The new Alternative Banking Regime which came into effect on 1 August 2016 allows two additional types of banking licences in relation to deposit taking.
The existing ‘Class 1’ in relation to deposit taking is now divided into three sub-classes. Whilst this does not affect existing banks, who will merely fall under Class 1 (1), there is also now the further options of Class 1 (2) and Class 1 (3).
Class 1 (2) – this is solely non-retail and is aimed at corporate and high net depositors with a net worth of a minimum of £500,000 not including property and other specified rights. Applicants for this licence need not be part of an established banking group and to the contrary banking does not have to be their primary activity thereby completely opening the Islands range of products to a number of diverse parties. The choice not to limit this licence to banking groups has the potential to offer solutions to many niches that are currently suffering as a result of zealous policies of major banking groups.
Class 1 (3)- this is aimed at Foreign banks who wish to open representative offices, but do not plan to take deposits on the Island. Previously these would need to take a full deposit-taking licence even if deposits were taken and services administered outside of the Isle of Man. This sub class has reduced supervision and is cost effective when compared to the other deposit taking sub classes available.
The purpose of introducing these additional classes is to enhance the non-retail banking sector and is hoped will encourage representative offices of foreign banks to the Island and offer solutions for sectors such as e-gaming, which is important to the Islands economy, and individuals such as politically exposed persons who experience difficulties in finding banks willing to provide services due to policies in compliance and risk reduction who will now have the option to establish their own banking regimes.