In a far sighted and at the same time very contemporary reading of the development of the financial services industry, the Isle of Man Government has created an alternative banking regime which came into effect on 1 August 2016.1

The new regime will enable corporations and high net worth individuals to become masters of their own destiny in controlling their financial and banking activities, in the context of the highly regulated banking sector in the Isle of Man, itself recognised as meeting the highest international regulatory standards.

The existing Class 1 deposit-taking banking licence structure is to be split into three:

Class 1(1) will apply to existing holders of deposit-taking banking licences and to any institutions taking retail deposits – the equivalent of the current, monolithic Class 1 licence.

Class 1(2) will allow an Isle of Man incorporated company which is part of a non-banking group to be established and licensed, to provide services to corporate organisations and to a restricted class of individuals.2 This is a new departure for the banking sector in the Isle of Man, and will include both wholesale and private and merchant banking activities.

Class 1(3) will apply to representative offices of banks operating and licensed outside the Isle of Man which are not able to take deposits in the island.

Fees3

Class 1(1) and Class 1(2) licence holders will be subject to the same level of fees.
Where the licence holder has total deposits excluding Isle of Man inter-bank placings of:

ThresholdsApplication FeeAnnual Fee
Up to but not including £1bn£9,850£19,000
£1bn to £5bn£9,850£22,500
Over £5bn£9,850£25,000

Class 1(3) licence holders pay a significantly lower level of fees:

ThresholdsApplication FeeAnnual Fee
n/a£3,000£2,500

Compensation

Neither Class 1(2) nor Class 1(3) licence holders (neither of which will involve activities which are directed towards the general banking public) will be part of or be required to contribute to the Isle of Man Depositors Compensation Scheme.4

Those who may benefit

In its consultation paper on the new proposals issued on 31 March 20165 the Isle of Man Financial Services Authority stressed the desirability of facilitating the development of financial services, insurance and pensions industries and emphasized the international character of those services and the desirability of maintaining the competitive position of the Isle of Man.

The Authority believes that the introduction of the alternative banking regime will assist the development of business sectors which are important to the Isle of Man economy, with a particular emphasis on e-gaming and fiduciary service providers.

The commercial team at MannBenham have amongst them many years of experience in advising clients in the banking and financial services sector both contentious and transactional matters, and work closely with them as project team members.

If you have any query regarding bank licensing in the Isle of Man, then please contact a member of our team for further assistance.

Key Contacts