 1975, signified that the bank had no local
premises or staff but is operated on the island by an
approved local bank. From July 12, 1989 the Treasury exempted,
for a specified period, all or part of the profits or
income of a "managed bank" from income tax.
Where such exemption existed, the Assessor did not require
deduction of income tax from payments to non-residents
and did not pursue income tax liability of non-residents
on such payments.
The Banking Act (as amended) recognises the contractual
duty of a banker to keep the affairs of his customer confidential
and the customers' entitlement to confidentiality. There
are very few limited exceptions to these principles, set
out in the Financial Supervision Act 1988 (since superceded
by the Financial Services Act 2008), and these include
circumstances where disclosure is required to assist criminal
proceedings or to enable the FSC to discharge its statutory
All banking licence holders are required to participate
in the Depositors Compensation Scheme. The FSC is the
Scheme Manager. The Banking Business (Compensation of
Depositors) Regulations 1991 extends to all licensed banking
institutions, except those listed by name in the Schedule.
Under the Compensation of Depositors Regulations 2008
as amended by Tynwald on October 23, 2008, and further
amended in October, 2010, the DCS compensates people who
have money in current and deposit accounts in the Isle
of Man with up to GBP50,000 of net deposits per individual
depositor or GBP20,000 for most other categories of depositor.
Cover is calculated per depositor, per deposit taker,
if this bank fails.
The Scheme was successfully operated in respect of the
default of BCCI which had a branch in the Isle of Man.
To date a total of GBP54.1 million has been received from
the liquidators. Of this, GBP24.4 million has been paid
to claimants. The remaining GBP29.68 million formed part
of the general pool of funds held by the FSC and enabled
repayments of GBP23.47 million to banks equivalent
to 100 per cent of the total levies imposed on them to
Isle of Man banks evidently offer many opportunities
to non-resident investors. However, some care is needed
when approaching a 'private banker' or a bank offering
customised relationship management (there are lots of
expressions all amounting to the same thing). What matters
is the structure of the bank. This is not to say that
one kind of bank is necessarily more reliable than another,
just to understand why the bank is offering personal attention,
and what it hopes to gain from it.
Some banks are little more than front ends for investment
funds. They may be safe enough, but are they objective?
Perhaps it is best to look for a bank that is trying to
make money out of private banking as an activity in itself,
rather than just using it as a scoop for customers for
its financial products. If you just want a bank that will
give you a good rate of interest without deduction of
withholding tax, then the choice is simpler.
However, it is necessary to remember that since July
1, 2005, the Isle of Man, in common with other European
offshore dependencies, has been applying the EU Savings
Tax Directive, meaning that interest paid to citizens
of EU Member States was subject to a 20% withholding tax.
But from July 1, 2011, the rate rose to 35% and the Isle
of Man switched to the automatic exchange of information
with regards to interest gained on the accounts held by
depositors resident in countries within the European Union
in accordance with the European Savings Tax Directive.
Private banking doesn't just mean investment: banks like
to lend money, and especially to richer people. This raises
the question of how a private banker is going to get rewarded.
Depositing money with a bank is reward enough, of course,
whether into the bank or into one of its financial products,
but private banking when it has an advisory nature and
is not accompanied by lending or borrowing may be fee-based.
Provided the sum involved is large enough to justify the
fee costs, an advisory private banking relationship is
probably a good way to go. The bank will get the benefit
from time to time of being able to offer bridging finance,
or of holding large amounts in transit etc. It can hope
for more substantial involvement with you in future. But
the immediate relationship is between financial adviser
For a fuller treatment of offshore banking, see www.investorsoffshore.com.
For a listing of Isle of Man banks, see the Isle
of Man Services Directory.
Back to Top
Isle of Man: Business, Taxation and Offshore