Puerto Rico
Financial Licenses

Puerto Rico's Banking License for Sale

9/27/2021 8:00:00 AM
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Switzerland, Andorra, United Arab Emirates, Puerto Rico, Panama. The countries mentioned have something in common that attracts a huge number of people worldwide, and that is precisely their banking industry. Some of these countries are considered tax havens because of their numerous advantages in terms of banking institutions. 

Puerto Rico has then emerged as one of the most promising places regarding its banking institutions and their service costs. Since they are not subject to CRS, it allows them not to share banking information with foreign authorities. That said, their existing banking institutions are currently doing well and could get even better in the near future. 

You might want to build a whole institution from scratch or maybe you want to purchase an existing one with all the features it already has, however, you could take a look at the reasons to get into it before. 

Reasons to Get a Banking License in Puerto Rico

Around the world, several procedures are a little tedious to complete, including licensing because of the amount of paperwork and legislation that must be completed in each different jurisdiction. However, once the licenses are obtained, the project can start without any problems.

Here we have some of the reasons to get involved with it: 

The tax advantages here with financial institutions are often quite striking. These institutions can enjoy tax exemptions for 20 years on income from foreign capital and a potentially 4% tax rate on income from local capital.

These are numbers that any experienced investor would be interested in, especially considering the debacles in this area in the legislations of other countries in the region such as Panama, which have gradually been reforming their banking laws. 

Another important aspect to take into account in Puerto Rico's legislation is the strength of its banking secrecy. In other countries in the region, and even in the world, banking secrecy has been a characteristic of tax havens that over time has been diminishing and yielding to pressure from the authorities of other countries.

Despite these circumstances, which undoubtedly represent a blow for investors who like privacy, for Puerto Rican banking institutions this is an opportunity for the amount of capital that would enter in the short and medium-term. 

However, banks are not the only financial institutions eligible for these licences, but other institutions such as insurers, investment advisors and others are also eligible. Puerto Rico is quite flexible in this respect. 

Finally, something we have not mentioned so far and just as important, is that in Puerto Rico there are two ways to obtain a banking licence to operate within the country: Apply for a new licence or buy an existing banking institution. 

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Buying an Existing Banking Institution

The advantages of buying an existing financial institution are many, starting with the fact that these entities already come with an approved licence from the time of their founding, but in addition to that, they come with a customer base that would help sustain the entity during the transition of ownership. 

Most businesses in any field suffer in this regard, getting off the ground and acquiring a solid enough customer base to be self-sustaining over time. 

Not to mention all the logistics and time involved in building new infrastructure, acquiring assets, building banking software, and so on. But the reality is that acquiring an existing institution saves all these problems and allows the investor to start operating almost immediately. 

There may be some people willing to invest in building a new financial institution in Puerto Rico from scratch, but the truth is that legislation in Puerto Rico regarding the opening of new international institutions is becoming increasingly difficult, so the real opportunity lies in acquiring an existing institution. 

Moreover, the country's Federal Reserve considers it better to open accounts for financial institutions that have immediate online capabilities rather than those that have to operate manually from scratch.

Specifically, some of the advantages of acquiring an existing banking institution may be: 

- License to acquire, trade, sell and hold all types of foreign currencies and precious metals

- Online & Mobile Banking (with its respective app)

- Pre-Approved for VISA card program

- Top Tier CORE banking system

- Robust and comprehensive compliance programReserve Trust (Direct Account)

- Wide option of FX options

- Domestic and International Wires

As for the steps to acquire one of these entities, we have: 

1. Provide a letter stating the reasons why you wish to acquire the bank. 

2. Sign a letter of intent regarding the acquisition. 

3. Basic due diligence. 

4. Sign a full confidentiality agreement between the buyer and seller of the institution. 

5. Share all relevant documentation and information. 

6. Finally, visit one of the institution's offices in Puerto Rico in person or, if unable to do so, virtually. 

Surely in the coming years, we will see how the market in this sector moves a little in Puerto Rico with all these changes in the legislation of other countries with similar characteristics, and with the same legislation that has driven Puerto Rico with the formation of new international banking institutions. 

In Mundo we can provide you with all the information on this subject and the best assistance for any action you wish to take regarding banking licenses in Puerto Rico, do not hesitate to contact us. 

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