License for banking activities

A banking license is a permit issued to a legal entity to operate lawfully as a financial and credit institution in a specific country. Obtaining this document is mandatory for foreign entrepreneurs planning to enter the international market and register a company in a particular jurisdiction.

A banking license allows one to operate within the legal framework of the chosen country, officially provide financial and credit services, issue loans, conduct cash and settlement operations, and ensure the safety of funds. Opening a financial institution in a foreign jurisdiction and obtaining a license provides the opportunity to:

• Issue loans and deposit certificates;
• Access the international financial market;
• Guarantee the safety of clients’ capital;
• Accept and place deposits in accounts;
• Issue checkbooks;
• Invest and control the movement of assets.

The process of obtaining a banking license is quite complex and requires thorough preparation, which can be assisted by Altindustry lawyers. Specialists are well-versed in the intricacies of international legislation thanks to many years of experience working in foreign jurisdictions. Lawyers will ensure the full cycle of organizing the work of a financial institution abroad from scratch, as well as provide preliminary consultation at the planning and business plan development stage.

Altindustry employees will:

• familiarize you with the conditions for obtaining a license in a specific country;
• select the optimal jurisdiction based on current priorities;
• develop the founding documentation of the company;
• submit a request to government authorities for obtaining a license;
• obtain a local address and seal for the legal entity;
• select software and a payment system;
• set up internet banking and register in the Eurowire payment system.

Types of Banking licenses

The general mechanism for obtaining a permit for financial activities for an institution is quite similar in different countries around the world, but the conditions for issuing the document and the requirements for founders differ. In the most attractive jurisdictions for foreign banks, such as Belize, Panama, Dominica, and Botswana, the business owner must not be a resident of the state. The cost of the license starts from 80-90 thousand USD, depending on the specific type of permit.

The main types of banking licenses are:

• general (Type A) is issued for large banks with an international reputation and clients worldwide;
• restricted (Type B) is provided to small financial institutions that are just starting to operate.

In some cases, banks need to organize the work of a physical office: rent premises, hire managers, accountants, and executives. Usually, small financial institutions choose an intra-company form of activity. New companies (managed) are registered based on an existing resident bank with a general license. The minimum capital requirement is set at the level of 500 thousand USD.

Choosing a jurisdiction for obtaining a license

To register a company with the aim of subsequently obtaining a banking license, low-tax zones and other jurisdictions favorable to this type of business are chosen. It is important to study the current legislation of the country, as well as the presence and content of regulatory acts governing the operation of financial and credit institutions.

In some countries, it is possible to obtain low-tax status or switch to a preferential tax regime for non-residents, allowing foreign investors to reduce costs on current tax rates.

An important factor when choosing a jurisdiction is the prestige of the region. The country where the banking activity is planned to be launched can subsequently determine the institution’s reputation and chances of successfully integrating into the international financial market.

Conditions for obtaining a license

Obtaining permission for banking activities for a registered financial institution requires thorough preparation of all necessary documents:

• completed application forms with the personal data of each founder;
• the founding agreement and other statutory documentation of the company;
• a certified extract from the minutes of the founders’ meeting.

The above list is not exhaustive, each country may have additional document requirements. For example, in Dominica, founders will also need to present a business plan. To organize the submission of tax reports, it will be necessary to set up an office or have a responsible agent in the local jurisdiction.

To obtain a license for banking activities, the following conditions must be met:

• confirm the availability of the minimum required capital — from 30 thousand USD (in Belize — from 3 million USD);
• organize the work of an office in the chosen jurisdiction or ensure legal representation, depending on local requirements;
• undergo a full check of the bank’s founders for professional competence, reliability, and absence of ties to terrorism.

Process of obtaining a banking license

To obtain permission for the financial activities of a financial institution, several main stages must be completed:

1. Prepare the founding documents.
2. Register the company in the local jurisdiction.
3. Obtain a tax number.
4. Submit an application for a license.
5. Obtain permission for banking activities.
6. Renew the license upon its expiration.

Depending on the current legislation, the state may impose separate requirements or conduct additional checks on candidates for banking licenses. It is important to familiarize yourself with the existing procedure for organizing the work of a financial institution, taking into account the latest amendments to regulatory acts.