Banking licence

A banking license is a legal prerequisite for a financial institution that wants to carry on a banking business. Typically, a business is not permitted to call itself a bank unless it holds a banking license. Under laws of most jurisdictions, general banking activities, such as taking deposits from the general public, are exclusive to holders of a banking license. A non-banking financial company is an institution that provides financial services without meeting the legal definition of a bank, such as holding a banking license.

Licenses are typically issued by a national banking regulator to applicant corporations that meet its banking requirements. The requirements may include minimum capital requirements, minimum number of directors, residence of shareholders, spread of shareholdings, disclosure of beneficial shareholders, besides other matters. These requirements may differ between jurisdictions, and may differ depending on the type of license being sought. Some jurisdictions, sometimes called tax havens, have a reputation for lax or corrupt standards in bank licensing, granting a license, for example, to shell companies, or to companies with nominee directors, or with dummy shareholders, etc.

The granting of the license may involve a long, complex and expensive procedure, which may depend on the type of bank license being sought. There are a number of sectors in which banks may be involved. The general bank license allows a bank to engage in all banking activities, such as retail banking, merchant acquiring, cash management, asset management and trading. An applicant can apply for a limited banking license, such as an offshore banking license.

Most state legislatures in the United States ban general corporations from accepting banker's deposits, which ban tends to cover any service whereby a general corporation acts as a funds drawee which transfers current funds (i.e. credit payable upon demand) to make payments as a substitute for coins on behalf of an account holder. Historically, in some states, this ban did not extend to a sole proprietor acting as a banker.

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