Does a banking license automatically permit certain other activities, e.g., broker dealer activities, payment services, issuance of e-money?
Banking & Finance
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. 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.
No, it does not. The authorization to establish a credit institution covers activities closely related to the setting up of banking operation only. Separate application proceeding shall be made with respect to any additional activities. Once a license has been issued by the HNB with respect to the operation of a credit institution, such license extends to the financial services and auxiliary financial services only, that are actually listed by the relevant permit of the HNB.
Yes, the banking licence permits the bank to perform certain other activities, e.g., provide payment services and to issue e-money.
A bank shall have the right to provide all financial services which include broker dealer activities, payment services, issuance of e-money etc. In addition to the provision of financial services, a bank may pursue only such other activities as those in the absence of which financial services cannot be provided, which assist in the provision of the financial services or are otherwise directly related to the provision of the financial services.
A conventional banking license cover the following activities:
- receipt of deposits and other repayable funds;
- lending (including mortgage loans);
- financial lease (leasing);
- payment services;
- provision of financial assurances and financial guarantees;
- conclusion of transactions, at one’s own or a client’s expense, on the money market instruments (cheques, bills, deposit certificates, etc.), a foreign currency, financial future and option transactions, the establishment of a currency exchange rate and interest rate, public securities and precious metals;
- investment services;
- financial mediation (activities of an agent);
- currency exchange (in cash);
- settlement of payments between credit institutions (clearing);
- storage and administering of monetary funds;
- provision of services related to issue of securities;
- issue of electronic money;
- management of investment funds, closed-ended investment companies, pension funds or investment companies with variable capital;
- other activities listed in the law.
A specialised bank is eligible to provide all conventional bank activities, except for provision of investment or pension fund management, public offering of securities and other similar services.
No, a banking license allows the holder thereof to carry out only those banking activities which it has applied for permission to perform. However, banks may do (and usually do) such exemplary activities if specified in the license/statute.
Yes. Pursuant to article 18 of the Romanian Banking Law, a banking license allows the provision of expressly mentioned and limited activities, such as payment services, issuance of e-money, trading of financial and money market instruments, participation in securities issues and the provision of services relating to such issues, advice to undertakings on capital structure, industrial strategy and related questions and advice, M&A services, money broking, portfolio management and advice, safekeeping and administration of securities, credit reference services.
Although the list of other permitted activities is limited, it does include a very general item ‘other activities and services related to the financial sector, subject to compliance with specific legislation’, provided that the regulator’s approval is obtained.
No, activities of the nature described above do not form part of the definition of banking services and trigger the requirement for additional regulatory licenses. For example, stock broking, merchant banking, portfolio management and other such services relating to the Indian securities market can only be undertaken after seeking the relevant registration with SEBI. Similarly, a separate license or registration is required under the Payment and Settlements Act, 2007 for undertaking payment services and for issuance of e-money or conducting activities relating to payment wallets and e-wallets.
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).
The business activities of a credit institution may, besides the business of banking, include any or all of the additional activities listed below:
- 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; exchange 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.
Note that the carrying out of the above-listed activities in isolation does not constitute the business of banking in terms of the Banking Act. The carrying out of any other activity not listed above is prohibited unless so authorised by the MFSA.
MFSA authorisation to carry on the above supplementary activity is without prejudice to the credit institution obtaining any other appropriate licence that it might require under any other law. Furthermore, the MFSA may require the credit institution to carry out such activities through a subsidiary.
A banking license does not automatically permit other activities, rather it permits only the activities expressly authorized by the regulatory authorities (please see Question 3). Prior to 2010, Nigeria allowed the issuance of universal banking licences, which allowed banks with such licenses to carry out activities including broker dealer activities etc. However, following the Great Financial Crises of 2008, the CBN by the Regulation on the Scope of Banking Activities & Ancillary Matters, NO. 3, 2010 repealed the Universal banking regime and by virtue of the Commercial Banking Regulation, the Merchant Banking Regulation and Specialized Institutions Regulation separated the categories of banking licenses into Commercial and Merchant Banking Licenses. Specialised banking licences had existed even before then. Other than Merchant Banks (which are authorized to carry out investment activities, the Securities and Exchange Commission (SEC), existing under the Investment and Securities Act, 2007 (ISA) regulates and supervises broker dealer firms, which are not banks but are allowed to carry out broker dealer activities.
The management, operation and supervision of payment services on the other hand is licensed and regulated by the CBN.
Yes. Upon obtaining a banking license, the relevant entity is licensed to carry out the regulated activities of receiving deposits and other repayable funds from the public, granting credit and posting guarantees and providing payment services. A bank must be specifically licensed in order to undertake any other regulated financial activities. Norwegian banks are also subject to statutory restrictions on undertaking activities (whether regulated or not) not covered by their license.
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 factoring;
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 instruments, financial futures and options, exchange and interest rate instruments, goods and transferable 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.
A licence permits the bank to carry out the general banking services. Any additional activities must be approved/licenced by the Qatar Central Bank.
The banking license does not automatically permit other licensed activities, such as broker dealer activities. However, most banks have both, a banking and a broker dealer license and/or request such a license in the licensing proceedings. Switzerland does currently not have a comprehensive regulation of payments services and issuance of e-money.
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.
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”) and under specific conditions the entities may issue electronic money in accordance with the Electronic Money Act 2010 (“E-GeldG 2010”).
There is no automatic permission of any of the banking services and activities. A bank is authorized to carry out activities as long as they are expressly included in its banking license. In case of breach of this rule, there is a risk of legal nullity of the transactions.
A bank may perform broker dealer activities only after it is duly and additionally licensed by the Financial Supervision Commission (FSC).
Each banking license/authorization shall determine the type of activity or service the entity is allowed to provide in Ecuador, COMF mentions they could be active, passive, contingent and other financial services operations, in accordance with the entity’s corporate purpose, line of business, specialties, capabilities and other requirements and conditions established by the Monetary and Financial Policy and Regulation Board. A banking license does not automatically permit other activities, like broker dealer activities, payment services, issuance of e-money.
A banking licence as issued in Ireland allows activities beyond those captured under the term ‘banking business’. A bank licensed under Section 9 of CBA 1971 (credit institution) can carry out a variety of banking related and associated activities as listed in Annex 1 to the Capital Requirements Directive 2013/36/EU (CRDIV) (implemented in Ireland by the European Union (Capital Requirements) Regulations 2014 of Ireland (SI 158/2014) (CRRI) and the European Union (Capital Requirements) (No. 2) Regulations 2014 of Ireland (SI 159/2014)), including but not limited to:
(a) payment services (as defined in Article 4(3) of Payment Services Directive 2015/2366/EU);
(b) issuing electronic money (E-Money Directive 2009/110/EC);
(c) investment services (MiFID and MiFID II and its sister regulation MiFIR as of 3 January 2018);
(d) broker-dealer services in any of the following:
- money market instruments;
- foreign exchange;
- financial futures and options;
- exchange and interest-rate instruments;
- transferable securities;
(e) money broking.
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.
Yes, pursuant to Articles 4 and 6 of the Banking act, the activities which may be covered by a banking license include: financial leasing, payment services, issuing and administering other means of payment (e.g. travellers’ cheques and letters of credit), guarantees and commitments, certain transactions for the institution’s own account or for the account of clients, participation in securities issues and the provision of services related to such issues, advice to undertakings on capital structure, business strategy and related matters, as well as advice and services relating to mergers and acquisitions of undertakings, intermediation on the interbank market, management or advice, safekeeping and administration of securities, credit reference services, safe custody services and the issuance of electronic money. However, the activities that an undertaking intends to roll-out need to be specified in a programme of operations which has to be submitted to the NBB as part of the licensing process. Strategic addition or cessation of certain activities in the course of the life of the credit institution will have to be submitted for approval to the NBB.
A banking license (a credit institutions licence) also permits certain other activities such as issuing e-money, providing payment services or conducting business as creditors or credit intermediaries. A credit institution may conclude transactions and perform acts other than listed as a financial services in Estonian Credit Institutions Act (hereinafter the “CIA”) if these are directly ancillary or supplementary to its principal activity. In order to conclude such transactions or perform such acts, a credit institution may found a company or gain control over another company.
Yes, it is possible for a credit institution to apply for and obtain a single license which, other than of accepting deposits and other repayable funds, allows it to perform one or more of the remaining services enumerated in Question 2 above.
In addition, the BoG may allow credit institutions to undertake supplemental or secondary banking activities, provided that all relevant risks are adequately hedged.
Pursuant to the German Payment Services Act (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.
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.
When a company is authorized by the Superintendence of Finance to be incorporated and to perform certain financial activities, companies are required to adhere their activity to those specifically authorized in the resolution issued by the authority. When applying for the authorization, the petitionary must include a draft of the future company’s bylaws and business plan, where they can state the different activities they intend to perform.
However, it is important to note that even with prior and express authorization from the Superintendence of Finance, restrictions or limitations imposed by the authorities described in question one, are applicable for financial institutions. Such restrictions may involve credit extensions, investments, conditional operations, lending activities, acquiring certain goods when they are not received as collaterals, foreign currency loans and negotiations, and managing a third-party’s funds.
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).
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.