Isle of Man adds alternative banking licences in bid to lure int'l business

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The Isle of Man Parliament has approved legislation which will introduce a new Alternative Banking Regime that provides for two additional types of banking licence on the Island.

The Department of Economic Development at Tynwald said in a statement issued today that it has worked closely with the Isle of Man Financial Services Authority (FSA) to develop this new legislation in order to encourage new banks to the Isle of Man and help to support the Island’s diverse banking needs.

The new legislation and associated guidance will come into effect on 1 August following a lengthy consultation on the matter.

The Alternative Banking Regime (ABR) framework is the result of consultation and industry collaboration. The statement said that ABR will widen the scope for banking opportunities on the Isle of Man bringing benefits to sectors that require niche banking facilities.

As reported, The Isle of Man Financial Services Authority issued a final public consultation in April this year relating to its plans to overhaul its banking regulations.

As well as encouraging additional banking and financial companies to the Island, the regulator said it hoped to further protect policyholders and members of retirement benefits schemes, while at the same time reducing financial crime and enhancing confidence in the Island’s financial services industries.

The consultation originally contained detailed proposals to create three separate types of Class 1 (deposit taking) licences. It follows on from a discussion paper that was issued in January, and includes a summary of comments received with respect to that earlier document.

‘Progressive initiative’

Laurence Skelly, minister for the Department of Economic Development in the Isle of Man, dubbed the new Alternative Banking Regime as a “progressive initiative that is set to attract new banking operations to the Island”.

“Our existing banks provide an excellent service,” said Skelly, but as the number of operators has fallen since 2008 he hopes that this initiative will increase the choice for businesses in the Isle of Man and internationally and boost banking business once again.

Leonard Singer, department member for Financial Services and Registries, in the Isle of Man, confirmed that talks are already underway with providers looking to take advantage of the new regimes.

He said: We have worked very closely with the FSA to develop this new legislation which has been designed to attract potential new banking operations to the Island.

‘Non-retail niche banking’

“In particular we are seeking to attract non-retail niche banking operations and also representative offices of foreign banks. We are already in talks with several such banks which have expressed interest in the ABR.”

As reported here in January, the Isle of Man regulator has been consulting with stakeholders since last year on the matter of introducing a regime to allow for new banking structures, and follows on from proposals initially made by the IoM’s Department of Economic Development. It comes against a backdrop of smaller financial centres around the world looking for ways to retain and attract banks, as many have been closing down their less-profitable operations.

Class 1 banking

Under the Isle of Man’s proposal, the existing Class 1 banking category would be split into three separate “sub-classes”, one of which would cover those banks that, as most island banking institutions currently do, provide services to the full spectrum of customers. The  other two sub-classes would apply to institutions catering for HNWIs and corporate clients (non-retail/ restricted deposit takers), and to the representative offices of foreign banks.

In its initial brief, which is referred to in the latest consultation paper, the DED noted the Government’s stated wish to create “a non-retail banking regime for high net worth individuals  and corporate clients” as well as to provide “flexibility to emerging business models”, with particular flexibility of ownership for non-retail banks, and to provide a provision for the representative offices of foreign banks.

Other UK offshore jurisdictions

The Isle of Man’s move to tweak its banking regulations comes as certain other UK offshore jurisdictions are also looking for ways to give their also-shrinking banking sectors a boost. In November,  as reported in II,   Guernsey treasury minister Gavin St Pier revealed that island’s plans to encourage the creation of a new “‘savings and loans’-type institution” on the island.

Also last year, the Gibraltar government opened its own lending institution, the Gibraltar International Bank, to fill what it said was a need in the marketplace that had resulted from the departure of a number of key existing banking institutions from the jurisdiction.

The Gibraltar bank was also envisioned as offering depositary services to Gibraltar’s funds industry – in order, the Gibraltar Government said in December, 2013, in announcing its plans to launch the bank – to ensure that the sector’s Gibraltar-based entities would be “able to meet the requirements of the Alternative Investment Fund Managers Directive (AIFMD)”.