International Business Companies (IBC's)

HUTT RIVER PROVINCE

International Banking Act 2004

Arrangement of Sections

PART 1 - PRELIMINARY

1. Interpretation

2. Banking Business

3. Application of Act

PART 2 - LICENSING OF INTERNATIONAL BANKING BUSINESS

4. Licence needed to carry on international banking business

5. Application for licence to carry on international banking business

6. Registrar of Banks to issue or refuse licence within 6 weeks

7. Criteria for the issue of a licence

8. Criteria for issue of licence to foreign banks or financial institutions

9. Conditions of a licence including annual fees

10. Revocation of licence

PART 3 - SUPERVISION AND ENFORCEMENT

11. Banking supervision

12. Compliance inspection

13. Participation of a foreign regulatory authority

14. Enforcement action

15. Appointment of examiner

16. Investigation of suspected contravention

PART 4 - OBLIGATIONS AND RESTRICTIONS ON LICENSEES

Division 1 - Obligations on licensees

17. Physical presence of licensees

18. Maintenance of minimum capital

19. Computation and form of minimum capital

20. Keeping of accounting records

21. Appointments

22. Registrar of Banks may remove officers

23. Operations outside HR Principality

24. Banking business name

Division 2 - Restrictions of licensees

25. Restriction on disposition of significant interest

26. Restrictions on carrying on banking business

27. Restrictions on advances exceeding 25 percent of capital

28. Restrictions on advances without security

29. Other restrictions on advances

30. Other restrictions on international banking business

PART 5 - AUDIT, DISCLOSURE AND TAX EXEMPTIONS

31. Appointment of approved auditor

32. Duties of auditor

33. Licensee to provide Registrar of Banks with report

34. Audit conducted in accordance with international standards

35. Disclosure of information by the Registrar of Banks and persons authorised

36. Disclosure of protected and other information generally

37. Exemption from taxes and stamp duty

PART 6 - MISCELLANEOUS

38. Offences

39. Protection of the term 'bank' etc

40. Indemnity from liability

41. Variation of terms and conditions

42. Court proceedings may be heard in camera

43. Personal directives by the Registrar of Banks

44. English the authentic text

45. Appointment of Registrar of Banks

46. Regulations

47. Commencement

HR Principality

International Banking Act 2004

To provide for the licensing, regulation and supervision of international banking business and related purposes

BE IT ENACTED by order of HRH Prince Leonard as follows:

PART 1- PRELIMINARY

1. Interpretation

In this Act unless the contrary intention appears:

accounting records includes the working papers and other documents as are necessary to explain the methods and calculations by which financial statements are made up and includes data held electronically or in any other form of non paper based system.

administrator means a person appointed as administrator under subsection 15.

approved auditor means an auditor appointed under subsection 32.

banking business has the meaning given by section 2.

company means a body corporate incorporated, formed or constituted under the laws of HR Principality, or any other country.

compliance inspection means the activities referred to in subsection 12.

director means an individual who exercises management and policy-making functions at the highest level of a company.

disqualified person means a person referred to in subsection 22.

Euro means the common currency of the European Union (€).

eligible capital of a company means the capital of that company which qualifies as eligible capital under international adequacy standards in accordance with the Basel Capital Accord.

examiner means a person appointed as an examiner under subsection 16.

financial statements means profit and loss accounts, balance sheets, and includes notes (other than directors' reports) attached to, or intended to be read with, any of the profit and loss accounts or balance sheets.

foreign bank or financial institution means a company, other than a company incorporated or continued under the International Business Companies Act 2004, that is licensed to carry on banking or related business in a jurisdiction outside of HR Principality.

foreign regulatory authority means an authority or body outside of HR Principality that exercises functions corresponding to, or similar to, the functions exercised by the Registrar of Banks.

international banking business means banking business that is conducted in a currency other than the currency of HR Principality and with a person who is not a resident of HR Principality, or the Commonwealth of Australia.

law enforcement authority means an authority or body, within or outside of HR Principality, dealing with the investigation of suspected criminal activity.

licence means a licence issued under section 5.

licensee means a company licensed under this Act to carry on international banking business.

locally incorporated licensee means a licensee that is incorporated or continued under the International Business Companies Act 2004.

Minister means the minister responsible for finance.

prudential matters in relation to a licensee includes matters relating to the conduct by the licensee of its affairs, with integrity, prudence and professional skill, in such a way as to keep itself in a sound financial position and not to cause or promote financial instability.

prudential supervision means the supervision of prudential matters including:

the collection and analysis of information in respect of prudential matters relating to licensees; and

the encouragement and promotion of licensees to carry out sound practices in relation to prudential matters; and the evaluation of the effectiveness and carrying out of such practices.

Registrar or Registrar of Banks means any person appointed to that position for HR Principality

regulations mean regulations made under this Act.

relevant person means a licensee, a former licensee, subsidiary or holding company of a licensee.

2. Banking business

A person, or company is carrying on banking business if he or it:

accepts deposits of money by the public that are withdrawable, or payable upon demand, after a fixed period or after notice; or

undertakes the public sale or placement of bonds, certificates or other securities;

and uses such deposits or the proceeds of such sales or placements, either in whole or in part, for loans or investments for the account and at the risk of the person.

A person is taken to be carrying on banking business if the person:

advertises for or solicits deposits of money, or offers to sell or place bonds, certificates or other securities; and

uses or intends to use the funds so acquired, either in whole or part, for making loans or investments, or any other activity authorised by law or customary banking practice, for the account and at the risk of the person.

Banking business does not include the acceptance of a deposit of money which is paid by a company ("the paying company") to another company if:

the paying company is a subsidiary of the other company; or

the paying company and the other company are both subsidiaries of a third company.

3. Application of Act

This Act has effect despite the International Business Companies Act of 2004 and if there is any conflict between the provisions of this Act and the provisions of that Act, the provisions of this Act prevail; however

A) nothing in this Act exempts a licensee from complying with the provisions of the International Business Companies Act of 2004; and

B) until the outcome of an application under this act is final, the name chosen for the bank will be reserved for the applicant.

PART 2 - LICENSING OF INTERNATIONAL BANKING BUSINESS

4. Licence needed to carry on international banking business

A) A person or company must not carry on international banking business unless the person or company is licensed under this Act.

B) If a person or company contravenes subsection A, the person is guilty of an offence.

5. Application for licence to carry on international banking business.

A) A company must apply in writing to the Registrar of Banks for a licence to carry on international banking business.

B) An application under subsection A must:

i) be in such form as is specified by the Registrar of Banks; and

ii) be accompanied by:

a statement disclosing the ultimate and intermediate, if any, beneficial ownership of the applicant; such documents as are specified by the Registrar of Banks; the prescribed application fee and the prescribed annual licence fee.

C) The Registrar of Banks may in writing request that an applicant provide such additional information and documents as the Registrar of Banks considers necessary to determine the application.

D) If a request has been made under subsection C, the applicant must provide such additional information and documents to the Registrar of Banks within the time specified by the Registrar of Banks.

E) If an application is refused, the Registrar of Banks is to refund the annual fee to the applicant. However, the application fee is not refundable.

F) An applicant must not furnish any information or document that is false or misleading in any material particular in connection with an application.

G) The prescribed application fees will be:

i) In the case of a foreign bank, or financial institution that has existed for a minimum of two years prior to its application under this Act for a full licence a fee of three thousand Euro (€3,000).

ii) In the case of a foreign bank, or financial institution that has existed for a minimum of two years prior to its application under this Act, for a restricted licence, a fee of two thousand Euro (€2,000).

iii) In the case of a licensee first incorporated in HR Principality applying for a full license a fee of five thousand Euro (€5,000).

iv) In the case of a licensee first incorporated in HR Principality applying for a restricted license a fee of three thousand Euro (€3,000).

6. Registrar of Banks to issue or refuse licence within 6 weeks

A) The Registrar of Banks must within 6 weeks after receiving a completed application for a licence and all other information and documents requested by the Registrar of Banks:

i) issue a licence to the applicant subject to such terms and conditions as the Registrar of Banks considers fit; or

ii) refuse the application and inform the applicant of the refusal.

B) The Registrar of Banks must advise an applicant in writing of the reasons for its refusal to issue a licence under this section.

7. Criteria for the issue of a licence

A) The Registrar of Banks must not issue a licence unless it is satisfied that:

i) the ownership spread, financial capacity and financial history (if any) of the applicant are satisfactory; and

ii) each director and manager of the applicant is a fit and proper person with sufficient experience in international banking to be involved with operations or management of an international bank; and

iii) each associate of the applicant is a fit and proper person to have an interest in an international bank; and

iv) the risk management, accounting and internal control systems of the applicant are satisfactory; and

v) the capital structure of the applicant is adequate and the amount of unimpaired paid up capital of the applicant is at least €250,000; and

vi) the applicant, if issued with a licence, intends to carry on international banking business and the kind of international banking business that the applicant intends to carry on is acceptable; and

vii) a written undertaking has been given by the applicant to the Registrar of Banks that the applicant will provide the Registrar of Banks with any information that the Registrar of Banks may require for it to carry out its prudential supervision functions under this Act; and

viii) a written statement has been given by the applicant to the Registrar of Banks that the applicant will keep the Registrar of Banks informed of any significant developments adversely affecting its financial soundness or reputation and the financial soundness or reputation of its holding company (if any); and

ix) the applicant upon the issue of the licence will comply with this Act and the regulations; and

x) the relationship between the applicant and its associates will not prejudice the effective supervision of the banking business of the applicant; and

xi) if a foreign bank or financial institution is an associate of the applicant - the applicant and the foreign bank or financial institution will be effectively supervised on a consolidated basis; and

xii) issuing the licence is not against the public interest and would not be detrimental to the reputation of HR Principality.

2) In subsection A, a person is an associate if the person:

A) has a significant interest in the applicant; or

B) is a subsidiary of the applicant; or

C) is a holding company of the applicant.

3) If a person has a significant interest in the applicant and a significant interest in another company, that other company is an associate of the applicant for the purposes of subsection (1).

8. Criteria for issue of licence to foreign financial institutions

A) This section applies to an application for a licence to carry on international banking business made by a foreign bank, or financial institution that has existed for a minimum of two years prior to its application for a license under this act.

B) The Registrar of Banks must not issue a licence unless satisfied:

i) of the matters set out in subsection A; and

ii) the reputation of the foreign bank, or financial institution is satisfactory; and

iii) the relevant law and regulatory environment relating to the foreign bank, or financial institution's home country is acceptable; and

iv) the foreign bank, or financial institution, has provided a written acknowledgment that the Registrar of Banks may discuss its conduct and status with the relevant authority in its home country.

9. Conditions of a licence including annual fees

A) A licence issued under this Act must not be assigned or transferred and any purported assignment or transfer is null and void.

B) A licence is subject to terms and conditions as are determined by the Registrar of Banks.

C) A licence issued under this Act remains in force until the Registrar of Banks revokes it.

D) A licensee must pay to the Registrar of Banks the prescribed annual licence fee on each anniversary of the licence being issued.

v) In the case of a foreign bank, or financial institution that has existed for a minimum of two years prior to first being granted a full license under this Act the annual license fee will be three thousand Euro (€3,000) on each anniversary of the licence being issued.

vi) In the case of a foreign bank, or financial institution that has existed for a minimum of two years prior to first being granted a restricted license under this Act the annual license fee will be two thousand Euro (€2,000) on each anniversary of the licence being issued.

vii) In the case of a licensee first incorporated in HR Principality that has been granted a full license under this Act the annual license fee will be five thousand Euro (€5,000) on each anniversary of the licence being issued.

viii) In the case of a licensee first incorporated in HR Principality that has been granted a restricted license under this Act the annual license fee will be three thousand Euro (€3,000) on each anniversary of the licence being issued.

E) A licensee that fails to pay the fee by the due date is liable to a surcharge equal to the amount of the annual licence fee payable to the Registrar of Banks within 7 days after the due date for payment of the annual licence fee. Failure to do so will result in cancellation of the Banking License.

F) An annual licence fee and any surcharge are debts due to the Registrar of Banks and are recoverable in a court of competent jurisdiction.

G) i) The Registrar of Banks shall retain as its income 45% of all license fees and application fees paid under this Act in order to cover its costs of operation;

ii) The Registrar of Banks shall pay the balance of all license and application fees to the Principality account as nominated by HRH the Head of State of HR Principality.

10. Revocation of licence

A) The Registrar of Banks may revoke the licence of a licensee if:

i) the Registrar of Banks is entitled to take enforcement action against the licensee; or

ii) the licensee has failed to commence carrying on international banking business within 6 months after the issue of its licence; or

iii) the licensee has ceased international banking business for a period exceeding 3 months; or

iv) the licensee has made a written request to the Registrar of Banks for its licence to be revoked.

B) If the Registrar of Banks intends to revoke a licence he must give notice in writing to the licensee stating that the Registrar of Banks intends to revoke the licence and the grounds upon which it intends to revoke the licence.

C) The licensee may within 14 days after receiving the notice under subsection B submit in writing reasons why its licence should not be revoked.

D) The Registrar of Banks may revoke a licence:

i) if the licensee does not make a submission under subsection C; or

ii) having taken into account the submission made by the licensee, the Registrar of Banks is of the opinion that the licensee has failed to show good reason why its licence should not be revoked.

E) The Registrar of Banks must give a licensee written notice of a revocation.

F) A revocation takes effect:

i) on the date the notice referred to in subsection E is given to the licensee; or

ii) such later date as is specified by the Registrar of Banks in the notice.

G) If a licence is revoked under this section, the licensee must:

i) cease to carry on international banking business on and from the date the revocation takes effect, or earlier; and

ii) return to the Registrar of Banks the original licence and all copies of the licence in its custody or control.

PART 3 - SUPERVISION AND ENFORCEMENT

11. Banking supervision

A) The functions of the Registrar of Banks include:

i) to undertake in accordance with the provisions of this Act and the regulations the prudential supervision of the international banking business of licensees;

ii) to review international banking business and implement internationally accepted standards for the prudential supervision of international banking business;

iii) to recommend to the Minister such amendments to this Act and the regulations as the Registrar of Banks considers necessary to enable it to supervise international banking business in accordance with internationally accepted standards.

B) In carrying out the functions under subsection A in relation to a licensee, the Registrar of Banks must have regard to the following matters:

i) the capital adequacy of the licensee in relation to the size and nature of its international banking business;

ii) the asset concentration and risk exposure of the licensee;

iii) the separation of international banking business of the licensee from the financial interests of any person having a significant interest in the licensee;

iv) the adequacy of the liquidity of the licensee in relation to its liabilities;

v) the quality of the licensee's assets and the adequacy of its loss provision;

vi) the internal controls, risk management and accounting systems of the licensee;

vii) the quality of the management of the licensee; and

viii) such other matters as the Registrar of Banks considers relevant.

C) The Registrar of Banks may formulate in writing guidelines and issue directives for the purpose of the prudential supervision of the international banking business of any licensee.

D) The Registrar of Banks may vary or revoke a directive or guideline.

12. Compliance inspection

A) The Registrar of Banks may, for the purposes of the prudential supervision of the international banking business of licensees, do all or any of the following at the cost of the licensee;

i) inspect the premises and the business, within or outside HR Principality, including the systems and controls;

ii) inspect the assets, including cash, belonging to or in the possession or control of a relevant person;

iii) examine records belonging to or in the possession or control of a relevant person, being records that in the opinion of the Registrar of Banks relate to the carrying on of international banking business by the relevant person.

B) If, after a compliance inspection, the Registrar of Banks is satisfied that a person is or has been an officer, employee or agent of a relevant person or holds or has held a significant interest in a relevant person, the Registrar of Banks may, by notice in writing, require the person:

i) to produce any records in the person's possession or control, or

ii) to provide any information within the person's knowledge or belief;

concerning the international banking business carried on or formerly carried on by the relevant person.

C) A notice issued under subsection B must state the time period within which and the place where the records must be produced or the information provided.

13. Participation of a foreign regulatory authority

A) Subject to subsection B, the Registrar of Banks may, upon the request of a foreign regulatory authority, permit that authority to take part in a compliance inspection undertaken by the Registrar of Banks under section 12.

B) The Registrar of Banks must not permit a for