By Luigi Wewege, the Senior Vice President, and Head of Private Banking, Caye International Bank in Belize.
There’s no doubt that offshore bank accounts can be helpful in many ways. Even for individuals who may or may not plan on living abroad after they retire, this approach to banking can yield quite a few benefits.
With that in mind, how do you determine which offshore bank is best for your purposes? Here are some factors to look at closely before proceeding to open any international account.
1. Applicable Banking Laws
One of the first things to understand is that the banking laws and regulations found in different countries will vary. That means the degree of protection you will enjoy in one jurisdiction may or may not be available in a different one. Before you spend a lot of time looking into what banks based on those nations have to offer, make sure you have a working knowledge of the regulations and laws that will govern your account.
For example, offshore banks have a reputation for providing excellent protection for the identities of depositors. That’s true in many cases, but not in all of them. You’ll want to look beyond general claims of confidentiality and find out precisely how current laws and regulations shape the practices of banks within that country. If you’re satisfied with those protections, it’s worth your time to look closely at those banks.
2. Stability of the Bank
As you identify nations with banking laws that appeal to you, take a close look at the institutional stability of the banks based in those countries. Your goal is to determine what measures are needed to protect your money when and if certain events come to pass. Some of those events may be political, while others may have to do with local and worldwide economic shifts.
One critical point to look at is the bank’s financials. How much money is kept on hand at any given time? You may be surprised to learn that banks in some nations are required to maintain 1% or even less of their deposits on hand. Other countries have more stringent requirements, such as Belize. In that nation, banks are required to keep 24% of the deposits on hand. That translates to greater stability and more peace of mind for you.
3. Range of Banking Services and Accounts Available
Depending on how you envision using offshore banking, there could be the need for several different types of accounts. Depositors focusing primarily on amassing wealth for their retirement years may want checking, time deposit, and some other sort of savings account at a minimum. Some may want to take advantage of investment opportunities not available in their home countries and would like access to a bank-based investment account.
Perhaps your plans include purchasing real estate, with plans to finance the effort through your offshore bank. While many will provide real estate financing to offshore clients, others will not. Along with making sure that non-citizens can own property in that nation, you also want to make sure the bank under consideration offers mortgage financing for international clients.
4. Competitive Terms and Fees
Just as you would look at the terms and fees associated with a domestic bank account, it makes sense to do so with an offshore account. Consider how they are calculated as you look at the schedule of fees associated with the accounts you want to open. Are they annual fees, or are they assessed every month? Identify what it will cost you to establish and maintain those accounts versus opting to do business with a different bank.
Always look closely at the terms associated with each type of account that you open. While those terms may be similar, there’s the possibility for some differences even if you establish all of those accounts with one bank. Your goal is to identify what obligation would exist if certain events came to pass. Projecting various outcomes and how the terms would come into play will help you identify the banks that offer the best terms overall.
5. Minimum Balance Requirements
You may be surprised to learn that some offshore banks will allow depositors to open accounts with relatively small balances. This is because many people still believe that offshore bank accounts are only for the wealthy. In fact, several offshore banks in different nations provide accounts to those who would be considered more in a middle-income bracket.
One point to determine is how much of a deposit will allow you to forego account fees while earning interest on the balances. Some banks allow customers to begin with smaller balances while paying modest account fees and earning no interest until each account has a certain amount. If your initial deposit won’t be enough to reach that level, but you expect to make more deposits over the next year that will exceed that threshold, opening an offshore account now is a reasonable financial strategy.
6. Interest and Other Returns on Account Balances
As you look at time deposit and other offshore account types, it’s not unusual to find some tiered structure. The bottom line is that as your account balance increases, you may qualify for earning greater amounts of interest. Many offshore banks provide schedules that make it easy to know how much you need to place and maintain in an account to enjoy the most significant returns.
Keep in mind that banks in some nations will automatically adjust your interest rate; there’s nothing you have to do other than make the deposits and note when they’re posted. In other nations, banking policies and procedures may require you to request the upward adjustment in the interest rate formally. Clarify that point before you open the account.
7. Multicurrency Availability
This is another point that may be important for those who travel abroad regularly. It doesn’t matter if it’s for business or pleasure; utilizing the same account for transactions with different currencies makes travel that much easier. It’s also helpful in tapping into the current rate of exchange between specific currencies and being able to stretch your resources a little future.
Don’t assume that multicurrency availability is a staple for all offshore banks; that’s not the case. When evaluating different institutions, specifically ask about this feature and how it works. Assuming that the structure for this benefit is compatible with the way you plan on doing business or spending money while traveling, that bank is worth considering further.
8. Ease of Making Global Transfers
The time may come when you want to do more than transfer funds from a domestic account to your offshore account. This is especially true with business operations that are in place in more than one nation. It may be to your advantage to transfer funds from one offshore account to an offshore account in another part of the world.
This is another feature that many offshore banks offer, but not by banks in all nations. While you might be able to work around this by transferring funds from one offshore bank to a domestic account and then making a second transfer to the intended destination, this could be more costly as well as time-consuming.
Should this be something that you envision using in the future, make sure the offshore bank that’s chosen allows for quickly making point-to-point global transfers without involving your domestic accounts.
Rely on an Established and Reputable Offshore Banking Institution
When comparing different offshore banks on these critical points, don’t forget to consider how each one fits in with your financial plans for the future. A well-rounded institution like Caye International Bank is likely to provide all the services needed while offering the security of a stable setting and banking laws designed to protect depositors.
Contact the professional services team at Caye International Bank today to find out more information about your offshore banking options.
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Luigi Wewege is the Senior Vice President and Head of Private Banking of Caye International Bank, headquartered in Belize, Central America. Outside of the bank, he serves as an Instructor at the FinTech School in California, which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of The Digital Banking Revolution, available in audio, Kindle, and paperback formats throughout all major international online bookstores – now in its third edition.