Banking and the administration of trusts are essential ingredients of any well developed financial services industry. As a zero-tax domicile, free of exchange control, TCI is an attractive location for a variety of banking and trust activities.
A TCI bank may cater to the domestic market or serve its existing client base and develop new products and clients internationally.
A TCI trust company may provide a range of services including trusteeship, administration of estates, custody of corporations where the objective of the subsidiary is to undertake investment securities, portfolio management, company management and registrar and transfer agent facilities. A trustee licence is often the most appropriate and cost-effective alternative to a banking licence for many professional firms.
THE LAW
Two types of banking licence are available under Banking Ordinance 1979, updated in 1989: 1) a National Banking License for banking activities within the TCI; and 2) Overseas Banking Licence for banking activities outside TCI. It is possible to have a combined National and Overseas Licence.
The Trustees (Licensing) Ordinance 1992 provides for the licensing and regulation of trust companies and other professional trustees. There are two classes of licence available
1) a Restricted Trustee Licence, which is issued on the basis of an undertaking by the trustee that it will act as professional trustee only in respect of a named trust or trusts;
2) an Unrestricted Trustee Licence, which is issued without any such restriction.
REQUIREMENTS FOR BANK LICENSING
An application for National Banking Licence will be considered only in respect an unrestricted licence of branches or subsidiaries of banks with an established track record which are subject to effective consolidated supervision by their home supervisory authority, except where the bank is predominantly locally owned and primarily doing business within TCI.
An application for an Overseas Banking Licence will be considered from:
1) branches or subsidiaries of banks with an established & track record subject to effective consolidated supervision;
2) banks which, although not subsidiaries, are closely associated with an overseas bank and which, by agreement, will be included within the consolidated supervision exercised by the overseas bank's home supervisory authority; and
3) wholly-owned subsidiaries of major corporations where the objective of the subsidiary is to undertake in-house treasury operations which are fully consolidated within the published financial statements of the parent company.
Banking licence applications will be subject to a detailed review. Whilst there are no published guidelines as to minimum capital, two main requirements are the submission of a detailed Business Plan and the written consent from the home supervisory banking authority to the establishment of the bank in TCI.
REQUIREMENTS FOR TRUSTEE LICENSING
The Trustees (Licensing) Regulations 1992 set out both the form of application for trustee licences and the rules governing the conduct of licensed trustees. The rules include the requirement to submit financial returns, appoint auditors and maintain professional indemnity insurance.
An important requirement in the licensing process is the submission of a Business Plan, together with full financial disclosure and business references on the principals and management of the proposed licensee. The minimum capital requirement for is US$250,000.
BENEFITS
Modern legislation and regulatory requirements allow for the cost-effective establishment and operation of banks. The supervision by their home supervisory authority, except Trustees (Licensing) Ordinance provides advanced legislation under which trusts (see "Trusts") are administered within a secure regulatory framework.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
