How jurisdictions differ in licensing banks

Taking deposits and making loans is the same economic activity everywhere. Yet the licence needed, the capital required, the time to approval and the markets the licence opens vary widely. Choosing a jurisdiction is therefore one of the most consequential decisions in a bank project.

This article explains where the differences come from and how they affect a licence’s practical value.

Common floor, national design

Global standard setters create a shared baseline. The Basel Committee sets prudential standards, the FATF sets AML/CFT standards, and the CPMI sets standards for payment infrastructure. Peer reviews check implementation.

Within that baseline, each jurisdiction decides:

1. Which activities need which licence. Some have one banking licence; others have several classes, such as full, restricted, wholesale or digital.
2. How much capital is needed to start, and how much supervisors expect above the legal minimum.
3. What substance is required: local management, staff, board meetings and systems.
4. Who may be served: residents, non-residents, retail or wholesale customers, and in which currencies.
5. Which other markets the licence opens, through passporting, recognition or none.
6. How fast and how predictable the process is, which depends on the regulator’s resources and approach.

The European Union: single rulebook and passporting

The EU harmonises bank regulation more deeply than any other region. The Capital Requirements Regulation applies directly in every Member State, and the Capital Requirements Directive is transposed into national law. Together with technical standards from the EBA, they form the single rulebook.

In the euro area and other participating states, licensing sits within the Single Supervisory Mechanism. According to the ECB’s licensing guide, the ECB has the authority to grant banking licences for all banks wishing to operate in the euro area. Applications enter through the national competent authority of the country of incorporation, and the ECB adopts the final decision.

Passporting

The main advantage of an EU licence is the passport. Under CRD Article 33, a credit institution authorised in one Member State may carry on the activities in Annex I in other Member States through a branch or cross-border services, provided its authorisation covers them. The host state cannot require a separate licence.

Third-country banks

Banks from outside the EU have no passport. Directive (EU) 2024/1619 inserts Article 21c into the CRD, requiring undertakings established in a third country to establish a branch and obtain authorisation before providing core banking services in a Member State.

Exceptions include services provided at the client’s own exclusive initiative, services to credit institutions, and intragroup services. Member States must apply this requirement from 11 January 2027.

Such a third-country branch is authorised only for the Member State where it is established. It cannot use a passport to serve other Member States, so a group that wants EU-wide reach generally needs an EU subsidiary.

Differences that remain inside the EU

Harmonisation is not uniformity. Member States still differ in supervisory practice, language, tax, local deposit insurance arrangements, national options in the CRD, and the time taken to review applications. The legal minimum initial capital is EUR 5 million under CRD Article 12, but the capital supervisors expect depends on the business plan.

The United Kingdom

The UK runs its own regime outside the EU. The Prudential Regulation Authority authorises deposit-takers, with the Financial Conduct Authority responsible for conduct. Since the UK left the EU, UK banks are third-country institutions under EU banking law and cannot use the EU passport.

The UK offers a structured route for new banks. The Bank of England’s New Bank Start-up Unit describes authorisation with restrictions, followed by a mobilisation period that typically lasts no longer than 12 months, during which deposit-taking is capped at £50,000 in total. This lets a bank secure investment and complete its build with a licence in hand.

Switzerland

Switzerland licenses banks through FINMA, which notes that legislation on banks and securities firms provides for various types of licences, each with its own conditions. Switzerland is outside the EU single market, so a Swiss licence does not passport into the EU. Swiss banks serving EU clients face the third-country rules described above, including Article 21c from 2027.

Singapore

The Monetary Authority of Singapore shows how a regulator can create a licence class for a policy aim. It awarded two digital full bank licences and two digital wholesale bank licences, the latter for SMEs and other non-retail segments.

MAS states that it is currently not granting new digital bank licences. Availability of a licence class can therefore change with policy, independently of an applicant’s merits.

Financial free zones: DIFC and ADGM

The United Arab Emirates hosts two financial free zones with their own regulators and rulebooks, separate from the onshore banking regime.

	Dubai International Financial Centre	Abu Dhabi Global Market
Regulator	Dubai Financial Services Authority, established under Dubai law as “the independent regulator of financial services and related activities for the DIFC” (DFSA GEN)	Financial Services Regulatory Authority (ADGM)
Legal basis	DFSA established under Dubai law	Established as a financial free zone under federal legislation; framework set out by Abu Dhabi Law No. 4 of 2013; guidance based on English common law
Deposit-taking category	Category 1 (PIB 1.3.1)	Category 1 (PRU 1.3.1)
Base capital for deposit-takers	US$10 million	US$10 million

Free zone licences are designed for international and wholesale business. The scope of permitted activities, the customers that may be served and the interaction with UAE onshore banking rules should be confirmed with the relevant regulator for each business model.

International banking centres

International financial centres license banks that mainly serve non-residents, often through categories that separate domestic from international business. The Cayman Islands Monetary Authority reported 76 licensed banks at 30 June 2026, 11 with Category A licences and 65 with Category B licences, a split that reflects the international orientation of the centre.

The serious centres require real presence. The Central Bank of Bahrain Rulebook makes mind and management a licensing condition: banks with a registered office in Bahrain must keep their head office there, and foreign bank branches must maintain local management presence and premises.

Global standards push in the same direction. The FATF defines a shell bank as one without physical presence, meaning “meaningful mind and management”, in its licensing country, and prohibits correspondent relationships with shell banks.

Reputation and correspondent access

A licence is only as useful as the relationships it can support. Correspondent banks assess the respondent’s jurisdiction as part of their due diligence. The CPMI found that correspondents had cut services for respondents located in jurisdictions perceived as too risky, among other reasons.

Two public lists feed directly into those assessments.

FATF lists

After each plenary, the FATF names high-risk jurisdictions subject to a call for action, and jurisdictions under increased monitoring. As summarised by Malta’s FIAU, after the June 2026 plenary the Democratic People’s Republic of Korea, Iran and Myanmar remained subject to a call for action. Bosnia and Herzegovina and Iraq were added to increased monitoring, while Algeria and Namibia were removed.

The increased monitoring list as of June 2026 includes financial centres as well as developing economies, among them Monaco, Bulgaria and the Virgin Islands (UK). Listing does not prohibit business, but counterparties apply more scrutiny.

The EU list

The EU publishes its own list of high-risk third countries, and EU obliged entities must apply enhanced due diligence to relationships and transactions involving them. The Commission’s list added Russia, Bolivia and the British Virgin Islands with effect from 29 January 2026.

The two lists are related but not identical, and they move at different speeds. Algeria and Namibia, for example, left the FATF list in June 2026 but still appeared on the Commission’s published EU list at the time of writing. A bank in a newly delisted jurisdiction may face EU enhanced due diligence for some time after FATF delisting.

Comparing jurisdictions in practice

Factor	Questions to ask
Market access	Does the licence passport, and to which markets? Can the target customers lawfully be served?
Capital	What is the legal minimum, and what will supervisors expect for this business plan?
Substance	How many senior people must be resident? Where must board meetings and key functions be?
Timeline	How long do applications typically take, and is there a restricted or mobilisation phase?
Deposit insurance	Is there a scheme, what does it cover, and what does membership cost?
Reputation	Is the jurisdiction on any FATF or EU list, and what was its last FATF evaluation?
Correspondent access	Do global banks maintain correspondent relationships with banks licensed there?
Supervisory culture	How does the regulator engage before and after licensing, and how predictable is it?

Conclusion

The cheapest or fastest licence is rarely the one with the most value. Market access, correspondent banking, reputation and supervisory quality decide whether a licensed bank can actually operate. The earlier articles in this series explain the capital, liquidity, governance, compliance, technology and payment requirements that apply wherever the licence is obtained.