Formation and Licensing of an International Bank
The licensing of an International Bank is an involved procedure requiring a considerable amount of information about the principals, their business affairs and their plans for the new institution. This is especially true of the unrestricted Class A license but it also holds true for the more restricted Class B license.
The “Class A” license or “General License” allows the institution to engage in the full spectrum of international banking activities with the general public. Applicants for Class A licenses should be aware that the days of “Brass Plates” are gone and that the regulators will almost certainly require the establishment of a proper banking office, with staff, software and management to be established in St. Lucia. Correspondent banking relationships are also key. To simply open an account with another bank and bank through them the way a normal business would is no longer sufficient.
The “Class B” or “Restricted License” restricts the institution in that funds/deposits may not be solicited or accepted from other than “listed” persons. The list of such persons – in reality a group or identifiable class of persons -forms part of the application package. This is essentially a private banking license. A good example of a listed person would be a financial services company looking to offer banking services to its customers and employees or a private bank held within a corporate group to loan money to subsidiaries in countries where a distinction between loaned funds and capital injections prevails.
This may all seem a bit daunting and with good reason. Nothing is viewed with more skepticism by regulators than a new bank. No other institution has the same ability to tarnish the good name of our jurisdiction and hurt a lot of people in the process. However, with the assistance of ADCO senior management, an initial response from the FSSU should, if all documentation is in order, be obtained in 5 to 7 weeks from the time of application. This will almost certainly not be a final decision but a request for more information. Thereafter the timing is a factor of how quickly and how thoroughly we respond to their queries. It is important however to be aware that the decision to grant the license rests with the Director of the Financial Sector Supervision Unit (“ the FSSU)”) and the Prime Minister so we cannot guarantee either the time frame or the eventual outcome of the application.
The other restriction that applies to either class of bank is that they are prevented from conducting certain banking business with residents of St. Lucia. This is rarely a concern however as the focus of an international bank is not generally on its country of incorporation. In order to make an application for either license the following information is required:
- Details of the proposed company which will hold the license (Name, Authorized and Issued Capital, Registered Office and Agent)
- Listing of the shareholders (and their % holding), directors and officers.
- In-depth resumes on the principals detailing the qualifications and past experience that make them suitable applicants to run a financial institution.
- Certified copies of passports, police certificates of character and references (three, one of which must be from a recognized banking institution) for each shareholder, director and officer of the bank.
- A detailed business plan including a three-year revenue and expense projection.
- Evidence of Liability Insurance in the amount of US$500,000 may, at the discretion of the Minister, be required.
- Engagement letter from an acceptable auditing firm.
- Engagement letter from an acceptable local law firm.
- A pro-forma balance sheet, certified by the auditors demonstrating compliance with the capital requirements. ( or other evidence of ability to capitalize)
The Application Process
Once all of the items listed above are gathered, the licensing process involves the following steps:
- The application forms are filled out and submitted in duplicate along with all the required information above and a non-refundable US$500 application processing fee.
- The Director of Financial Services reviews the application and replies to ADCO usually within 5 to 7 weeks requesting additional information or documentation and, possibly, confirming that a conditional license has been granted (or denied).
- Assuming the conditional license has been granted, ADCO then proceeds to form the International Business Company (IBC) with the name that was previously submitted. Once the company is formed, a local bank must be selected to hold the new institution’s statutory deposit of US$ 100,000 (note that this amount qualifies as part of the new bank’s capital requirement)
- The auditors certify that the deposit is in place.
- ADCO submits a copy of the auditor’s certification, the company’s incorporation documents and the certificate of good standing to the Director.
- The Director then issues the license upon payment of the relevant annual license fees. The fees are US$25,000 per annum for a “Class A” bank and US$15,000 per annum for a “Class B” bank. A US$300 per annum IBC registration fee is also required.
Other Relevant Facts
- The bank must have at least two directors. Both must be natural persons (as opposed to corporate directors) and one must be a resident of St. Lucia. ADCO can help find a suitable candidate for this position.
- The capital for a “Class A” bank is US$1,000,000 and for a “Class B” bank is US$250,000. Only the statutory deposit of US$100,000 must be maintained in cash or certain specified near-cash equivalents. The remainder of the bank’s capital can be contributed in securities, real estate or other assets with a readily determinable value. It is however important to note that liquidity is a key determinant in the granting of a license (the concept being that if a bank has no cash how will it conduct its affairs). We would recommend, subject to the nature of the banking business in which the new institution intends to engage, that no less than 50% of the bank’s capital be contributed either in cash or in readily marketable securities.
- The bank may be subject to review by the Director’s office at any time, however the only required filing is submission of the annual audited financial statements, due within three months of the bank’s year-end.
- St. Lucia recognizes the need for confidentiality in business affairs. To this end, the country’s IBC Registrar only maintains a copy of the bank’s license and a copy of its Memorandum and Articles of Association. The shareholders and directors are known only to ADCO and to the Director. Both ADCO and the Director are required by law, under threat of severe fines and penalties, to keep confidential all information obtained whether it be during the incorporation process, ongoing bank management or a Director’s examination.
Professional fees are a mixture of set charges for certain functions and time-based billings for other situations. Please contact us to discuss your requirements and allow us to prepare a fee quote for your unique needs.
We hope that you have found this information to be helpful in providing the basics of International Bank formation. Please do not hesitate to contact us if we can be of further assistance. We look forward to working with you.