The Isle of Man’s alternative banking regime

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| The European | 16 April 2019

In recent years, the Isle of Man has updated the licensing regime applicable to banks. In so doing, the island’s legislature and regulators continue to demonstrate that they are willing to adapt and innovate in order to ensure that the island remains attractive to new business. The Isle of Man now offers three alternative categories of banking licence: Class 1(1), Class 1(2) and Class 1(3).

Class 1(1)

Prior to the introduction of the current licensing-regime, what is now Class 1(1) was the only banking licence available on the island. This is a full deposit-taking licence which permits a holder to accept deposits from any person. The Isle of Man Financial Services Authority’s licensing policy requires, amongst other things, an applicant to be part of a group that includes an existing deposit taker as part of that same group. Presently, there are 13 holders of Class 1(1) licences, including large institutions such as Barclays Bank Plc and HSBC Bank Plc.

Class 1(2)


This class was introduced in 2016 and is aimed at attracting applicants from the non-retail banking sector. A Class 1(2) licence permits the holder to accept deposits from restricted depositors, such as corporates, trusts and high net-worth individuals meeting certain criteria. In contrast to Class 1(1), Class 1(2) applicants are not required to be part of an established banking group and it is hoped that new entrants will be attracted to this sector, such as large corporate groups and merchant banks which will diversify and enhance the island’s banking offering to non-retail customers.

Class 1(3)

Class 1(3) was also introduced in 2016, to attract overseas banks to establish representative offices in the island. The activities of a Class 1(3) licence-holder are restricted, and a representative office may not carry on deposit-taking business in the island. However, the fees to obtain and maintain a Class 1(3) licence are significantly lower than those for Class 1(1) and 1(2) licences. Class 1(3) therefore offers a relatively cost-effective means for an overseas bank to market its services on the island, which could ultimately lead to a licence-holder applying for a more comprehensive Class 1(1) or 1(2) licence. ν

Further information

www.simcocks.com

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