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Banking Licenses in Luxembourg

Posted by: Christian Reeves
Category: Luxembourg, Offshore Bank License

Europe has quickly become one of the safest places in the world for offshore banking. Its secure financial laws and varied landscape of distinct jurisdictions make it a prime location for foreign investors looking to obtain a banking license outside of the United States and the Carribean.

Many jurisdictions in Europe offer incentives to anyone looking to set-up a bank or start their own financial entity, so it would be wise to do a heavy amount of research before selecting the country that you wish to obtain a banking license from. Today, I am going to talk about a country that is not widely known in the banking industry but it definitely should.

In Luxembourg, the government entity in charge of reviewing and approving banking license applications is called the Ministry of Finance. To be approved, you will have to follow a strict license application procedure. If you do not have all of your affairs in order regarding finances I recommend you don’t waste your time. This country only accepts the best of the best applicants.

The first thing you have to do is have a detailed business plan for your bank. The business plan will be heavily scrutinized. We can draft the business plan for you, but you will have to provide a great deal of information to move forward.

● You can read the outline we use when we write a business plan for a client on this website. See Business Plan for an Offshore Bank License

Within the business plan, you must include the IT infrastructure that your bank will use. This is an important aspect as proving that you are technically secure is very important when it comes to getting your license approved.

Before you present your business plan as part of the application you must have a concrete and concise idea of who your shareholders, directors, and business partners will be. This must all be written down on paper and notarized.

A background check will be done on everyone associated with the application to make sure that the shareholders are all in good standing. This includes an overview of their finances, a clean criminal record, and a clean past involving financial trades and business practice.

For the very same reason, Luxembourg has strict Anti Money Laundering Laws that every financial institution must comply with. If you can’t prove where your finances come from or have clients with an unclean background your license will be denied and/or revoked.

Once you have everything in order and your application has been received by the corresponding authorities, you can expect your banking license in Luxembourg to be given to you in about 18 months.

There are many things that you can do in Luxembourg with a banking license, such as commercial and financial cross border business with other countries in the European Union, private and corporate banking, fund administration, custody, wealth management, and treasury services.

Other services that you will be able to offer to clients once your banking license has been approved include:

– Risk management
– Supervision of fund transactions
– Shareholder services
– Portfolio clearance
– Order Processing
– Fund distribution

Luxembourg is currently in a unique status in that it is centrally located within the European Union so you can “passport” your services into other European countries as they are part of what is called the “free service regulations”.

In recent years, there has been an influx of Chinese banks opening a branch inside the country. These banks have been welcomed with open arms as they have had a huge impact on the economy of the country and will continue to do so.

Just like all the other jurisdictions around the world, to obtain a bank license from Luxembourg, you must fulfill certain capital requirements. You must first make sure that your finances can sustain the bank for the first 30 days.

Second, the minimum share capital to open a bank or a financial entity in Luxembourg is 8.7 million Euros of which 6.2 million must be paid upon the incorporation of the company. This is non-negotiable.

Another benefit that comes with setting up a bank or a financial entity in Luxembourg is that you will not have to worry about your corresponding bank partner leaving you or put you many restrictions.

The number one hassle that most offshore banks have to deal with on a daily basis is finding and/or maintaining their corresponding bank partner. The Caribbean has been dealing with the departure of many corresponding banking partners because of safety concerns.

In Luxembourg, you won’t have to worry about that. Luxembourg’s safety practices involving banking makes it a safe bet for most corresponding banking partners. Luxembourg attracts them instead of repelling them.

I hope you’ve found this article on an offshore banking license in Luxembourg to be helpful. For more information, or for assistance in starting a bank in Luxembourg, contact us at info@banklicense.pro or call us at (619) 323-1151.