The Isle of Man Financial Services Authority has issued a further public consultation relating to its plans to overhaul its banking regulations.
The regulator said it hopes to encourage additional banking and financial companies to the island, as well as 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 contains 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.
The latest consultation document also includes the draft legislation that will bring the new regime into operation.
The closing date for comments is 14 May.
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.
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.
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)”.
‘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.”