Madeira: Offshore Business Sectors
Until 2001, international and Portuguese banks could establish offshore subsidiaries or branches anywhere in Madeira in the 'Offshore Financial Centre' to take advantage of the Free Trade Zone Legislation. Permitted activities included foreign exchange, the management of investment funds and the issuance of negotiable securities as well as a normal range of banking services.
Unless an offshore bank held an international banking license it could not supply financial services to Portuguese residents. The law on the licensing, regulation and supervision of offshore banks and financial institutions was set out in Decree Law No 10/94.
Offshore banks were supervised by the Madeira Development Company. Additionally the Bank of Portugal oversaw and regulated banking matters; the regulations were the same as those that apply to the establishment of financial institutions in mainland Portugal and involve prior authorization from the Bank of Portugal or the Ministry of Finance. Capital requirements were high at 3.5 billion escudos prior to the issue of a banking license.
It took between 5-7 months for the license application to be processed. The banks of European member states were subject to less stringent authorization requirements than non European Union financial institutions, under the EU 'passport' rules.
A bank must paid an annual license fee of USD25,000. Prior to 2002, around 40 banks and other financial institutions were licensed to operate under the Free Trade Zone Legislation. They included such household names as Chemical Bank, Citibank, Deutsche Bank and ABN-Amro.
Under the 'acceptable state aid' scheme approved by the EU in late 2002 and extended in 2006, newly-established financial services companies were longer able to take advantage of the MIBC regime.