The Isle of Man Alternative Banking Regime

In response to the traditional retail banking sector adopting a more risk-averse approach, the Isle of Man Government and the Financial Services Authority have developed the Alternative Banking Regime (“ABR”).

The Isle of Man’s ABR legislation has been in place since August 2016 and offers an alternative means to traditional banking.  The legislation categorises banks into three different classes:

  • Class 1 (1) – for typical existing bank and any taking retail deposits
  • Class 1 (2) – for non-retail deposit takers – those that provide services to a very limited class of individuals, and corporates
  • Class 1 (3) – for Representative Offices of Foreign banks, not able to take deposits in the Island

The Class 1(2) licence is of particular interest as it presents significant opportunities for clients to take control of bank compliance and reporting by means of their own licensed banking operation.

The advantages of a Class 1(2) licence include:

  • competitively priced application and licensing regime
  • transparent and prompt application process
  • comfort afforded from operating within a strong regulatory framework
  • full control over management of efficient and prompt operational banking facilities and due diligence processes
  • absolute control of treasury functions
  • centralised reporting for FATCA and CRS
  • control and management of confidential data

The basic requirements associated with a Class 1(2) licence are as follows:

  • an Isle of Man corporate entity and a formal Isle of Man footprint
  • a minimum paid-up share capital of £3,500,000 (or its equivalent in another currency)
  • a suitable correspondent bank although it is not necessary for this correspondent bank to be situated in the Isle of Man.
  • suitable financial resources to support all banking activities
  • a proven track record and relevant competency
  • employment of Isle of Man resident ‘key persons’ that have relevant professional experience.

The application process takes approximately three months from submission of the application and depositors are restricted to:
– corporate entities
– individuals with a net worth in excess of £500,000
– trustees of trusts with a net worth in excess of £500,000

Further, Class 1(2) deposit takers are not eligible to be included in the Isle of Man Depositors’ Compensation Scheme or market their products or services in the media to the general public.

The Isle of Man Financial Services Authority fees for establishment of an ABR operation and annually thereafter are as follows:-

Description of regulated activity Application fee Annual fee
Class 1(1) or Class 1(2) where the licenceholder has total deposits excluding Isle of Man inter-bank placings of —
– up to but not including £1 billion £9,850 £19,000
– £1 billion to £5 billion £9,850 £22,500
– over £5 billion £9,850 £25,000
(taken from the deposit taking return for 31 March before the annual review date)
Class 1(1) or Class 1(2), where an Isle of Man incorporated Class 1(1) or Class 1(2) licenceholder, for whom the Authority is lead regulator, has a branch or deposit taking subsidiary outside the Island Nil £6,600 per branch and/or subsidiary

Cavendish Trust Company Limited has significant experience of working within an Isle of Man regulatory environment and can provide a broad range of administrative/ management assistance and guidance to clients wishing to establish an Alternative Banking Regime operation in the Isle of Man

For further information please contact either of the following members of our team:

Shaun Corris – Email: