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UK banking structural reform and its impact
in the Isle of Man
Liaison took place with relevant banking groups,
and the UK Prudential Regulation Authority, on
the more detailed implications for the Isle of Man
operations of the major UK retail banks that are
subject to the UK’s ‘ring-fencing’ regime. That
regime comes into full effect from 1 January 2019.
The Isle of Man operations (and other parts of the
UK groups that are not in the EEA) must be outside
of the ring-fenced part of these groups. In some
cases this will involve legal entity restructuring in
the Isle of Man.
The Isle of Man’s Alternative Banking Regime
During the period, and following consultation,
the regulated activity of deposit taking was
split into three sub-classes: class 1(1), class 1(2)
and class 1(3). All banks currently have class
1(1) licences.
Class 1(2) banks are only able to undertake
business with certain depositors (‘restricted
depositors’) which are bodies corporate and
individuals subject to stringent minimum net
worth criteria. Class 1(2) banks are not members
of the Island’s deposit compensation scheme. The
ownership structure permitted for these banks is
wider than for class 1(1).
Class 1(3) banks are representative offices of
overseas banks.
Discussions continue with a number of parties
interested in applying for class 1(2) or class 1(3)
licences and guidance has been issued to assist
potential applicants.
Funds and Investment Services
Over the period of this report, the team held
a number of annual business meetings with
investment and funds services businesses (which
include financial advisers, investment managers,
stockbrokers, fund administrators and managers,
custodians and investment platforms).
Supervisory visits to financial advisers and
discretionary investment managers continued
to focus on suitability of advice and disclosure
requirements, as well as AML/CFT compliance.
With regard to fund administrators and managers,
focus was given to AML/CFT and take-on
procedures applied when evaluating prospective
new business. It is always important to understand
any interconnectedness between the various
parties / functionaries to a collective investment
scheme and ensure that the overall structure and
purpose of what is being established is for the
benefit of investors / prospective investors into the
scheme.
Over the period there was a significant focus on
remediation work which included intervention into
a number of collective investment schemes and
licenceholders. This included applications to Court
where necessary.
Some of the project work planned for the period was
reprioritised as a result. The project to update and
simplify the Island’s funds offering to take account of
the revised IOSCO Principles and Methodology will
continue over the forthcoming year.
Isle of Man Financial Services Authority Annual Report 2016/17 • 17