Banking business is defined under the Banking Ordinance 1998, as amended ("the Banking Ordinance") Section 2 as
- The business of accepting deposits, and
- Employment of those deposits by any means at the risk of the person accepting those deposits.
Anyone carrying on activities defined as banking business in the islands must be licensed to do so. Applications for banking licences must be submitted to the Commission for approval.
There are two types of banking licences that may be granted under the Banking Ordinance:
- National Banking Licence: This licence authorises the licencee to carry on banking activities in and from the Islands with islanders (or “Belongers,” as defined by the Immigration Ordinance) and other residents who are ordinarily or temporarily resident in the Islands. Holders of the licence must typically maintain their head office within the Islands.
- Overseas Banking Licence: This authorises the licencee to carry on banking activities from within the Islands but specifically excludes banking business with any person who is ordinarily or temporarily resident in the Islands. This type of licence may be granted to financial institutions who do not maintain their head office in the Islands, provided that the banking activities carried on from the Islands are managed by either another licencee who maintains a principal office in the Islands or approved person who is resident in the Islands.
Applications for licences must be accompanied by memorandum and articles of association or similar, a business plan and any other documents which are deemed necessary. Changes in either the constitution or activities of the business from those submitted with the original application must be declared.
A financial institution may hold both types of banking licence provided that separate accounting records are maintained or business activities under each licence is conducted through separate branches or subsidiaries. Full details of the application process are included in the First Schedule to the Banking Ordinance.
The Banking (Capital) Regulations 2003 ("the Capital Regulations") made under Sections 9-13 of the Banking Ordinance define the minimum capital requirements for licences carrying on banking business in or from within the Islands.
Holders of a banking licence are required under Section 29 (1-6) of the Banking Ordinance to file monthly and quarterly returns with the FSC.