Banking Regulation 2025 Comparisons

The principal legislation governing the British Virgin Islands’ (BVI) banking sector is the Banks and Trust Companies Act, Revised Edition 2020 (as amended) (BTCA) and the Banks and Trust Companies Regulations, Revised Edition 2020. The BVI Regulatory Code (Revised 2020) has the status of delegated or subsidiary legislation and sets out certain principles of business and explanatory notes that apply to all BVI licensees (including banks), along with additional requirements specific to banks.

The Financial Services Commission (FSC) is the regulator responsible for supervising banks in the BVI.

The BTCA provides that no person shall carry on any kind of banking business in or from within the BVI unless the person holds a valid licence authorising them to carry on that kind of banking business. There are three banking licence classes issued under the BTCA: a general banking licence, a restricted class I banking licence and a restricted class II banking licence.

The minimum requirements for obtaining a general banking licence are: proven banking experience, a minimum paid up capital of USD2 million, physical presence in the BVI, and the applicant must meet the FSC’s fit and proper test. A successful applicant is also required to make a deposit or investment of USD500,000.

Preliminary discussions with the FSC and completion of a comprehensive application form are required to submit an authorisation application. This includes supporting documents such as a detailed business plan covering capital requirements, compliance and AML policies and procedures, approved auditor details, professional indemnity cover and Form As (a certain form called “Form A”) for the directors and senior officers of the bank. The FSC has committed to acknowledge receipt of new licence applications within one week from submission, and determine a complete application within ten weeks, although in practice this may take longer. Costs will depend on the type of bank licence and include legal, FSC (application, initial licence and renewal fees) and company incorporation fees, along with associated premises, immigration and labour costs.

“Banking business” means the business of accepting deposits of money which may be withdrawn or repaid on demand or after a fixed period/notice, by cheque or otherwise and the employment of such deposits, either in whole or in part:

• in making or giving loans, advances, overdrafts, guarantees or similar facilities; or
• the making of investments,

for the account and at the risk of the person accepting such deposits.

The holder of a restricted class I or II banking licence must not:

• take deposits from any person resident in the BVI other than another licensee or a company incorporated, continued or re-registered under the Business Companies Act;
• 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 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
• without the written approval of the FSC, 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.

Restricted Class II banking licensees must also 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.

The holder of a BVI bank licence does not need to comply with the Financing and Money Services Act, Revised Edition 2020 (as amended), which licenses financing businesses and money services businesses.

BVI banks do not have access to the European passporting system.

Prior written approval to disposing of or acquiring a “significant interest” in a BVI bank is required from the FSC. “Significant interest” is defined in summary as a holding or interest in the bank or in any parent of the bank that entitles a person, directly or indirectly, to:

• control 10% or more of the voting rights of the bank;
• a share of 10% or more in any distribution made by the bank;
• a share of 10% or more in any distribution of the surplus assets of the bank; or
• appoint or remove one or more directors of the bank.

The FSC approval will focus on whether the person(s) seeking to acquire a significant interest in the bank satisfy its fit and proper criteria, set out in the BVI Regulatory Code.

Change in control notifications are usually submitted by way of letter to the FSC with appropriate supporting documents such as transaction structure charts, transaction documentation and the constitutional documents of the relevant entities involved. Recent BVI change in control approvals have taken between 2–3 months (although they can take longer) to obtain and should be factored into the transaction timeframe and be a condition to completion.

A BVI bank is required to immediately notify the FSC of any matter that it considers to be material to the fitness and propriety of any person having a significant interest in it.

The BVI Regulatory Code sets out the corporate governance framework applicable to BVI banks, which provides that a bank must:

• take reasonable care to maintain a clear and appropriate apportionment of significant responsibilities among its directors, senior managers and key functionaries;
• establish and maintain such systems and controls as are appropriate for the nature, size, complexity, structure and diversity of its business;
• ensure that its systems and controls are regularly reviewed and updated as required; and
• make and retain records as to its compliance.

The BVI Regulatory Code also sets out requirements for terms of business, advertising and communication practices, directors of banks, and board and senior management responsibilities.

In terms of systems and controls, a BVI bank must:

• establish such strategies, policies, systems and controls as are appropriate given the nature, size, complexity, structure and diversity of its business and the degree of risk associated with each area of its business;
• ensure that its strategies, policies, systems and controls are fully and clearly documented and are communicated, as appropriate, to members of staff and other functionaries; and
• specify the duties and responsibilities of the board and senior management.

A BVI bank must also establish and maintain a clearly defined risk management strategy and policy, business continuity plans, and an adequate and effective system of internal controls appropriate for the nature, size, complexity, structure and diversity of its business over which the board has ultimate responsibility. IT systems should be reliable and secure, and monitored independently with adequate contingency measures.

Internal controls must be monitored on an ongoing basis, with regular reports made to the board and any deficiencies corrected as soon as reasonably practicable. To this end, an internal audit function and audit committee must be appointed, and the bank must maintain and retain sufficient records.

Banks are specifically required to have in place investment, credit and operational risk strategies, systems and controls, along with systems for credit administration, measurement and monitoring, and controls over credit risk. They must also have country and transfer risk systems and controls, and a framework for managing liquidity, including liquidity limits.

There are no BVI-specific voluntary codes which BVI banks have to comply with, although there is a BVI Bank Association.

Whilst there are no governmental or FSC-imposed diversity requirements or binding rules of conduct for bank employees, these may be defined at each bank’s corporate level, with reliance on international standards such as the United Kingdom’s standards (pursuant to the Equality Act 2010) and internal certification for stall members, respectively. This would depend on such bank’s internal policy and application as well as enforcement varies from bank to bank.

Directors and senior officer (which includes senior managers responsible for the compliance, money laundering compliance and internal audit functions) appointments to BVI banks require prior FSC approval. This requires the submission of Form As to the FSC and relevant supporting documents in order for the FSC to conduct a fitness and proprietary assessment.

Supporting documents include:

• certified copy of academic qualifications;
• CV/resume;
• job description;
• organisational chart;
• notarised copy identity documents (passport and recent utility bill);
• separate professional, financial and personal references;
• certificate of absence of criminal record; and
• certificate of absence of dishonesty, bankruptcy, and other things.

FSC approval of a director or senior officer appointment usually takes around four weeks.

There are no specific remuneration requirements applicable to banks in the BVI.

BVI banks are subject to the offences and general reporting requirements under the Proceeds of Criminal Conduct Act, Revised Edition 2020 (as amended), including mandatory reporting of suspicious transactions to the Financial Investigation Agency. In addition, they are subject to the BVI sanctions regime, which is the UK sanctions regime as extended to the BVI through primary legislation and Orders in Council.

The Anti-Money Laundering Regulations, Revised Edition 2020 (as amended) (“AML Regulations”) and the Anti-Money Laundering and Terrorist Financing Code of Practice, Revised Edition 2020 (as amended) (“AML Code”) apply to the extent an entity is engaged in “relevant business”. This includes “banking business” within the meaning of the BTCA. As such, BVI banks are subject to the AML Regulations and the AML Code. In summary, the key requirements are to:

• establish and maintain internal systems and controls, which include:
1. having written policies preventing money laundering, terrorist financing and proliferation financing in connection with the bank’s business;
2. conducting business risk, transaction and business relationship assessments;
3. having mechanisms to enable the identification and verification of customers;
4. recognising and reporting suspicious transactions; and
5. keeping records of customer transactions and any suspicious transaction reports;

• appointing a designated Money Laundering Reporting Officer;
• establishing and maintaining an independent audit/review function; and
• engaging with the BVI competent authorities, including various reporting and notification requirements.

The Virgin Islands Deposit Insurance Corporation (VIDIC) was established pursuant to the Virgin Islands Deposit Insurance Act, 2016 (as amended) (the “VIDI Act”) and the Virgin Islands Deposit Insurance Corporation Regulations, 2023 (the “VIDI Regulations”).

The VIDIC is governed by a six-member Board of Directors from the public and private sectors, and an external director. These include the CEO of VIDIC (ex-officio director), the Managing Director of the FSC or their nominee (director), and four other directors appointed with the approval of the Cabinet of the Government of the BVI, including one external director and one non-executive chair-person.

The Virgin Islands Deposit Insurance Corporation provides protection for eligible deposits up to USD100,000 per depositor per member institution. This USD100,000 limit is inclusive of the principal amount and the interest amount of the deposit. Deposits in different member institutions are protected separately.

Deposits held jointly have separate protection from other types of deposit accounts. Also, joint accounts held with different account holders have separate protection at USD100,000 collectively and not USD100,000 per joint account holder.

Deposits held in trust accounts (includes client deposit accounts held by professional practices – eg, legal and accounting) are protected separately from deposits in other types of accounts.

Any deposit received or held by a member institution of the VIDIC from or on behalf of a depositor, notwithstanding the commercial denomination used by the member institution, is an insurable deposit. Regardless of the commercial denomination of an insurable deposit, insurable deposits fall within the definition of the following types of deposits:

• savings accounts;
• checking accounts;
• certificate of deposits;
• electronic deposits;
• special savings accounts; and
• other deposits accounts that from time to time VIDIC may add to this list.

The availability of deposit insurance is not limited to citizens and residents of the BVI and any person who maintains deposits in a member institution is entitled to the deposit insurance provided by the VIDI Act and the VIDI Regulations.

The FSC adopts the guidelines as set by the Basel Committee for bank regulation and supervisory practices for the calculation of the capital adequacy ratio. The Basel Committee recommends a minimum capital adequacy ratio based on risk-weighted assets of 8%.

A BVI bank must, at all times, maintain a minimum risk-weighted capital adequacy ratio of 12%. In general, a BVI bank must not, without the FSC’s prior written approval, incur:

• an aggregate exposure to a counterparty or related counterparties that exceeds 25% of its capital base; or
• large exposures that in aggregate exceed 800% of the bank’s capital base.

General banking licence holders are required to have a minimum fully paid-up capital of not less than USD2 million or its equivalent in foreign currencies, or such sum as the FSC, by order determines, and have deposited or invested the sum of USD500,000 in such manner as the FSC by order, prescribes.

Restricted class I and class II licence holders are required to have a minimum fully paid-up capital of not less than USD1 million or its equivalent in foreign currencies, or such sum as the FSC, by order determines, and have deposited or invested the sum of USD500,000 in such manner as the FSC by order, prescribes.

A BVI bank must establish and maintain an appropriate liquidity strategy and policies, along with effective systems and controls. The bank’s liquidity management strategy must be submitted to the FSC and liquidity limits must be set to ensure adequate liquidity.

The BVI does not have additional requirements applicable to systemically important banks.

The BVI legal system as it relates to failing entities is principally a termination rather than a rescue regime. There is no equivalent to the English administration or US Chapter 11 processes aimed at promoting the rescue of companies in financial difficulty under the protection of a statutory moratorium.

Where a company is insolvent, a liquidator may be appointed by the court or by a resolution of a 75% majority of shareholders to collect, realise and distribute the assets of the company to creditors under court supervision. The liquidator must be a BVI-licensed insolvency practitioner. While the liquidation is taking place, the company is protected from claims by a statutory moratorium. The appointment of a liquidator does not interfere with the ability of a secured creditor to enforce its security. Any assets not subject to security realised in the liquidation are distributed to creditors evenly in proportion to their admitted claims against the company. Following the conclusion of the liquidation, the company will be dissolved.

A company in financial difficulty can seek to restructure short of liquidation either via a creditors’ arrangement under the Insolvency Act under the supervision of a BVI-licensed insolvency practitioner (if insolvent or likely to become insolvent) or a company scheme of arrangement under the Business Companies Act sanctioned by the court. Either process enables a compromise to be agreed by the vote of a 75% majority of creditors to bind all creditors, including dissenters and those who did not vote. Creditors with different interests may be separated into classes, with each class requiring 75% approval to approve the arrangement. Neither process benefits from a moratorium while being negotiated.

Provisional liquidators may be appointed on a “light-touch” basis over a BVI company in order to facilitate a restructuring under the control of an independent court-appointed office-holder. The appointment of provisional liquidators does not convey an automatic moratorium as is the case for full-blown liquidation. However, applications to stay claims pending against the company can be made to the court under the insolvency legislation.

The BVI is not a member of the FSB, but is part of the Americas Regional Consultative Group established by the FSB to provide a structured mechanism for interaction regarding various FSB initiatives, promote implementation within the region of international financial policy initiatives, and act as a forum to share views on measures that could be taken to promote financial stability.

The scope of preferential creditors in a BVI insolvency is very limited and relates largely to certain, limited, obligations to BVI employees and to the BVI government.

Guidelines in the BVI require environmental risk assessment to be included in banks’ lending and investment processes. Environmental impact must be evaluated, both in terms of negative and positive impacts. The BVI offers incentives to banks for sustainable practices, including tax breaks and reduced reserve requirements.

Some of the components of the BVI’s sustainable banking initiative include:

• green loans and mortgages;
• sustainability-linked bonds;
• environmental stress testing; and
• reporting and disclosure requirements.

The DORA requirements apply to firms employing ten or more people and that have a turnover and/or annual balance sheet total of more than EUR2 million. Further, DORA applies to all financial entities, including banks, insurance companies, investment firms, payment service providers, and others. DORA, meaning the Digital Operational Resilience Act, is an EU Regulation that will apply from 17 January 2025. While it is an EU Regulation, that does not necessarily only mean that it applies in the EU. If a firm is operating in the EU, the DORA will apply. Therefore, it could be relevant to a firm in a country outside of the EU, such as the BVI. It is related to the entity and its operations in the EU.

As part of the Financial Action Task Force’s Mutual Evaluation of the BVI in 2024, the government has indicated that it will separate the current BTCA into two Acts – one for banking business and one for trust company business. The current timeline of such a separation is unknown.