It’s no secret that starting a bank is a process. But what are the specific licensing requirements to open a bank in your jurisdiction? This article will provide an overview of the banking licensing requirements for new banks, including the licenses and permits required to open and operate a bank.
Banking Licenses Every New Bank Needs
The first step in starting a bank is to obtain the proper banking licenses. Depending on the bank’s business model, different types of licenses are required. For example, if the bank offers credit products, it must obtain a credit license.
There are two main types of banking licenses: onshore and offshore. Onshore banking licenses are typically obtained from the bank’s home country regulator, while offshore banking licenses are obtained from regulators in other countries.
Offshore Banking Licenses
There are a few reasons why a bank might choose to obtain an offshore banking license. For example, it allows them to tap into new markets and customers by offering banking services in a foreign country.
Several jurisdictions around the world offer offshore banking licenses. Some popular jurisdictions include the Bahamas, Cayman Islands, and Gibraltar.
To obtain an offshore banking license, the bank must first incorporate it in the jurisdiction of choice. Then, once incorporated, the bank must apply for a banking license from the jurisdiction’s financial regulator.
The application process for an offshore banking license has several steps. First, the bank must provide detailed information about its shareholders, directors, and officers. The bank must also submit audited financial statements and a business plan.
Once the bank has been granted a license, it will be subject to ongoing regulation by the jurisdiction’s financial regulator. In addition, the bank must maintain certain capital levels and comply with anti-money laundering regulations.
Onshore Banking Licenses
Many banks choose to obtain an onshore banking license. Onshore banking licenses are typically obtained from the bank’s home country regulator. The application process for an onshore banking license is similar to that for an offshore banking license.
Once the bank has been granted a license, just like with an offshore bank, it will be subject to ongoing regulation by the home country’s financial regulator. Again, the bank must maintain certain capital levels and comply with anti-money laundering regulations.
Permits and Approvals
In addition to banking licenses, other permits and approvals are required to open a bank. For example, the bank will need to obtain a business license from the government. The bank will also need to get approval from the central bank to open branches and offer certain products and services.
Some of the other licenses and permits that may be required to open a new bank in the United States include:
- A license from the Office of the Comptroller of the Currency (OCC)
- A license from the Federal Deposit Insurance Corporation (FDIC)
- A license from the Federal Reserve Bank
- A state bank charter
A license from the Office of the Comptroller of the Currency (OCC) is required for any bank that wants to engage in interstate banking activities. A Federal Deposit Insurance Corporation (FDIC) license is required for banks that wish to insure deposits. Finally, a license from the Federal Reserve Bank is necessary for banks that want to issue credit cards or engage in other lending activities.
State bank charters are required for banks that want to operate in more than one state. State bank charters are also typically required for banks that wish to engage in certain types of businesses, such as trust companies or investment banking.
Permits that the new bank must obtain include:
- A trade name or business license
- An employer identification number
- A state bank charter
The requirements for these permits vary from country to country, but they are generally relatively straightforward and can be obtained through the relevant government agencies.
Starting a bank requires a wide range of licenses and permits. The licensing requirements for banks are in place to protect consumers and ensure that banks operate safely and soundly. If you have any questions about the banking licensing requirements or need help obtaining the necessary licenses and permits, contact a qualified bank attorney for assistance.