Does a banking license automatically permit certain other activities, e.g., broker dealer activities, payment services, issuance of e-money?
Banking & Finance (2nd edition)
The Banking Law sets out the activities a Banking Corporation may carry on in Israel. This is a closed list that defines what a bank is entitled to engage in. The list includes, inter alia:
The acceptance of money deposits in current accounts, subject to withdrawal by check upon demand; the acceptance of other money deposits; the issue of securities; maintenance of a system of payments; purchase and sale of foreign currency; the granting of credit; investments in securities; the safekeeping and administration, as an agent, bailee, dealer or trustee, and excluding the granting of underwriting obligation, the management of a provident fund, the management of a mutual joint investment fund, and management of portfolios management ;the purchase and sale of securities as a dealer or agent; broking in financial and economic transactions in the sphere of its business; pension Advice and also the performance of a transaction for a client, as these terms are defined in the Pension Advice and Marketing Law; Investment advice and Investment Marketing according to the Investment Advice Law.
A Banking license automatically permit a Banking Corporation to engage in the activities detailed in the list above. Investment Advice services are included in the list above, but are also regulated in the Investment Advice Law. Generally, under the Investment Advice Law, a bank, and any other Banking Corporation which is authorized to do so pursuant to the Banking Law may engage in Investment Advice without obtaining a license; however, those engaging in Investment Advice on behalf of the bank must be employees of the bank or Banking Corporation, who are either licensed advisers or authorized to engage in Investment Advice without a license pursuant to the Investment Advice Law. Note, that the Investment Advice Law prohibits banks themselves from engaging in Portfolio Management activities (however they may control a separate portfolio management company). As for Brokerage activities and performance of clients transactions, those activities are not regulated, and do not require licensing, as of today in Israel.
Also, a recent amendment to the Securities Law, 1968, added a prohibition on offering securities trading services through a securities trading system that is not managed by a stock exchange licensed in Israel (and therefore applies to brokerage services for the purchase of securities on stock exchanges outside of Israel) by determining a permit regime for entities seeking to engage in the aforesaid activities. Following this amendment the ISA published the conditions for receiving a general permit for foreign stock exchanges and for other entities, including Israeli Banking Corporations.
Regarding custody services, there are recommendations of an inter-ministerial committee for "Custodian Services in the Israeli Capital Market" that were published on 2011 and were adopted by the Bank of Israel on 2013. The main purpose of these recommendations is the protection of client assets, inter alia, in cases of insolvency of the custody agent.
An entity which has been granted a license for deposit business may also conduct exchange bureau business and / or leasing operations (sec 1 para 3 BWG [“legal license”]). Further, all licensed entities may conduct ancillary activities pursuant to the legal license, which are directly connected with banking activities in accordance with the scope of the license granted. Credit institutions are also allowed to carry out certain activities pursuant to the WAG 2018, some payment services set out in the Payment Services Act (“ZaDiG 2018”) and under specific conditions the entities may issue electronic money in accordance with the Electronic Money Act 2010 (“E-GeldG 2010”).
The Banking Licence automatically permits the Banking Services, as elaborated in question two, other activities are not automatically covered.
Credit institutions may pursue the following business activities:
- receive repayable funds from the public;
- other fund-raising;
- granting of credit or other finance;
- financial leasing;
- payment services;
- issuing of electronic money and related procession of data;
- collection of payments;
- foreign exchange services;
- notary services;
- securities trade and other securities business;
- provision of guarantees;
- credit information operations;
- housing savings associated with acquisitions of shares in a housing company and real estate brokerage;
- other similar business activities.
A credit institution may also provide investment services. The Articles of Associations or rules of the credit institution must contain information on the investment services provided or investment activities conducted by the credit institution and the credit institution must notify the FFSA of the commencement of any business including investment services or ancillary services and specify how the conduct of business rules and the client protection provisions are complied with.
Investment services and investment activities of credit institutions are primarily regulated by the Finnish Investment Services Act and the provision of payment services is subject to the Finnish Payment Services Act (290/2010, as amended).
Credit institution and electronic money institution licenses allow to provide payment services and ser-vices related to electronic money.
Credit institutions may also carry out operations related to their activity such as:
- Exchange transactions;
- Trading in gold, precious metals and coins;
- Investment, subscription, purchase, management, custody and sale of securities and any financial products;
- Advice and assistance in wealth management;
- Financial management advisory and assistance, financial engineering and, generally, all services intended to facilitate the creation and development of companies, subject to the legislative provisions relating to the illegal exercise of certain professions;
- Leasing operations of transferable or real estate property for institutions authorised to car-ry out financial leasing transactions;
- Payment services;
- Issue and management of electronic money.
When it provides investment services, the exercise of related operations and the conservation activity are subject to the prior approval provided of the ACPR.
A banking license enables banks to conduct other services such as dealer or payment services activities as explained under Questions 2 and 3 of this Guide.
Furthermore, certain investment services (i.e. intermediation in public offerings of capital markets instruments, investment advisory services and portfolio management) cannot be conducted by deposit banks and participation banks. Development and investment banks are entitled to conduct such investment services as subject to the relevant licenses of the CMB. Furthermore, no bank is able to operate multilateral trading systems and on-the-counter market places, irrespective of bank type.
Pursuant to the German Act on the Supervision of Payment Services (Zahlungsdiensteaufsichtsgesetz – “ZAG”), credit institutions licenced to do business in Germany may provide payment services and conduct e-money business.
Further, the purchase and sale of financial instruments on behalf of and for the account of others qualifies as licensable securities service in the form of contract broking. This activity is covered by a banking licence pursuant to section 32 KWG, if applied for, see 3 above.
The banking license does not automatically permit other licensed activities, such as broker dealer activi-ties. However, most banks have both, a banking and a broker dealer license and/or request such a li-cense in the licensing proceedings. Switzerland does currently not have a comprehensive regulation of payments services and issuance of e-money.
No, a banking license allows the holder to perform only banking activities which are contained in the li-cense and for which the bank has applied.
Only in some cases, depending on the nature of the other activity and the relevant legal and regulatory framework applicable to that activity.
A banking licence issued under the BA will authorise the entity to carry on banking business (subject to any conditions specified by MAS within the licence). Therefore, a licensed bank will therefore have to observe all requirements applicable to it under the regime of the BA.
Apart from banking business, a licensed bank may also engage in other financial activities that are regulated under other statutes.
Overall, the various regulatory regimes in Singapore for financial services are activities-based, in that a single financial institution may be subject to regulation under several distinct frameworks based on the activities it chooses to engage in. As an integrated financial services regulator, MAS does not typically require a financial institution to apply for and hold multiple licences under each of the applicable frameworks.
For instance, broker-dealer activities are regulated by MAS under Part IV of the Securities and Futures Act (Cap. 289) (“SFA”) and a broker-dealer must ordinarily hold a capital markets services licence issued by MAS. A licensed bank or approved merchant bank that wishes to engage in broker-dealer activities is exempt from having to apply for and hold a capital markets services licence. Instead, it will only be required to file a notification with MAS under Part IV of the SFA to obtain exempt status. However, the exempt status relates only to licensing. To ensure a level playing field, MAS still requires compliance with all applicable business conduct requirements of the SFA regime.
Similarly, the provision of investment advisory services are regulated by MAS under the Financial Advisers Act (Cap. 110) (“FAA”). A licensed bank or approved merchant bank that offers investment advisory services is exempt from having to apply for and hold a financial adviser licence, but must instead file a notification with MAS under the FAA to obtain exempt status. Again, the exempt status relates only to licensing, and all applicable business conduct requirements under the FAA regime would continue to apply.
At the time of writing, payment services in Singapore have a relatively light touch regulatory framework. The Payment Systems (Oversight) Act (Cap. 222A) (“PSOA”) gives MAS the authority to oversee and control payment systems as well as stored value facilities, but licences and approvals are not generally required unless the payment system or stored value facility has developed to such a size or has such a market impact, as to give rise to systemic risk concerns, at which point MAS may then apply a more intrusive regulatory regime to that particular payment system or stored value facility. Generally speaking, banks in Singapore are able to offer various forms of payment services with relatively minimal restrictions.
A banking license automatically permits payment services.
A bank is allowed to conduct certain other businesses incidental to the banking business, such as issuing guarantees, securities lending, being a custodian, and making finance leases, under the Banking Act. However, if an incidental business requires a separate license or other qualifications, the bank must satisfy those other requirements as well.
For example, a banking license does not automatically permit broker dealer activities. The Financial Instruments and Exchange Act (FIEA) maintains a separation between banking and securities businesses. If a bank is registered with the FSA pursuant to the FIEA, it is allowed to conduct certain securities businesses, such as dealing with government bonds, investment trusts and certain derivatives transactions, but not certain other securities businesses, such as dealing with corporate bonds and equities.
As for the issuance of e-money, it is divided into two services. One is a prepaid service, which is used only for the payment of goods and services; and the other is a fund transfer service, which may be used not only for the payment of goods and services but also for simply remitting money without any underlying transaction. Banks are required to register with the FSA pursuant to the Payment Services Act before they can provide prepaid services, but not for fund transfer services which are considered banking business (see Nos. 2 and 3).
A person is authorised to carry out that banking business, which the applicant has applied for in its ap-plication to the CBO and in respect of which a licence was then issued. If a person wishes to carry out any additional activities, they must be approved and licenced by the CBO to carry out those additional activities, i.e. through the issuance of an investment banking licence, hire purchase, lease financing li-cence or the operation of money exchange centres.
In the case of a person wishing to carry out investment banking activities through an investment banking licence, further approvals may also need to be obtained from the CMA.
Yes, pursuant to Article 20 of Law of Georgia on the Activities of Commercial Banks, the banking license permits:
(a) Selling and purchasing monetary instruments, including cheques, bills of exchange and depositary certificates, securities, debt instruments or interest rates of futures and options, currency and interest rate instruments, debt documents, foreign currency, precious metals, and gems, with its own and customers‘ funds;
(b) performing monetary and non-monetary payment transactions and cash-collection services;
(c) issuing means of payment and organising their circulation (including payment cards, cheques, and bank bills);
(d) providing interest-free banking services;
(e) rendering intermediary services in financial markets;
(f) performing fiduciary (trust) transactions, soliciting and placing funds by order of customers;
(g) storing and registering valuables, including securities;
(h) providing credit reference services;
(i) central depositary activities under the Law of Georgia on Securities Markets;
(j) leasing property; (subject to restrictions under the law)
(k) providing payment services, operating payment system, performing the functions of a paying agent;
(l) providing services related to all of the above activities.
A license under the BA is always issued based on a specific business model and scope of services and does not automatically cover the provision of all services and activities. Generally, however, a banking license may cover the provision of investment services and the issuance of e-money. Banks do not re-quire a separate license under the payment services act.
The banking license referred to above is broad and allows a credit institution to carry out, among others, the following activities (apart from the core bank activity i.e. accepting deposits and lending) (Article 3(7) of the Financial Sector Law):
- the provision of payment services within the meaning of Article 1(38) of the Law of 10 November 2009 on payment services;
- trading for one's own account or for the account of customers in: (a) money-market instruments (cheques, bills, certificates of deposit, etc.); (b) foreign exchange market; (c) financial futures and options; (d) exchange and interest-rate instruments; and (e) transferable securities;
- money broking;
- portfolio management and advice;
- issuance of e-money;
- investment services and activities listed in part A of Annex II to the Financial Sector Law; and
- ancillary services listed in part C of Annex II to the Financial Sector Law.
A banking authorisation automatically allows the following activities:
a) acceptance of deposits or other repayable funds;
b) lending, including the granting of guarantees and other commitments, financial leasing and factor-ing;
c) payment services;
d) issuing and administering other means of payment not covered by the foregoing subparagraph, e.g. paper cheques, paper travellers’ cheques and bankers’;
e) trading for own account or for account of customers in money market and foreign exchange in-struments, financial futures and options, exchange and interest rate instruments, goods and trans-ferable securities;
f) participation in securities issues and placement and provision of related services;
g) money broking;
h) portfolio management and advice, safekeeping and administration of securities;
i) portfolio management and advice in relation to other assets;
j) advice to undertakings on capital structure, corporate strategy and related questions and advice as well as services relating to mergers and the purchase of undertakings;
k) dealings in precious metals and stones;
l) acquisition of holdings in companies;
m) insurance mediation;
n) credit reference services;
o) safe custody services;
p) leasing of movable property, under the terms authorised to financial leasing companies;
q) provision of the investment services and investment activities;
r) issuance of e-money.
- The banking licence issued in terms of the Banking Act does not grant automatic permission to per-form other activities, although the MFSA may, upon the applicant’s request and subject to any other law regulating such activities, authorise an institution to carry out all or any of the following additional activities: Financial Leasing;
- Payment Services;
- Issuing and administering other means of payment (travellers’ cheques, bankers’ drafts and similar instruments);
- Guarantees and commitments;
- Trading for own account or for account of customers in: money market instruments (cheques, bills, certificates of deposit, and similar instruments); foreign exchange; financial futures and options; ex-change and interest-rate instruments; and transferable securities;
- Participation in securities issues and the provision of services related to such issues;
- Advice to undertakings on capital structure, industrial strategy and related questions and advice as well as services relating to mergers and the purchase of undertakings;
- Money broking;
- Portfolio management and advice;
- Safekeeping and administration of securities;
- Credit reference services;
- Safe custody services; and
- Issuing electronic money.
In any case, the carrying out of the above-listed activities in isolation will not constitute the business of banking in terms of the Banking Act, and the carrying out of any other activity not listed above is prohib-ited unless so authorised by the MFSA. Furthermore, the authorisation to carry on the above additional activities is without prejudice to the credit institution obtaining any other appropriate licence that it might require under any other law, and the MFSA may require the credit institution to carry out such activities through a subsidiary.
The banking field is a highly regulated field and as such the license received will clearly stipulate the scope of powers the bank has, if the bank wishes to do further activities it must get the permission of the Qatar Central Bank prior to commencing the other activates.
A banking licence may cover a range of activities, but the right to carry out any given activity is subject to the scope of the respective individual banking licence. The list of activities prescribed by art. 18 of EGO 99/2006 does not imply a general authorization for a credit institution to carry out all of the activities stated, and there is no automatic authorization of a credit institution in respect of any of the named activities. Instead, the NBR licence will specifically authorize a credit institution, on a case-by-case basis, to carry out particular individual activities. The respective activities for which authorization is sought should correspond to the business plan that has been submitted to the NBR together with the application for authorization (art. 17, EGO 99/2006).
Regarding financial intermediaries, broker dealing is allowed, and this activity falls under the regulatory oversight of the Financial Supervisory Authority, in application of the legislation that regulates financial services.
The bank may perform services for which it has received consent of the National Bank of Serbia as well as services that are, by nature, similar to the services for which consent was received. Special license of the Securities Commission is required for broker-dealer services.
The scope of the authorized activities that a bank has vary and a bank will need to have the correct permissions as part of its authorization.
Banks have broad powers to engage in activities incidental to banking, including lending, discounting commercial paper and other financial assets, furnishing payment services, and providing advisory, transaction and settlement processing services. A bank with fiduciary authority may act as a trustee or personal representative of decedents.
While banks broadly have the power to act as custodians of securities and to provide advice with respect to investments in securities, they have only a limited authority to engage in the activity of effecting transactions in securities. The limitation on the combination of securities activities and banking were first adopted by the Glass-Steagall Act, which constituted part of the Banking Act of 1933. While key provisions of the Glass-Steagall Act have since been repealed, banks are still prohibited from engaging directly or indirectly (with limited exceptions through a separate fully-licensed broker-dealer subsidiary) in dealing in, or underwriting (as part of public offerings), securities other than certain federal and state government and quasi-government securities. Other securities-related activities are permitted subject only to fairly significant limitations.
Yes, the banking authorisation released by the Bank of Italy pursuant to article 14 of the Italian Banking Act automatically allows banks to (i) issue, redeem and distribute electronic money; (ii) provide payment services (as listed in annex I to the PSD); (iii) provide ancillary activities to payment services (such as guaranteeing the execution of payment transactions, money exchange and data storage); (iv) manage payment systems.
A commercial bank shall undertake only commercial banking business and business incidental to or necessary for undertaking commercial banking business as prescribed in the notifications of the BoT. Activities currently covered by BoT notifications include e-money services, securities business (exclud-ing equities), trustee activities, escrow agent, insurance brokerage business, etc.
No. E.g. entities have to obtain special authorisation from Bank of Slovenia to provide payment services as a payment institution or to provide electronic money issuance services.