Banking offshore: Bank license

Vanuatu is one of the few countries in the world where it is possible to establish a privately owned financial institution or private offshore bank of course subject to the satisfactory completion of a due diligence process to ensure that the principals and all those involved have good bona fides and a sound business plan. It is not required to have bank license in some other reputable jurisdiction.

Vanuatu government replaced the Vanuatu Banking Act by the International Banking Act in 2002. This new banking licenses act has enhanced the reputation of Vanuatu as a bona fide banking jurisdiction by strengthening the supervisory frame work to protect the interests of depositors, investors and ensure financial and monetary stability. This means that government no longer license shell offshore banks. Only serious and reputable bank applications, which set up local presence, are now welcome.

Like in all offshore jurisdictions offshore bank licensee cannot carry on banking business locally, only outside of Vanuatu and no shell banks are possible this means that the bank must maintain a physical office and keep all the bank’s records in Vanuatu.

The bank must maintain at all times paid up capital of not less than $500,000 or in suchminimum proportions in relation to its assets, liabilities or risk exposures. This capital need not be maintained in Vanuatu. It can be maintained in a reputable bank or financial institution outside of Vanuatu, subject to the approval of the Reserve Bank and may be invested in approved financial instruments. Another advantage is that all Vanuatu Offshore Banks enjoy all the benefits of Vanuatu’s tax regime. Until recently, all offshore banking licenses were held through exempted companies.Applications for an Offshore Banking License can be lodged under an International Company and take advantage of all the benefits associated with an International company.

The guidelines for the issue of offshore bank licenses can be summarized as follows:

• Details of ownership, financial capacity and financial history;
• Information on major shareholders and the character and experience of senior management and board of directors;
• Details of risk management, accounting and internal control systems;
• Details of the applicant’s capital structure;
• A detail business plan outlining the types of services to be offered including a three year projections for assets, liabilities and profitability;
• A written undertaking that the applicant will provide the Reserve Bank with any information it may require to carry out its responsibilities under the acts;