It will also offer banking licences to representative offices of foreign banks who do not plan to take deposits on the island and who are seeking a quick, low-cost licence.
The rules for the new Alternative Banking Regime have been agreed with the island’s new regulator, the Financial Services Authority and will be submitted to the parliament or Tynwald shortly as “secondary legislation”. It is expected to be live by August.
The new banking regime is effectively an expansion of the IoM’s existing class 1 (deposit taking) banking licence through the addition of two new classes of licence.
Two new classes
The first, known Class 1 (2) licence, would only be available to corporations, trusts or an individual depositor who can certify they have a minimum £500,000 ($734,695, €657,229) in net worth. Standard bank licence requirements for competency, solvency, integrity and the need for a real presence on the Isle Of Man would still apply.
The second new licence, known as Class 1 (3), is similar to the representative office licences offered in Australia and Canada for foreign banks, and will carry an application fee of £3,500 and an annual licence fee of £2,500.
Neither of the two new licences would be part of the Isle of Man’s depositor’s compensation scheme and would not have to make contributions to the fund nor benefit from its protection.
Simon Pickering, head of retail financial series for the IoM’s Department of Economic Development said the licences had been almost two years in the making and, when issued, will be the first new banking licences granted on the offshore island since 1994.
He said the new licences were designed in response to the changes to the banking sector which had taken place since the 2008/09 financial crisis, especially in the areas of compliance and risk reduction, as well as to support the government’s efforts to attract new players to its financial sector.
“Corporates, trusts, HNW’s and PEPs (politically exposed persons) in particular have found it more difficult to obtain a choice of suitable facilities in recent years,” he said.
“In particular we are looking to widen the scope of offering for our e-gaming and corporate service providers,” he added.
Niche banking target
Currently the Isle of Man is home to 17 different banking operators groups which have deposits of around £40bn, which largely specialise in providing banking services to expatriates and international companies.
“The new regime is aimed at foreign and private banks who may have a niche offering of services,” Pickering said.