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Brunei: Law of Offshore

Banking Law

This page was last updated on 3 June 2019.

The International Banking Order 2000 (IBO) governs the provision of international banking services to non-residents. While encompassing the traditional definition of banking by reference to taking of deposits, the IBO recognises that this is not the daily concern of a sophisticated international bank.

Four classes of licence are provided for:

  • a full international licence for the purpose of carrying on international banking business generally;
  • an international investment banking licence for the purpose of carrying on international investment banking business;
  • an international Islamic banking licence for the purpose of carrying on international Islamic banking business, granted in respect of full, investment or restricted activities.
  • a restricted international banking licence for the purpose of carrying on international banking business subject to the restriction that the licensee may not offer, conduct or provide such business except to or for persons named or described in an undertaking embodied in the application for the licence.

‘International banking business’ includes taking deposits from the (non-resident) public, granting credits, issuing credit cards and money collections and transmissions. But the definition is expanded to embrace foreign exchange transactions, the issue of guarantees, trade finance, development finance and sectoral credits, consumer credit, investment banking, Islamic banking business, broking and risk management services whether conducted by conventional practices or using Internet or other electronic technology and includes electronic banking.

‘International investment banking business’ includes:

  • providing consultancy and advisory services relating to corporate and investment matters, industrial strategy and related questions, and advice and services relating to mergers and restructuring and acquisitions, or making and managing investments on behalf of any person;
  • providing credit facilities including guarantees and commitments;
  • participation in stock, or share issues and the provision of services relating thereto: or
  • the arrangement and underwriting of debt and equity issues.

‘International Islamic banking business’ is banking business whose aims and operations do not involve any element which the Islamic religion expressly forbids. Provision for Sharia (Islamic law) to override a conflicting provision in the IBO is made, subject to good banking practice, and there is a requirement for the appointment of a Sharia council. The restriction to local ownership which applies under the domestic Islamic Banking Act does not apply to the international regime.

Under section 4 of the Order, an institution wishing to carry on international conventional or Islamic banking business may apply for a licence. ‘Institution’ is defined in section 2 as a company incorporated or registered under the Companies Act, (Chapter 39), an international business company or a foreign international company (i.e. incorporated or registered respectively under the International Business Companies Order, 2000. The alternatives ‘incorporated’ and ‘registered’ in relation to the Companies Act are used to clarify that the company is either initially incorporated, or is a company incorporated outside Brunei, which establishes a place of business in Brunei and is registered with the (domestic) registrar of companies under section 299 of Part IX of the Companies Act. In the last-mentioned case, the Bank will need strictly to segregate its international business and the conduct and accounting thereof from the domestic operation. This is both a regulatory and a tax issue, the latter because section 25 of the Order exempts international banking conducted under the Order exempts international banking business conducted under the Order from taxation and revenue fillings with the tax authorities.

The IBO imposes strict standards of confidentiality on both the authority and the banks and their officers. In line with what are becoming expected international standards, mutual assistance between designated supervisory authorities exercising similar powers to the authority in other jurisdictions is permitted. This is, subject to continuing confidentiality and guarantees of reciprocal assistance.
In respect of banking supervisory actions, the authority will require:

  • to receive audited annual accounts;
  • to conduct on-site inspection;
  • to be given notice of significant changes in ownership and key personnel (which respectively attract consent procedures for Brunei headquartered banks); and
  • to investigate and take action in appropriate cases of criminal or unlawful acts and when the circumstances of the bank justify intervention;

and is empowered to apply to the High Court for such assistance as may be necessary in appropriate cases to avert criminal or solvency/liquidity matters which are beyond the mutually-exercised corrective measures available to the bank and the authority acting in concert.

Those who conduct activities included in the services also offered by banks will be exempted from the IBO provisions. But companies which conduct banking activities without any regulatory controls, consents or licences will not be permitted to do so in Brunei, except by means of full disclosure and Ministerial exemption in exceptional cases, on specified terms.

Brunei expects and looks to attract the presence of good quality institutions whose credentials are based on quality and activity rather than size alone.



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