The parliament of the jurisdiction has passed a law paving the way for a new banking regime that it hopes will appeal to those with niche offerings.

Lawmakers in the Isle of Man have approved legislation to create a new alternative banking regime (ABR) that grants two additional types of banking licence in the island, continuing moves to compete with rival offshore jurisdictions and reverse a fall in banks registering there. 

The new rules take effect from 1 August and are designed to attract more niche players in the banking world, a statement from the government said.

The ABR widens the scope for banking opportunities on the Isle of Man, aiming to bring benefits to sectors that require niche banking facilities. The ABR splits the existing Class 1 (deposit taking) banking licence into three sub classes: 1 – for the typical existing bank and any taking retail deposits; 2 – for non-retail deposit takers - those that may only provide services to corporates, and a very limited class of individuals ("restricted depositors"), and 3 - for representative offices of foreign banks, which are not permitted to hold deposits or conduct any other regulated activities.

“Our existing banks provide an excellent service, but the number of operators has fallen since 2008 and this initiative aims to increase the choice for businesses in the Isle of Man and internationally,” Laurence Skelly MHK, minister for the Department of Economic Development.

In 2010, a total of 34 deposit-taking banks were registered on the Isle of Man; in March 2016, according to official data, 22 banks were registered, overseeing around £45.3 billion of deposits, down from £54.6 billion at the end of 2010.

The development of such a regime was flagged to this publication earlier in the year and is one of a number of initiatives being worked on by the UK Crown Dependency. The government of the Isle of Man will hope that such new banking options will boost business in the island. Last month, policymakers sought to soothe nerves after the international ratings agency Moody’s Investor Services reduced its outlook on the island to “negative” from “stable” following the 23 June Brexit vote by UK voters.