By Luigi Wewege is the Senior Vice President, and Head of Private Banking of Belize based Caye International Bank,
Congratulations on the decision to open an offshore bank account. Many people find that this solution helps them grow their assets and position them to take advantage of exchange rates when they travel.
One thing to keep in mind is that not all offshore accounts in all nations work precisely the same way. That’s why you want to choose wisely before opening that first account. Here are some points that you should consider closely. The information that you collect will improve the odds that you’re happy with the account for a long time to come.
What’s the Primary Reason for Opening an Offshore Bank Account?
You likely have more than one reason for wanting to open an offshore financial account. Don’t feel alone. It’s not unusual for individuals to open this type of account for several reasons. Even so, there’s usually one reason that stands out from the rest.
Examine your motivation and identify the primary reason for wanting to open the account. Could it be that you’re thinking primarily about your retirement years? It could be that a time deposit account with the right bank would be a great addition to your retirement savings plans. Perhaps the main goal is to build up assets based in the country where you plan on retiring. There are also bank accounts that will help you grow the balances faster.
By defining the primary purpose of having the offshore account, it’s easier to focus on institutions that can help you meet that goal.
Finding the Best Location
Do put some thought into where the bank you’re considering happens to be based. One of the more essential reasons for this is that banking laws vary slightly from one nation to the next. Understanding the rules and regulations that the bank is required by law to follow makes it easier to decide if that’s the right place for your money.
Along with the banking laws and regulations, the general stability of that nation is also something that you want to consider. Is the political situation relatively stable? Does the economy seem to weather recessions and other international incidents with comparative ease? When you find the banking laws to be equitable and the country to be stable overall, that’s an excellent place to consider depositing your hard-earned cash.
The Bank’s Reputation Matters
When you chose a bank for your domestic accounts, it was more involved than going with the bank closest to your home or office. You spent some time reviewing ratings and reviews of local banks. Your goal was to find out how well the bank took care of clients, and if there seemed to be any recurring issues that would make you hesitate to do business with that institution. Take the same care when looking for an offshore bank.
Do take the time to find out what others think about the bank and how it operates. You want to know that the staff is there when you have questions or would like some advice on how to get the most returns for your deposits.
You also want to know that the bank is known for standing behind any stated promises. If the general reputation is positive and the bank offers the types of savings and checking accounts that you want, it’s worth considering.
Minimum Balances for Opening Accounts
One of the misconceptions that people have about offshore banks is that it takes quite a bit of money to open accounts. In some nations, that’s true. Offshore banks based in other countries offer account options that require modest opening deposits.
If your income is more middle class than the upper class, it pays to find out what sort of minimum deposits are needed to open accounts with a particular bank. You may find that some allow you to establish the accounts with less money on the front end. Once your balance reaches a certain level, you begin to earn interest. This type of arrangement is an excellent solution for anyone who will need to build balances incrementally rather than make a larger initial deposit.
Banking fees are a fact of life, no matter where your accounts are based. Your goal is to look closely at the fee structure associated with any bank that’s under consideration. Primarily, you want to keep the type of fees and the fee amounts as low as possible. Many people are surprised how much money they save by looking closely at this one facet of international bank accounts.
As you look around, you’ll find that banks in some nations seem to charge fees for everything under the sun. You may have monthly maintenance fees, transaction fees that apply even if you transfer money between accounts with the same bank, or even costs that apply if you want online access to your funds.
The good news is that some international banks have a simple and relatively short list of fees that would apply to any depositor. That’s the type of bank you want to consider.
Access to Your Accounts
Access to your accounts is also something to consider. While online access is more common today, there are still nations where international clients have to do business by phone or email rather than accessing their accounts directly. You want to choose a bank that offers a simple and straightforward interface that allows you to check balances and conduct transactions at any time.
Equally important is the security measures that apply to your online access. Opt for a bank that provides enough authentication on the front end to minimize your account’s risk being compromised. Since you already take measures on your end to prevent unauthorized access to your home network, it makes sense that you would want some assurance that the bank is also protecting the access on the other end.
The better banks are happy to provide potential clients with a demonstration of how the online interfaces work.
Protections and Privacy for Your Account Balances
It’s not just your interface that needs to be secure. The measures taken by the bank should ensure that getting to proprietary data is as difficult as possible. For this reason, you want to find out more about the security measures used to protect the bank’s network and access to customer data.
It also helps to know how much access officials in your country of origin would have to your offshore bank account data. In other words, you want to know that no third party can get to your bank balances or information without your permission.
Why does this matter? If something happened that left your domestic assets open to collections and seizures, you want to make sure your offshore accounts can’t be touched. Those funds will provide the basis for getting a fresh financial start.
Take the First Step in Offshore Banking
The first step is to decide that you want to open offshore accounts. After that, it’s a matter of selecting the right financial institution that’s based in the ideal location.
Choose an institution like Caye International Bank, and you’ll enjoy the benefits that come with banking in a stable setting with a bank that will serve you well. For more information, contact Caye International Bank today and learn more about their various account options.
This is a Sponsored Feature
Luigi Wewege is the Senior Vice President, and Head of Private Banking of Belize based Caye International Bank, a FinTech School Instructor and the published author of The Digital Banking Revolution – now in its third edition.
You can follow his posts on trends shaping the banking and financial services industry on Twitter: @luigiwewege
A quarter of banking customers noted an improvement in customer service over lockdown, research shows
SAS research reveals that banks offered an improved customer experience during lockdown
This represents some good news for banks in an extremely challenging time, with 59% of customers also saying they’d pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.
The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of banking customers using a digital service or app has grown by 11%, adding to an existing 58% who were already digital customers. Over half (53%) of new users plan to continue using these digital services permanently moving forward.
Brian Holden, Director, Financial Services at SAS UK & Ireland, said:
“It’s notable that in times of need customers value being able to communicate with their bank and place an even higher value on good customer service. A rise in the number of digital customers means banks can now reach a wider audience online, leveraging AI and analytics to offer a more personalised experience.
“There is work to be done, though. Even greater personalisation is needed if banks are to win over the 12% of customers who felt banking services deteriorated over lockdown. And this personalisation will need to get right down to a segment of one to properly reflect the unique circumstances some individuals now find themselves in due to the pandemic.”
While the number of digital users grew over lockdown, there is still a quarter (24%) of the banking customer base that have chosen not to make the switch to digital services.
Meanwhile, failure to offer a consistently satisfactory customer experience could prove costly for banks, with a third (33%) of customers claiming that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service, so this just underlines how much retail banks can win or lose in these difficult times.
For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer?
Swedish Bank Stress Tests in Line with Recent Rating Actions
The Swedish Financial Supervisory Authority’s (FSA) latest stress test results show major Swedish banks’ robust ability to absorb credit losses. The results support Fitch Ratings’ view that short-term risks have abated in recent months, and are in line with Fitch’s assessment of major Swedish banks’ capitalisation at ‘aa-‘, which was a factor when Fitch removed the ratings of Handelsbanken, Nordea (not covered by the FSA’s stress test) and SEB from Rating Watch Negative in September.
The FSA estimated about SEK130 billion of credit losses over 2020-2022 for the three largest banks (Swedbank, Handelsbanken and SEB) under its stress test. This represents about 220bp of their loans, or about 70bp annually. However, the banks’ pre-impairment profitability in the stress test could absorb credit losses of up to about 110bp of loans annually. Fitch’s baseline expectation is for credit losses below 20bp of loans in 2020 and 8bp-12bp in 2021.
Capital remained strong under the stress test. The average common equity Tier 1 (CET1) ratio fell by only 2.8pp (1.9pp if banks did not pay dividends) from 17.6% at end-June 2020. The capital decline was not driven by credit losses, which could be absorbed by pre-impairment profitability, but by risk-weighted asset inflation.
The three banks’ 3Q20 results showed that capital has been resilient despite the coronavirus crisis. The banks had a CET1 capital surplus over regulatory minimums, including buffers, of almost SEK100 billion (excluding about SEK33 billion earmarked for dividends). SEB had a CET1 ratio of 19.4% at end-September, Handelsbanken’s was 17.8% and Swedbank’s 16.8%.
The SEK130 billion credit losses under the latest stress test are lower than under the FSA’s spring 2020 stress test (SEK145 billion), which also covered a shorter period of two years. However, they are still larger than the actual losses incurred by the three banks during the 2008-2010 crisis. This is despite tightened underwriting standards by the three banks in recent years, including, in the case of SEB and Swedbank, in the Baltics, the source of most of their loan impairment charges in the previous crisis.
In its baseline economic forecasts, the FSA assumes a harsher shock to Sweden’s GDP in 2020 and 2021 (-6.9% and 1%, respectively) than Fitch’s baseline (-4% and 3.4%), although it assumes a similar recovery by end-2022. It also assumes real estate price corrections, which appears particularly conservative in light of a 11% housing property price increase over January to November 2020.
The ratings of Handelsbanken (AA), Nordea (AA-) and SEB (AA-) are on Negative Outlook due to medium-term risks to our baseline scenario. The rating of Swedbank (A+) is on Stable Outlook, reflecting significant headroom at the current rating level following a one-notch downgrade in April due to shortcomings in anti-money laundering risk controls.
Future success for banks will be driven by balancing physical and digital services
Digital acceleration due to COVID-19 has not eliminated the need for bank branches
Faster service (23%), smaller queues (26%) and longer opening hours (31%) are among customers’ biggest asks of their bank branch, new research from Diebold Nixdorf today reveals. But with 41% consumers saying they would be comfortable to engage with all banking services via an app, it is vital that banks respond to the full spectrum of customer needs – balancing and evolving their offerings on multiple fronts.
A third (35%) of customers say they will always want access to physical, in-branch banking services in some capacity and one in ten (10%) consumers will never bank predominantly online in the future. This demonstrates that there remains an important role for the services a branch provides. This role, however, continues to shift away from purely transactional banking:
A quarter (26%) value face-to-face advice when it comes to their banking needs
One in five (18%) seek advice on different products
17% want to speak to the staff or other customers.
Matt Phillips, Diebold Nixdorf vice president, head of financial services UK & Ireland, said: “The majority of banks have spent the last decade focusing on their digital strategies and investing in improving – or establishing – their online customer experience. However, the data shows that there is still an essential role for physical branches. Banks now increasingly face the challenge of continuing to provide customers with access to a range of physical and as well as digital services, giving them the flexibility to choose the best service for them at any given moment in time.”
When looking beyond the impact of COVID-19, planned branch visits by customers are expected to rebound to 28%, following a dip to 11% during lockdown. And when asked about the new services they’d like to see inside their bank, sixteen percent of respondents said more self-service machines would improve their in-branch experience.
Matt Phillips continues: “In a world that is fast evolving and where the future is digital, there’s no doubt that high street banks must, and are, responding to the needs of highly digital customers. But not every customer requirement is digital. There is still a strong need for physical bank branches and the interaction and services they offer, and striking this balance between physical and digital is where the industry must come together to provide solutions. For example, building a strong, leave-behind strategy is something we’re seeing across the board when banks have to close branches, ensuring customers have access to self-service machines to complete all their transactional needs.”
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