Formation of a Bank - Bank License: Basic Considerations regarding the Formation of a Bank
(Deposit Bank)
Basic Considerations regarding the Formation of a Bank
(Deposit Bank)
International banking law is an extremely complex legal practice area.
"Forming a bank on the fly" is a contradiction in itself. Please
consider that many dubious providers offer their services via the
Internet, these providers are neither tax accountants specialized in
international tax law or attorneys specialized in bank law, nor do they
have sufficient knowledge and expertise in the area of national and/or
international law. So-called "bank formations" by such providers are
seldom worth the paper on which the supposed license is documented. We
provide services to clients who have already lost more than 100,000 Euro
to such providers, in which cases a bank formation was not realized.
When forming a bank - or a financial services company with the approval
for providing bank services domestically and internationally - there are
numerous laws that must be complied with in the seat country in which
the bank is to be formed, as well as compliance with the domestic laws
of the "provider country".
Key issues include among others:
-What objectives are being pursued with the formation of a bank?
- Which services is the bank to offer?
-In which countries are the bank services to be offered and in "which
form"?
-Where is your "permanent residence" (location of unrestricted tax
liability); Where do the shareholders reside in terms of tax liability?
A Brief Overview of the Terminology
Asset Management Company:
Asset management companies may receive funds from third parties, invest
such funds, and distribute profits from such investments as defined by
(term). An asset management
company is, however, not a bank as defined by the respective provisions
(may not offer any bank typical services), and consequently an asset
management company is not a deposit bank. Examples of asset management
companies: Asset Management
Company Liechtenstein, Asset Management Company Panama or Belize.
Bank:
Banks are defined as deposit banks, which may offer bank typical
services (invest and distribute third-party funds, provide loans, lawful
currency, etc...). Banks as defined by (term) are, as a rule, subject to
the supervision and oversight of the relevant agency and/or the
country's Central Bank. As a rule, the banks must comply with the Basel
II Accord and as such must commission an auditing firm.
E-Money Institutes and Investment Bank:
Contrary to this, some countries (for example Germany) know the terms
E-Bank and/or Investment Bank. "paypal" for example is an
E-Money-Institute. The equity capital required for such financial
services companies are, as a rule, lower than that of a full-service
bank (equity capital for an investment bank in Germany is approximately
730,000 Euro, for an e-Bank is 1 million Euro).
Financial Services Companies with Bank
Services License
These financial services companies may offer bank typical services.
Typically such financial services
companies may only offer their services to customers outside of the seat
country, consequently the term "offshore financial services company with
a license for bank services" is utilized.
The New Zealand Financial Services Company is an example of
this. These institutes are, as a rule, subject to the supervision and/or
oversight of the relevant oversight agency or the country's Central
Bank.
Offshore Bank:
The term offshore bank is not defined and for this reason is utilized to
describe a number of institutes. It can be defined as: deposit banks as
defined by (term), which can only be active outside of the seat country,
in other words "offshore". Such an institute can be subject to the
oversight and supervision of the relevant agency and/or Central Bank or
not. Deposit banks are often defined as an offshore-bank, which is
subject to the supervision and oversight of the respective agency and/or
the country’s Central Bank and may offer bank services in the seat
country, however the offshore-bank’s seat country is located in typical
tax-havens.
General Information on Banking License,
Provision of Financial Services, Asset Management Companies
The license prerequisites are very different in individual countries, in
particular the required equity capital of the bank and/or the asset
management company. The basis – more specially, the formation of a stock
corporation according to the law of the seat country, supplemented by
the installation of an ordinary place of business in the seat country is
recommended. The stock
corporation then applies for the license on behalf of the asset
management company and/or bank (deposit bank).The New Zealand Financial
Services Company can be an
excellent
alternative. A New Zealand Bank (correct term:
New Zealand Financial Services Company with a license for bank services)
can offer bank services globally to private individuals and companies
via the Internet without restrictions on the number of customers, the
amount of deposits, or the number of currencies. However, the New
Zealand Financial Services Company with a license for bank services is
not subject to the supervision and oversight of the country’s Central
Bank. This fact has consequences with regard to the presentation of the
services in other countries, consequently loans cannot be attained at
the Central Bank and a correspondent bank is always required, i.e. the
bank does not have its own SWIFT code etc….
The fee schedule for forming a bank and/or asset management company is
based on the seat country and the services provided.
Legal Basics – Terminology: Bank
International banking law is an extremely complex legal practice area. In
simplified terms it can be described as follows: Financial service
companies in terms of a deposit bank, which is subject to the
supervision and oversight of the respective Central Bank and/or other
state regulatory authorities and have the corresponding license, to
offer the corresponding financial services to third parties, are
referred to as a “bank” as defined by (term). They may offer bank
services as defined by (term) to domestic natural and legal entities
and, as a rule, also to "individuals" outside of the seat country of the
bank (restrictions/limitations can however exist within the national law
of the "other countries”).
The respective license requirements are stipulated by the financial
services laws/bank laws of the respective countries.
In most countries adequate funds
i.e. equity is required (for example Switzerland requires 5 million
Swiss Franks, the US requires 5 million US dollars and 10 million US
dollars collateral deposited with the FED, Germany requires
approximately 5 million Euro, Cayman Island requires approximately
350,000 Euro, Belize requires 1.3 million US dollars etc...). In
addition, most bank laws regulate the requirements placed on bank
management – the so-called “professional qualifications” (professional
education/studies in the field of banking, management experience in
banking, perfect police certificate for good conduct, credit report,
etc…), the existence of a qualified place of business, General Terms and
Conditions, and auditing and accounting provisions.
In addition, some countries offer the possibility of forming a financial
services company with a license for bank services, without being subject
to the supervision and oversight of the respective Central Bank (for
example the New Zealand Financial Services Company with a license for
bank services). These institutes, as a rule, may only offer bank
services outside of the seat country and are therefore often referred to
as “offshore banks”.
Contrary to this some countries know the term E-Bank and/or Investment
Bank. "paypal" for example is an E-Money-Institute. The required equity
capital of such financial services institutes are, as a rule, lower than
that of a full-service bank (an investment bank in Germany requires
approximately 730,000 Euro, e-Bank requires 1 million Euro).
What differentiates a bank formation
domestically as opposed to internationally?
A “Full Service Bank” is, as a
rule, understood to be a bank, which is formed and licensed according to
the financial services laws of the respective country, bank services as
defined by (term) permit the offering of services to residents, and as a
rule, are subject to the supervision and oversight of a government organ
and/or the country’s Central Bank. If - and under which conditions –
such a bank is then permitted to offer its services in other countries,
is regulated by the bank laws of the “provider countries”.
An “Offshore Bank” is, as a
rule, understood to be a bank, which may only offer its bank services to
“non-residents” (offshore). This form of a financial services company
with a license for bank services (for example New Zealand Financial
Services Company with a license for bank services), is not subject to
the supervision and/or oversight of the country’s Central Bank. However,
some of these offshore banks (including New Zealand) are indeed subject
to the statutory provisions regarding the prevention of money laundering
among other acts:
-
Bills of Exchange Act 1908
-
Checks Act 1960
-
Companies Act 1993
-
Consumer Guarantees Act 1993
-
Credit Contracts and Consumer Finance Act 2003
-
Electronic Transactions Act
2002
-
Fair Trading Act 1986
-
Financial Transactions Reporting Act 1996
-
Investment Advisers (Disclosure) Act 1996
-
Personal Property Securities Act 1999
-
Proceeds of Crime Act 1991
-
Property Law Act 1952
-
Reserve Bank of New Zealand Act 1989
-
Securities Act 1978
-
Unclaimed Money Act 1969
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