The Isle of Man’s financial regulator is considering introducing a new banking model, to address a recent decline in the island’s traditional offshore banking sector, and has launched a public consultation to gauge reaction to its plans.
The consultation, unveiled this week, comes about seven months after a more limited consultation on the matter resulted in a proposal that would see the creation of two additional banking licences – one for banks serving high net-worth individuals and corporate clients only, and the other for representative offices of foreign banks, according to a background document on the Isle of Man Financial Services Authority’s website.
In effect, the document notes, “it is suggested that the existing Class 1 category [of banking institutions] could be split into three separate sub-classes”, one of which would cover those banks that, as most island institutions do, “provide services to the full spectrum of customers”, with the other two sub-classes being the ones for HNWIs and corporate clients and the representative offices of foreign banks.
The consultation also includes a suggestion that the additional types of banks need not be part of ‘banking’ groups per se, “in contrast to the Isle of Man Financial Services Authority’s current licensing policy” for so-called Class 1 – deposit takers.
The Isle of Man’s move follows efforts in certain other UK offshore jurisdictions to give their also shrinking banking sectors a boost. In November, as reported, 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 (GIB), 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)”.
‘Investors not taxpayers to bear risk’
Unlike traditional lending and savings banks, where the government acts as a lender of last resort, the risks associated with the types of alternative banks being proposed for the Isle of Man “would be borne by the investor and not the taxpayer”, Chris Corlett, chief executive of the Isle of Man’s Department of Economic Development, was quoted by the Isle of Man Today news website.
“We are not talking about banks lending, or taking savings for the likes of you and me,” Corlett added, according to the IoMT.
“Corporate clients and high net worth individuals are looking for different things. For people worth many millions, the £75,000 covered under the [Isle of Man’s] Depositors’ Compensation Scheme is an irrelevance.”
Those interested in submitting comments on the Isle of Man’s plans to introduce new banking models to the island have until 5 February to do so, the FSA said.