What legal entities can operate as banks? What legal forms are generally used to operate as banks?
Banking & Finance
Under the Banking Law, the BoI is authorized to grant various bank licenses to Israeli corporations except for foreign bank licenses which can be granted to a corporation incorporated outside of Israel, acting as a bank in its origin location. Currently, Israeli banks are organized as limited liability companies. In theory, a bank may take the forms of other types of corporations such as a cooperative society. When a Non-Israeli bank obtains a foreign bank license from the BoI, it is not required to incorporate a legal entity in Israel. Typically, the license is granted to the foreign bank entity, and allows it to open a branch in Israel.
In accordance with the relevant rules of the Hungarian Banking Act, companies limited by shares or branch offices may operate as banks. In Hungary banks generally operate in the form of private companies limited by shares or as a branch offices of foreign credit institutions. Only few banks operate as public companies limited by shares.
In Latvia, a bank may be founded only as a JSC (i.e., public company, the shares of which may be publicly tradable).
The legal form taken by a bank as a legal person may only be a public limited liability company or a private limited liability company. The first option is generally used to operate as a bank in Lithuania.
Only joint stock companies (in Polish Spółka Akcyjna) can operate as banks in Poland.
The Romanian banks, the Romanian branches of the foreign credit institutions or, through passporting under certain conditions, the credit institutions authorised and supervised in an EU Member State.
Romanian banks may only be set-up as joint stock companies.
A foreign company can carry out banking activity through:
- a branch;
- a wholly owned subsidiary (WOS); or
- a subsidiary with aggregate foreign investment of up to a maximum of 74% in a private bank (49% through the automatic route and up to 74% on approval by the government) (see question 17).
An Indian private bank is typically operated as a company incorporated under company laws.
While a foreign bank is allowed to carry out banking activities through a branch, the RBI encourages banks to follow the WOS structure and provides near national treatment in respect of branch expansion. Foreign banks, which commenced operations in India after 2010 and which fulfil the prescribed criteria laid down by the RBI are required to mandatorily adopt the WOS structure. Such criteria, among others, include banks declared as being systematically important by the RBI, banks with complex structures, banks that are not widely held, banks not providing adequate disclosures in their home country and likewise. Foreign banks in India operating prior to 2010 have the option to continue their banking business through the branch mode or convert into a WOS. To date, most have remained branches.
To obtain a banking license in Japan, the applicant must be a kabushiki kaisha (a stock company) with a minimum stated capital of 2 billion yen. The kabushiki kaisha is a common form of business entity in Japan. Some foreign financial institutions have used kabushiki kaisha as the corporate entity for their banking subsidiaries in Japan.
However, most foreign banks establish a branch in Japan. The branch must hold assets of 2 billion yen or more in Japan in the form of Japanese government bonds, deposits with the Bank of Japan or other Japanese banks, or other assets designated by the Enforcement Ordinance of the Banking Act.
Only a ‘company’ can operate as a bank in Malta. For the purpose of the Banking Act, ‘company’ means a limited liability company constituted in Malta in accordance with the Commercial Partnerships Ordinance or the Companies Act, or any law which may from time to time be in force, or a company registered, licensed or holding an equivalent authorisation in another country outside Malta under the laws of any country provided that such company, if not constituted in Malta, would qualify to be so registered or licensed under the laws of Malta.
Under the BOFIA, only companies duly incorporated in Nigeria can carry on banking business in Nigeria. This means that a legal entity seeking to operate as a bank must first be incorporated as a company with the CAC in accordance with the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria, 2004.
Limited liability companies and savings banks can operate banks, see our answer to question 3 for further details. The largest players in the Norwegian banking sector (serving both the commercial and retail banking market) are organised as public limited liability companies, however the commercial banks are vastly outnumbered by the savings banks, serving mainly their local market. Most savings banks are now members in one of the three major strategic banking alliances. Each alliance is organised so that the participants jointly owns product companies on insurance, investment services, asset management and real estate agency business. These alliances also cater for cooperation on the technical side, i.a. within development of information and communication technology.
Only legal entities adopting the legal form of a limited company (“sociedade anónima”) can operate as banks. Their object shall only be restricted to banking activities.
Without prejudice to the provisions of the Commercial Companies Law and the Foreign Investment Law, the Qatar Central Bank, in accordance with the conditions and regulations set by it, license the practice of banking business for banks that take the form of joint-stock companies and offer their shares for IPO.
However, the Qatar Central Bank may grant a licence to any type of business other than a joint-stock company, subject to the approval of the Council of Ministers.
A bank may primarily be established in the form of a corporation (Aktiengesellschaft), but may also be a cooperative (Genossenschaft, with certain special requirements), a sole proprietorship (Einzelfirma, for private bankers), a general partnership (Kollektivgesellschaft), or a partnership limited by shares (Kommanditaktiengesellschaft). Cantonal banks may take the form of an establishment (Anstalt) or a corporation (Aktiengesellschaft) on the basis of Cantonal law.
Only the entities incorporated as joint stock (anonim şirket) companies are allowed to operate as banks in Turkey.
A banking license may be grated to (i) a limited-liability corporation (“GmbH”), (ii) a stock corporation (“AG”), (iii) an European public company (“SE”), (iv) a cooperative society (“Genossenschaft”), (v) an European cooperative society (“SCE”) or a savings bank (“Sparkasse”). However, most banks choose the legal form of a stock corporation for operating their business.
Only Bulgarian joint-stock companies in process of incorporation and branches of foreign banks (as discussed above) may apply for a banking license.
Only Stock Corporations (Compañías Anónimas) can be eligible as banks. The minimum stockholders will be two. The corporate purpose must be limited to financial activities.
The Constitution (2008) expressly prohibits media companies to have any direct or indirect relationship, through administrators or shareholders chain with financial activities companies (Article 312).
Section 7 of CBA 1971 allows incorporated bodies, natural persons and unincorporated bodies to act as banks in Ireland. However, Section 18(2) of the Companies Act 2014 of Ireland (as amended) (CA 2014) prohibits private companies limited by shares and incorporated in Ireland from acting as credit institu-tions. As such an Irish corporate entity intending to operate as a credit institution must be incorporated as a designated activity company (DAC) (as provided for under CA 2014) or as a public limited company (PLC). Most banks established in Ireland are DACs or PLCs.
Banks, mutual or cooperative banks, specialised credit and municipal credit banks can operate as banks following the credit institution license.
In order to issue a credit institution license, the ACPR control the suitability of the legal form for the pro-posed activity.
French credit institutions are incorporated under the form of unlimited companies by shares, that is to say under the form of SA (public limited company), SAS (simplified joint-stock company) or sometimes under the form of limited partnership.
Each commercial legal entity can operate as a bank, with the exception of a private limited liability company that has been established by one person (EBVBA/SPRLU). Usually banks are structured as public limited liability companies (NV/SA) or as cooperative companies.
A credit institution may operate as a public limited company or commercial association and the provisions of law regarding public limited companies or savings and loan associations apply thereto. A credit institution founded as a public limited company is required to use the word “bank” in the business name thereof and a credit institution founded as an association is required to use the word “association bank” in the business name thereof. In Estonia banks usually operate as a public limited companys.
Credit institutions may be exclusively established and operate in Greece under any of the following forms:
- a Société Anonyme of Law 2190/1920 or
- a Credit Cooperative Institution of Law 1667/1986 or
- a European Company of Regulation 2157/2001 or
- a European Cooperative Society of Regulation 1435/2003
The variety of legal entities that operate as banks in Germany is extremely broad and range from public law entities and cooperatives to stock corporations. There are little limitations as to which legal forms can be used to operate a bank and, in principle, even single merchants (Einzelkaufmann), ie natural persons, can operate a bank, if they have received their licence prior to 1976. Today single merchants are excluded from operating a bank, but this is the only explicit exemption with regard to credit institutions and securities trading firms (Wertpapierhandelsunternehmen) can however, in principle, be operated by single merchants. The minimum capital requirements that have to be complied with to obtain a licence safeguard the protection of the customers in situations where legal forms are chosen that do not per se require certain amounts of equity.
Banks themselves are the legal entities, most commonly in the form of corporations or similar associations. As described above, an organiser or organisers of a bank may select a specific type of bank charter, and the bank is organised in corporate form as that type of institution.
Although there are several types of financial institutions as stated in question two above, the only ones allowed to operate as banks in Colombia are banks, including commercial banks and mortgage banks. Such entities must be incorporated under the form of Corporations (Sociedad Anónima) or Cooperative Associations (Asociaciones Cooperativas) and properly authorized by the Superintendence of Finance. Foreign entities can carry out bank nature activities as a branch of the foreign financial institution.
Credit institutions may be organised as commercial banks, co-operative banks, savings banks, mortgage credit institutions or as branches of foreign credit institutions. Commercial banks are either public or non-public limited liability companies. Local banks are generally co-operative banks or savings banks, which typically operate in a limited geographic area. Mortgage credit institutions issuing covered bonds (ie bonds secured mainly by housing loans) are defined as credit institutions having the form of a limited company and engaged only in mortgage credit bank operations under a licence granted by the FFSA.
Investment banks are generally investment firms organized as limited liability companies and authorised to provide investment services, engage in investment activities and provide any ancillary services as defined in the MiFID II and implemented by the Investment Services Act or fund management companies authorised to provide portfolio management and investment advice.
Most banks take the form of limited companies, with larger banks typically being public limited companies and smaller ones being both public companies and private companies.