For international banks licensed in Puerto Rico and other foreign jurisdictions, establishing a branch in Florida can provide an opportunity to tap into the growing financial markets of the state. However, there is a specific procedure and set of requirements for such banks to obtain a branch license. This article delves into the different branch license types available in Florida, the steps and requirements, and highlights some of the recent foreign bank branch establishments in the state.

Types of Branch Licenses in Florida

There are primarily two types of licenses for international banks looking to establish a presence in Florida:

• International Bank Agency (IBA): An IBA can conduct most of the activities a full-service bank branch can. However, it cannot accept deposits from U.S. residents unless the money will be sent outside of the country.
• International Branch: This allows a foreign bank to engage in the business of banking in Florida, including accepting deposits.

Note that an IFE in Puerto Rico is allowed to open a branch as an IBA with approval from OCIF, but may not open a full service deposit taking branch. International Bank Agencies (IBAs) in Florida are regulated by the state of Florida, specifically by the Florida Office of Financial Regulation (OFR)

An IBA is a type of foreign bank office that can conduct limited banking activities in the United States. IBAs cannot accept deposits, but they can provide other services such as:

• Making loans to U.S. businesses and individuals
• Providing letters of credit
• Trading foreign currencies
• Collecting and paying bills

IBAs are regulated by the State of Florida. However, there is oversight by the Federal Reserve and the Office of the Comptroller of the Currency (OCC). The OCC has set limits on the number of IBAs that a foreign bank can operate in the United States. As of March 2023, there are 105 IBAs operating in Florida.

The entry of IBAs into the Florida market has been welcomed by some businesses and individuals who see it as a way to access international financial markets and services. However, others have expressed concerns about the potential risks of IBAs, such as the possibility of money laundering and terrorist financing.

Overall, the impact of IBAs on the Florida market is still being debated. However, it is clear that they are playing an increasingly important role in the state’s economy.

Application Process and Requirements

The financial landscape of Florida beckons many international banks to establish their presence in the state. For banks hailing from Puerto Rico, a U.S. territory with its unique blend of local and federal financial regulations, the prospect of branching out into Florida offers a promising opportunity to tap into the larger U.S. market while capitalizing on cultural and linguistic ties. The pathway to this expansion is through obtaining an International Bank Agency (IBA) license, a critical regulatory step that enables banks to operate within the bounds of Florida’s stringent financial oversight.

However, the process of securing an IBA license in Florida is intricate, governed by a set of meticulous requirements and steps that banks need to navigate. The Florida Office of Financial Regulation (OFR) oversees this licensing process, ensuring that international banks, including those from Puerto Rico, meet the state’s high standards in terms of financial stability, integrity, and commitment to customer protection. Embarking on this journey requires thorough preparation, a clear understanding of regulatory expectations, and a strategic approach to align with the state’s financial ecosystem.

• Initial Inquiry: The bank should start by contacting the Florida Office of Financial Regulation (OFR) for initial discussions and consultations.
• Application Submission: The bank has to submit a comprehensive application, detailing its business plans, financials, and other pertinent information.
• Documents Required:
  • Proof of the bank’s authorization to conduct banking activities in its home jurisdiction.
  • A certified copy of the bank’s charter or articles of incorporation.
  • Financial statements for the past three years, audited by a recognized international accounting firm.
  • Business plan detailing the proposed activities in Florida.
  • Information on the bank’s directors, executive officers, and principal shareholders.
  • Anti-money laundering (AML) and combating the financing of terrorism (CFT) policies.
• Investigation & Vetting: After the application is submitted, OFR will conduct a thorough investigation of the bank’s operations, financial condition, management, and other key aspects.
• Issuance of License: Once the OFR is satisfied with the bank’s credentials and its alignment with Florida’s regulations, it will issue the respective license.

Timeline & Costs 

The timeline can vary based on the completeness of the application, the bank’s responsiveness, and any concerns raised during the investigation. However, generally, the process can take anywhere from 8 months to 18 months.

The costs of setting up an IBA in Florida will vary depending on a number of factors, including the size and location of the office, the services that will be offered, and the regulatory fees. However, some of the costs that should be expected include:

• Legal fees: Legal fees for setting up an IBA can range from $60,000 to $150,000. This will depend on the complexity of the application and many factors..
• Regulatory fees: Application fees $5,000 to $10,000 nonrefundable application fee. The bank may also need to pay other regulatory fees, such as those associated with anti-money laundering compliance.
• Office space: The cost of office space will vary depending on the location and size of the office. In Miami, for example, the average rent for office space is \$30 per square foot.
• Staffing: The IBA will need to hire staff to provide the services that it offers. The cost of staffing will depend on the number of employees and their qualifications. A typical burn rate for a foreign branch in Florida is $65,000 per month not including core system and related costs which are borne by the applying bank.
• Marketing: The IBA will need to market its services to potential customers. This could include advertising, attending industry events, and networking.

The total cost of setting up an IBA in Florida could be several hundred thousand dollars. However, the exact cost will vary depending on the specific circumstances. When advising an IFE in Puerto Rico, I generally recommend a budget of $250,000. 

Here are some additional factors that may affect the cost of setting up an IBA in Florida:

• The complexity of the services that the IBA will offer.
• The size of the IBA’s customer base.
• The IBA’s compliance with anti-money laundering regulations.
• The IBA’s location.

To apply for an IBA license in Florida, you must submit the following to the Florida Office of Financial Regulation:

• A completed application form
• A copy of the foreign bank’s charter or certificate of incorporation
• A copy of the foreign bank’s bylaws
• A copy of the foreign bank’s most recent financial statements
• A list of the foreign bank’s officers and directors – background reports and financial statements are required
• The foreign bank’s business plan as per the year of filing the application

Conclusion

Florida offers a dynamic and promising environment for international banks to expand their footprint. However, it’s essential for these banks to understand and navigate the regulatory landscape efficiently. It’s always recommended to engage with local experts and consultants who can provide up-to-date information and guidance on the process.

For more information, and a detailed quote, please contact us at info@banklicense.pro.