International Bank Licenses – An Introduction – Start here for banking licenses

We’re a boutique firm specializing in setting up new offshore banks and selling offshore bank licenses. We’ve been in the industry since 2003 and it’s all we do. We spend 100% of our time working with international banks and are uniquely qualified to assist you to build an offshore bank in the most efficient jurisdiction. 

A banking license is a permit or legal permission to operate as a bank. Bank licenses are issued by a country or territory and regulated by the local authority. Only those with a banking license are allowed to incorporate a company with the word “bank” in the name. Different countries offer different types of licenses. The most common bank license types are: 

• Class A banking licenses for general banking activities, such as taking deposits from the general public and lending to the local market.
• Class B international banking licenses (offshore banking licenses), which allow you to take deposits from anyone outside of your country of license.
• Class C captive banking licenses allow the bank to do business with only those persons or companies named in the permit. 

Class A bank licenses are for those that want to offer domestic business. Most domestic banks will not accept foreign persons and they only offer services in the country where they are licensed. 

For example, most Class A banks in the Cayman Islands will not open accounts for persons outside of Cayman. In order to open a bank account on the island, you must show that you have a residency permit, own real estate on the island, or have some other close ties to the country. 

An international banking license or offshore banking license allows you to accept deposits from outside of your country of operation. For example, an international bank licensed in Dominica can accept deposits from anywhere in the world except from Dominica. 

The process to negotiate a new international bank is typically broken down into three stages. 

1. Submit your business plan and background on all officers, shareholders, directors, and key persons and receive a Permit to Organize. 
2. Get approval from regulators to open a bank in the country or territory and then build out your business. This includes hiring employees, securing a correspondent bank, building out office space, setting up hardware and core software, and everything else required to open your doors, and 
3. Go through a systems, processes, and personnel audit to receive your Permit to Operate, which allows you to begin accepting deposits. 

Note that most quality jurisdictions have an employee requirement. Switzerland requires a minimum of 3 employees and Puerto Rico required 4 employees (most start with 5). These employees must be living in the country of license and the bank must operate from that jurisdiction in an office approved by regulators. 

Regulators take two approaches to offshore bank licenses. Some allow anyone to apply for a license and some will only issue an international banking license to a group that already has a Class A banking license from a major jurisdiction.

For example, if you want to open a Class B bank in the Cayman Islands or Panama, you first need a Class A licensed from the United States, United Kingdom, etc. These types of banks typically operate as trading desks and confer tax benefits on the parent bank. 

In contrast, entrepreneurs and businesses can apply for an international banking license in the US territory of Puerto Rico or from Domica. Applicants must show sufficient capital, a clean history, and significant banking experience, but they don’t need a Class A license from a top tier jurisdiction. 

What constitutes “sufficient capital” varies greatly from jurisdiction to jurisdiction. For example, the minimum capital for a bank license in Mexico is $100 million USD. A Class A license in Panama is about $30 million, and an international bank license from Switzerland is CHF 10 million. 

In the Carribean, the typical capital requirement is $1 million. Minimum capital in the US territory of Puerto Rico is $550,000.  But, don’t let the low capital requirements from the territory fool you. It’s never “cheap” to setup an international bank and regulators will make sure you have enough capital to support the bank during a downturn (stress tests performed annually). . 

In order to receive your Permit to Organize in Puerto Rico, you must demonstrate 1) $550,000 in capital, with $300,000 of that being paid in tier 1 capital and $250,000 being in a CD or bond, and 2) sufficient capital and resources to support your business model with Federal Reserve and Basel II or III capital requirements (see § 167.6 Risk-based capital credit risk-weight categories). 

Therefore, we usually look for clients with $2 to $5.5 million in capital. Also, you should have a plan to reach $2.5 million in paid-in tier 1 capital in 2 years and $5 million in 3 to 4 years depending on your business model. 

In addition to capital, the three most important considerations when applying for an international banking license are:

• The personal biographical reports, resumes, and 3 years audited personal financial statements of the directors, officers and management of the proposed bank. These should show both financial stability and significant banking experience.
  
• A detailed business plan with pro-forma financial statements for 5 years and a historical financial statement (balance sheet, income statement, and statement of cash flows), covering at least 3 years of operation, if available. If the shareholder of the bank will be an operating company, three years audited financial statements will be required.
• A due diligence report from a company such as Berkeley Research Group or Kroll will be required for each person named in the business plan (each investor, shareholder, officer, director, and key person). There reports usually cost $5,000 to $10,000 per person. 

Once you have all of this information compiled, you submit an application for a Permit to Organize… and wait. Processing time ranges from 3 to 6 months depending on the business model and the country. 

Once you have your Permit to Organize, you can form your corporation, hire your employees, build out your office, set up your software and systems, and negotiate with a correspondent bank. From experience, this process takes about 6 months, but this depends on the client. If you have a correspondent when you apply, or your team has significant banking and systems experience, this might go faster. If you have no such experience, this might be delayed.

When you’re ready to open your doors, you’ll apply for your Permit to Operate. Regulators will audit your system, compliance program, employees, etc. If and when you pass, you’ll be issued a Permit to Operate. This usually takes 2 to 3 months. 

So, the entire process of starting an offshore bank in a quality jurisdiction will take about one year if everything goes perfectly. It’s this time to market which defines the resale value of an international banking license. 

Based on experience, I suggest that a Permit to Organize is worth about $1.3 million, a Permit to Operate is worth about $3 million, and an operating bank with a lower level correspondent bank is worth about $4.5 million. As the quality of the correspondent bank improves, the value of the offshore bank for sale will go up. 

Espero que haya encontrado útil esta introducción básica a las licencias bancarias internacionales y las licencias bancarias offshore. Para obtener más información, contáctenos por CORREO ELECTRÓNICO o TELÉFONO. Estaremos encantados de ayudarle a crear un nuevo banco internacional o comprar una licencia de banco offshore en una variedad de jurisdicciones.