This country-specific Q&A provides an overview of Banking & Finance laws and regulations applicable in British Virgin Islands.
What are the national authorities for banking regulation, supervision and resolution in your jurisdiction?
All banks in the British Virgin Islands (“BVI”) and BVI business companies carrying on banking business from outside the BVI are required to be licensed by and are subject to the supervision of the BVI Financial Services Commission (the “Commission”).
Which type of activities trigger the requirement of a banking licence?
Banking business is defined under the Banks and Trust Companies Act, 1990 (the “Act”) as the business of accepting deposits of money which may be withdrawn or repaid on demand or after a fixed period or after notice, by cheque or otherwise and the employment of such deposits, either in whole or part,
a) In making or giving loans, advances, overdrafts, guarantees or similar facilities; or
b) The making of investments
Does your regulatory regime know different licenses for different banking services?
A licence issued under the Act must be in one of the following categories:
a) a general banking licence, for the purposes of carrying on banking business within and outside the jurisdiction of the BVI;
b) a restricted Class I banking licence for the purpose of carrying on banking business with the restrictions on that business set forth in section 11 of the Act;
c) a restricted Class II banking licence, for the purpose of carrying on banking business with the restrictions on that business with the restrictions on that business set forth in section 11 of the Act with the further restriction that the licensee shall not receive or solicit funds by way of trade or business from persons other than those listed in any undertaking accompanying the application for the licence.
Section 11 of the Act provides that a holder of a restricted Class I or Class II banking licence shall not
a) take banking deposits from any person resident in the BVI other than another licensee or a company incorporated under the BVI Business Companies Act, 2004;
invest in any asset that represents a claim on any person resident in the BVI except a claim resulting from
a transaction with another licensee, or
b) the purchase of bonds or other securities issued by the Government, a statutory corporation or a company in which the Government is the sole or majority beneficial owner; or
c) without the written approval of the Commission, carry on any business in the BVI other than the business for which the restricted Class I or Class II banking licence has been obtained.
Does a banking license automatically permit certain other activities, e.g., broker dealer activities, payment services, issuance of e-money?
No. Additional classes of licence apply to other regulated business for example investment business requires a licence under the Securities and Investment Business Act, 2010. Payment services and the issuance of e-money require a licence under the Finance and Money Services Act.
Is there a “sandbox” or “license light” for specific activities?
The June 2020 enactment of the Financial Services (Regulatory Sandbox) Regulations (the “Regulations”) created a mechanism established within the Commission to enable the processing and acceptance of participants into a regulatory sandbox (the “Regulatory Sandbox”). This includes a live and contained environment in which the sandbox participants may test their products or services in relation to the provision of financial services business. The Regulatory Sandbox encourages innovation within the jurisdiction’s financial services sector, while mitigating and managing possible risks. For example, the risks of financial disruption and instability to the economy. It creates a space which enables participants to introduce and test innovative financial services products and services in a defined and controlled environment with specific regulatory parameters, including but not limited to a restriction on the period for testing.
Are there specific restrictions with respect to the issuance or custody of crypto currencies, such as a regulatory or voluntary moratorium?
There is currently no specific legislation in the BVI with respect to the issue or custody of crypto currencies. The Commission issued guidance on the regulation of virtual assets in July 2020. Virtual assets and virtual assets- related products used as a means of payment for goods and services which provide the purchaser with an ability to only purchase goods and services would not be captured by financial services legislation. Where a virtual asset product or service provides a benefit or right beyond a medium of exchange, it may be captured under the Securities and Investment Business Act, 2010.
What is the general application process for bank licenses and what is the average timing?
Application is made to the Commission by completing the relevant sections of the application form (which can be found on the Commission’s website). An additional Form A must be completed for all directors and senior officers, the compliance officer and anti-money laundering officer together with supporting documents – certified photo i.d., resume, references. In support of the application a business plan, compliance manual and structure chart must be provided.
The application process takes approximately six months. It may take longer if the application is incomplete or where there are potential issues with the applicant or any of its directors or senior officers.
Is mere cross-border activity permissible? If yes, what are the requirements?
Where a regulated activity is not carried out in or from within the BVI i.e on a pure cross- border basis, there is no requirement to hold a licence. This would not apply to BVI business companies. A BVI business company which carries out or holds itself out as carrying on regulated activity outside the BVI is deemed to carry on business from within the BVI.
What legal entities can operate as banks? What legal forms are generally used to operate as banks?
The BVI banking sector consists of 6 commercial banks. All of which are limited companies.
What are the organizational requirements for banks, including with respect to corporate governance?
The Regulatory Code sets out the organizational requirements for licensees, including with respect to corporate governance.
A BVI licensee shall
a) Take reasonable care to maintain a clear and appropriate apportionment of significant responsibilities among its directors, senior managers and key functionaries so that
It is clear who has which of those responsibilities
The business and affairs of the licensee can be adequately monitored and controlled by the directors and the relevant senior managers; and
The employees of the licensee are appropriately supervised ;
b) Establish and maintain such systems and controls as are appropriate for the nature, size, complexity, structure and diversity of its business.
c) Ensure that its systems and controls are regularly reviewed and updated as required;
d) Make and retain for the retention period a record of how it has complied:
e) Inform its customer, in writing, of the agreed terms of business between the licensee and the customer;
f) Have an adequate number of directors and at all times at least 2
g) Have an audit committee
h) Have a compliance officer and
i) Ensure that at all times its tier 1 capital is maintained in an amount equal to or greater than
Where it holds a general banking licence US$2,000,000 or
Where it holds a restricted Class I or restricted Class II banking licence US$ 1,000,000.
Do any restrictions on remuneration policies apply?
There are no restrictions on remuneration policies.
Has your jurisdiction implemented the Basel III framework with respect to regulatory capital? Are there any major deviations, e.g., with respect to certain categories of banks?
The BVI has not implemented the Basel III framework.
Are there any requirements with respect to the leverage ratio?
There are no requirements with respect to leverage ratio.
What liquidity requirements apply? Has your jurisdiction implemented the Basel III liquidity requirements, including regarding LCR and NSFR?
A BVI bank shall
a) Ensure that at all times, it maintains its capital resources at a level that is adequate to support its banking business, taking into account the nature, size, complexity, structure and diversity of that business and the bank’s risk profile; and
b) Maintain adequate systems and controls to monitor and assess its capital adequacy requirements on an ongoing basis.
The board and senior management of a BVI bank shall make their own determination of the capital resources that re reasonably required to support the bank’s business, taking into account its risk profile, and shall ensure that the bank’s capital resources are increased beyond the minimum required by the Code where appropriate.
On at least an annual basis
a) Senior management of a BVI bank shall report to the board on the scope and performance of the systems and controls established to monitor and assess the bank’s adequacy requirements; and
b) The board shall review those systems and controls taking into consideration the report by senior management.
A BVI bank shall ensure that at all times its tier 1 capital is maintained in an amount equal to or greater than
a) Where it holds a general banking licence , US2,000,000; or
b) Where it holds a restricted Class I or restricted Class II banking licence $1,000,000.
The BVI has not implemented the Basel III liquidity requirements.
Do banks have to publish their financial statements? Is there interim reporting and, if so, in which intervals?
BVI banks are not required to publish their financial statements. Audited accounts must be filed with the Commission within 6 months of the end of the bank’s financial year.
Does consolidated supervision of a bank exist in your jurisdiction? If so, what are the consequences?
The Commission may take such steps as it considers appropriate to co-operate with
a) Foreign regulatory authorities;
b) A competent authority acting to pursuant to an enactment;
c) Persons, in or outside the BVI, who have functions in relation to the prevention or detection of financial crime , including money laundering, financing of terrorism, financing of the proliferation of weapons of mass destruction, misconduct in, or misuse of information relating to, financial markets and offences involving fraud or dishonesty.
Co-operation may include
a) The sharing of documents and information which the Commission is not prevented from disclosing by any enactment;
b) Making requests for assistance to foreign regulatory authorities or a competent authority acting pursuant to any enactment; and
c) Providing assistance to foreign regulatory authorities.
What reporting and/or approval requirements apply to the acquisition of shareholdings in, or control of, banks?
A person owning or holding a significant interest or controlling interest in a licensee shall not sell, transfer, charge or otherwise dispose of his interest in the licensee, or any part of his interest, unless the prior written approval of the Commission has been obtained. A person shall not, whether directly or indirectly, acquire a significant interest in the licensee unless the prior approval of the Commission has been obtained. A licensee shall not unless the prior written approval of the Commission has been obtained
a) Cause , permit, acquiesce in a sale, transfer, charge or other disposition or
b) Issue or allot shares or cause, permit or acquiesce in any other reorganization of its share capital that results in
A person acquiring a significant interest in the licensee or
A person who already owns or holds a significant interest in the licensee increasing or decreasing the size of that interest.
Does your regulatory regime impose conditions for eligible owners of banks (e.g., with respect to major participations)?
All persons with responsibility for the management and control of a licensee must satisfy the Commissions fit and proper test. The Commission exercises judgment and discretion in assessing fitness and propriety. This process takes into account all relevant matters, including the following:
a) Honesty, integrity and reputation
b) Competence and capability
c) Financial Soundness.
Are there specific restrictions on foreign shareholdings in banks?
There are no specific restrictions on foreign shareholdings in BVI banks.
Is there a special regime for domestic and/or globally systemically important banks?
There is no special regime for domestic and/ or globally systemically important banks.
What are the sanctions the regulator(s) can order in the case of a violation of banking regulations?
The sanctions the Commission may impose range from reprimands to fines and suspension or revocation of the licence.
What is the resolution regime for banks?
There is no resolution regime for banks in the BVI.
How are client’s assets and cash deposits protected?
A licensee shall ensure that
a) Customer assets are identified, or identifiable and appropriately segregated and accounted for
b) It makes arrangements for the safekeeping and proper protection of customer assets
c) Any account that any customer maintains is
Held with an approved bank
Separate from any of the licensee’s own bank accounts
Clearly designated as a customer account; and
Under at least dual signatory control, where the signatories are sufficiently senior to provide an appropriate span of control
BVI banks are required under the regulatory regime to establish and maintain a strategy and, if appropriate, policies for the day-to day management of its liquidity appropriate for the nature, size, complexity, structure and diversity of the bank’s business and the liquidity risk to which it is exposed and systems including information systems, and controls that are sufficient to ensure that the liquidity management strategy.
Does your jurisdiction know a bail-in tool in bank resolution and which liabilities are covered?
There is no such legislation in force in the BVI.
Is there a requirement for banks to hold gone concern capital (“TLAC”)?
There are no requirements for banks to hold gone concern capital.
In your view, what are the recent trends in bank regulation in your jurisdiction?
Given that there are only 6 banks in the BVI seen any recent trends. The most significant change was in 2009 with the implementation of the Regulatory Code and the Financial Services Commission Legislation.
What do you believe to be the biggest threat to the success of the financial sector in your jurisdiction?
The impact of the pandemic has hit the BVI tourism sector which has had a knock on effect on the financial sector.
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