Banks and Offshore Banking in Isle of Man
Like many other Crown Dependencies such as Jersey and Guernsey, the Isle of Man has evolved into something of a banking haven, an international payment gateway to other parts of the world. There are currently 34 banks established and operating on the Isle of Man, most of them branches or subsidiaries of banks located elsewhere, especially the United Kingdom. Other major banking presences—aside from Isle of Man banks—are banks from the EU, Asia and the West Indies.
Bank Regulation on the Isle of Man
Banks are regulated on the Isle of Man by the Financial Supervision Commission, which is a part of the country's central government. According to the FSC's website, they have set up specific regulations regarding what banking entities can attain licensure on the Isle of Man and how they man conduct business, as follows:
Banks operating in the Isle of Man should, with a reasonable amount of flexibility, always:
- Act as a subsidiary or branch of a bank which is licensed as a member of another major banking company or group. That banking group must be presently regulated by a government that applied strict standards of regulation, which at the least are equal to the standards applied to banks on the Isle of Man.
- Not be run by dominating controllers
- Show a systemic financial importance in their home country or jurisdiction, and that the home jurisdiction is capable and prepared to support the bank branch located in the Isle of Man if the need arises.
- Meet all financial qualifications and standards as set down by the Financial Services Commission.
- Be run locally by people who have the proper amount of industry experience and competency in banking matters.
The Financial Services Commission applies very financially conservative requirements to the banks which incorporate in the Isle of Man instead of being branches of a larger banking body. These requirements are in compliance with international bank regulation standards, in an effort to ensure that those banks which are incorporated in the Island are always well-capitalised and always maintain adequately liquid.
There are other, more specific, licensing conditions which are designed for individual banking groups in reflection of their specific circumstances. These specifications can encompass such areas as activity limits and kinds of customers the bank can take on.
Depositor Protection in the Isle of Man
According to the FSC, the Isle of Man does have deposit-protection in place. Called the Depositors' Compensation Scheme, this coverage is mostly in keeping with other schemes which have been set up in fellow Dependencies such as the Isles of Jersey and Guernsey. The biggest focus of the Depositors' Scheme is that all personal depositors receive cover for their savings in incorporated banks or licensed branches in the Isle of Man for up to £50,000. Other non-personal depositor categories, such as companies or trusts, will be insured to a maximum amount of £20,000.
How Does the FSC Supervise Licensed Banks in the Isle of Man?
According to the FSC, they supervise banks licensed in the Isle of Man in four different areas of banking activity:
- They monitor the bank's co-operation and compliance with all local required regulations.
- They conduct examinations of the bank site and meet with bank staff and management.
- They perform off-site analysis and supervision of financial information and procedures.
- They act as an international governmental liaison, such as co-ordinating dialogue between other banking group supervision bodies and the banks which are licensed in the Isle of Man.
FSC Fitness and Evaluation
The International Monetary Fund reviewed the Isle of Man FSC in 2008, looking at the FSC's approach to banking supervision and the commission's performance. The findings by the IMF were that the Isle of Man is for the most part compliant in following the Basel Core Principles for Effective Banking Supervision, which are the international standards in the industry.
Banking Safeguards
The FSC declares that funds deposited with licensed deposit-taking banks in the Isle of Man are safe and secure due to the following:
- The integral financial quality of the various banking groups operating in the Island.
- The strict and constant regulation and oversight provided by the FSC to all licensed banks.
- The accessibility of the Depositors' Compensation Scheme.
What Kinds of Banking Services do Banks in the Isle of Man Offer?
There are presently 34 licensed banks in the Isle of Man, and various of them offer differing kinds of accounts, services and banking products to their patrons, as well as being devoted to differing areas of business. Examples of this include:
- Acting as a transactional bank facility for ONLY international/non-resident clients.
- Offering private, personal bank and wealth-managing services.
- Retail banking services and products, such as current accounts, cheques, debit cards, mortgage and other major loans, and overdraft protection.
- Corporate banking.
- Savings accounts with normal and higher interest.
Recent Performance by Banks in the Isle of Man
The global financial recession has indeed touched the shores of the Isle of Man, bringing the number of licensed banks down to 34 from a previous high of 54 in 2007. The banking industry in the Isle of Man still retains a high level of regard, having an AAA rating by the World Bank. It is known as an "offshore banking haven," but its recent acknowledgment as a compliant country with the United States Internal Revenue Code and accession to other European Union financial and banking agreements enacted against money laundering and eliminating banking privacy has diminished that reputation somewhat.
The Isle of Man's finance and banking sectors are dominated by either subsidiary companies or satellite branches of many United Kingdom clearinghouse banks and some foreign financial institutions. Most Isle of Man banks offer private bank servicing to expatriates from the United Kingdom and foreign national citizens. This servicing goes well beyond taking deposits into the realm of founding and maintaining trust accounts and managing any corporations and/or assets which are held by trusts, such as management of investments.
Other growth sectors in the Isle of Man are in the areas of captive and life assurance, collective investing schemes, and management of major investments. This infers that the organisations managed are cash-rich and have ample investment funds. Some Isle of Man banking companies act in the capacity of trustee for some collective investment plans and schemes.
The FSC requires banks licensed in the Isle of Man to post either quarterly or twice-yearly financial reports or returns. There is also a yearly account audit that must be performed by accountants qualified to effect professional indemnity cover at £10,000,000.
Banks in the Isle of Man
- Alliance & Leicester International Limited
- Britannia House
- Cayman National Bank & Trust Co.
- Conister Bank
- Zurich Bank International Ltd.
- AIB Isle of Man
- Anglo Irish Bank Corp
- Bank of Ireland
- Bank of Scotland Intl. ltd
- Barclay's Bank
- Bradford & Bingley Intl. Ltd
- Close Wealth Management Group
- Duncan Lawrie Ltd.
- Fairbairn Private Bank Ltd.
- Habib European Bank Ltd.
- HSBC Bank Int.l Ltd/Bank PlC
- Lloyd's TSB
- Nationwide Intl. Ltd.
- NatWest
- RBS Intl.
- Santander UK PLC
- Standard Bank Isle of Man Ltd.
- Royal Bank of Scotland PLC
- Standard Bank of South Africa
