What is even a bank licence?
If you work in trading, in finance or in the banking system, you know that underlying the activity you work in, there is a licence. It is usually call a financial, or banking licence, though rarer or specialised terms can be found, such as payment service licence or digital money licence. In short, a licence is what allows company to work in the financial sector.
There are likely a variety of reasons why you or your company are thinking about licensing a new bank or fund, as financial specialists and financial companies alike require licenses to run their businesses. Licensing a new bank is an extremely complex undertaking that requires both research and a thorough understanding of the underlying factors required under the applicable regulations and legal provisions that apply to the jurisdictions where the license is being pursued.
When one is licensing a bank or a financial service, a variety of things must be taken into consideration. For the most part, you are seeking authorization to obtain intermediate third-party capital. This in itself is a very complex process and requires comprehensive planning and a fine-tuned strategy : KYC and financial ratios, thorought check of credentials, structuration and data integrity are only a few among the requirements needed for any financial service.
- Bank setup and formation (Business Plan design, application, licensing, intermediary accounts, compliance, auditing, banking relations, etc.
- Establishing and licensing of MSB (BP design, application, licensing, intermediary accounts, compliance, auditing, banking relations, etc.)
- Credit union formation (BP design, application, licensing, intermediary accounts, compliance, auditing, banking relations, etc.)
- Payment processing companies (BP design, application, licensing, intermediary accounts, compliance, auditing, banking relations, general advisory, etc.)
- Creation and licensing of Forex brokers and Forex retail and online exchange services (BP design, licensing, IT services, intermediary accounts, general advisory, auditing)
- Setup and licensing of cyptocurrency exchanges, broker dealers, and bitlicense companies: Formation and licensing of crypto exchanges authorized to trade any digital asset on the international market without limitation
- Trust formation (trust management firms, sole trusts, licensing, etc.)
- Funds and other specific types of structure formations
Our experts[vc_empty_space height=”15px”]
“Business intelligence is still a little-known field for companies, wrongly so. With Eternos Corporation, take the lead in the future and develop your company with a digital approach to finance thanks to Business Intelligence.”
Mr. Arslan has graduated from the London Business school and the Westminster Business school, respectively in Financial and Security Economics.
He has worked with a few Europeans banks, auditing them in regards to the financial ratios needed, standards to be respected and long terms sustainability.
“It may seems self-evident, but the best way to avoir any problem
in banking law is prepare an answer to every question .”
Mr. Fabregue is a veteran expert of KYC regulation. After working with both Swiss, French and British companies, he has acquired an extensive knowledge of European and international regulation to this regard.
You can find his personal website on Tax and Banking regulation on Iusblog.com
He also manages the specific French speaking Banking consultancy that you can find HERE
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In Europe, new banks have been establishing themselves over the last few years, using a European fintech banking license to disrupt the market there and bring customer-centric banking to the region. The future of cashless and branchless banks may not be reality even in the future, but not all modern banks are created equal and not all offer the same products and services. With so many new banks and financial services providers emerging it can be difficult to differentiate between the various categories of modern banks.
One option for categorising modern banks is by the type of banking license they have. The main licensing options for today’s banks include:
- Traditional Banking License
- Fintech/Digital/Virtual banking license
- Payment Service / E-money license
- Extended Banking License
Traditional Banking License – Credit institution
As the name suggests, banks with this type of license follow a traditional formula for offering financial products and services, they include a physical presence, with widespread branches and large-scale operations. Many traditional banks are looking for ways to reduce their branch numbers to cut costs and are focusing on digitalising their systems in order to keep up with new players in the industry. They are managed directly by the EU Central Bank system.
Fintech / Digital / Virtual Banking License
Thanks to fintech, digital and virtual banking licenses, new banks have emerged that offer the same products and services as a traditional bank but without branches and with a laser-focus on online customer experience. New banks such as Monzo, Starling Bank or N26 have started with this kind of licence, and are able to provide customers with deposit accounts, loans and payment services all through digital-only channels and without physical branches. The only limitation is generally linked to the size the bank can reach, with can be quite limitating.
Payment Service Providers/ E Money
With only an e-money license or similar, E-money institutions (EMIs) or Payment Service Providers (PSPs) do not have full banking licenses and are restricted when it comes to the range of payments and banking services they can offer to customers. Generally, they offer payment services such as money transfer and currency exchange. TransferWise and InstaReM both use e-money licenses to offer payments services.
Other examples of companies that have acquired e-money licenses include Google, Facebook, Amazon and Apple. While each of these big tech firms have launched various payments products, we have yet to see any of them make the full jump into financial services. It remains to be seen exactly what these giants plan on doing with their e-money licenses.
New banking licenses have made markets more competitive, brought financial products and services to the unbanked and made financial management easier for customers. The banking industry will continue to change for the better as more countries roll out similar licensing options.
Licensing a bank is a very complex subject and is not an easy feat.
Here at Eternos Corporation , we have the relevant experience to help with your licensing needs.