What Shall I Do if I Want to Start Financial Institution

Many people dream of becoming self-employed and working exclusively for themselves, that is, doing what they like or implementing their own business ideas. Working for yourself, you decide what orders to fulfill, how and when to work.

One of the most popular and promising areas in the modern commercial world is the banking sector. Development in this direction and general banking activities are attractive to many entrepreneurs. However, starting a financial institution is expensive. In this article, we will consider the main features and prospects that this niche can give.

There are companies that specialize in the establishment and licensing of companies (click here) around the world. They have been working for many years, which is a confirmation of our professionalism and extensive experience.

Preparing for Establishment: What Shall I Do?

Preparing for Establishment: What Shall I Do?
Source: erstebank.rs

Banking is available to businessmen with significant start-up capital. To establish interaction with government agencies, stable ties will be needed. Sometimes, it can take years to establish a strong commercial relationship. If everything works out, the entrepreneur will have an asset with a high level of profit. To open your bank, you need to weigh the pros and cons.

In the future, an entrepreneur can get a good income, provided that he/she can correctly start the business and manage it competently. It’s mandatory to consider living conditions in the country. The slightest panic provokes depositors to take money from deposits, reducing the amount of finance on the balance sheet of a credit institution.

So, first of all, it is necessary to conduct detailed research of the existing market. From time to time, there is an economic crisis on the world stage. The banking sector is feeling the impact of negative consequences.

Lending is slowing, and the mortgage market is surviving thanks to government support. In difficult times, investors withdraw money from deposits, leaving structures without capital. The economy is gradually adapting to difficult conditions.

Considering all the pros and cons, it is important to research how resistant a particular market is to crisis fluctuations, as well as to general ups and downs of the economic environment of the jurisdiction. In addition, it is important to consider the position of the jurisdiction on the world stage.

Business-Plan Development

Business-Plan Development
Source: alphajwc.com

Registration of a financial institution is a process that consists of several stages and requires strict adherence to the procedure for each of them. All types of licenses are issued by the local regulatory body, the type of which depends on the jurisdiction chosen for business.

Financial companies are required to disclose information about the ownership structure both during registration and those who already operate on the basis of a license. So, let’s take a closer look at how to prepare for this process.

First, it is important to note that you need to bring your business into line with certain requirements. Each jurisdiction puts forward its own rules and regulations, however, there is a certain list that is common to almost all commercial spaces. Thus, what shall you prepare?

Corporate Office for Finance Operations

The main requirement for such an office is its availability. It may be owned by the company or leased. At the same time, the premises must be equipped with computers and other equipment (for example, communications equipment) sufficient to provide financial services provided for by the financial license that the applicant is going to receive. For certain types of financial institutions, additional requirements for premises may be established.

Make a Smart Business Plan

Reflect on the costs of launching and developing the project, potential income and planned activities aimed at achieving the set goals, in order to assess the development prospects and the payback period of investments.

Bank Registration

The first thing you need to open a commercial bank is state registration. Individual entrepreneurs are not licensed. Therefore, the preferred form of ownership: LLC or JSC.

Obtaining a License

Licensing of banking activities is carried out by the central regulator in each jurisdiction. The document can be obtained only after checking the amount of the authorized capital.

Preparation of A Package of Documents

To obtain a license, the following documents must be submitted to the Central Banking Institution or another regulatory body. This package depends on the business-activities scale: small institutions, huge corporations, etc.

  1. Statement
  2. A complete business plan for a financial institution
  3. The founding documents of the company
  4. Minutes of the founders’ meeting
  5. Receipt for payment of state duty
  6. Copies of documents (certified by a notary) confirming the state registration of the founders of the future bank
  7. Potential customer audience
  8. Questionnaires of applicants for the post of head of the institution, chief accountant, and their deputies
  9. Auditor’s opinion on the reliability of the financial statements of the founders as legal entities
  10. Confirmation of the source of origin of money that the founders contribute to the authorized capital as individuals
  11. Documentation to form an opinion on the company’s compliance with the requirements for conducting cash transactions
  12. The entire list of founders along with characteristics

The procedure for obtaining a license can take up to six months; this period depends entirely on the jurisdiction. In addition, if you resort to the professional assistance of our experts, companies will help you obtain the necessary license and establish a banking institution as quickly as possible. The term is counted from the moment of submission of documents. If everything is in order, the regulator issues a license.

Operational Infrastructure

Operational Infrastructure
Source: chase.com

A bank is not an institution where you can close your eyes to some of the shortcomings of the staff. Here you should choose the staff as meticulously as possible. Of course, this is the task of the personnel department and the bank’s own security service, but it would also be useful for the director to know as much as possible about his employees.

If a potential employee who came to the interview has any debt, outstanding loan, or some financial offenses, then you should already look at him with caution and double-check everything before hiring. This is especially true for employees who are related to the financial side of the process.

When opening your own bank, you must be aware that from this moment you have a serious responsibility both to any customer and to the country. Violations and financial fraud are unacceptable here. Even minor inconsistencies of your enterprise with certain standards will lead to the revocation of the license, and as a result, freeze your enterprise.

An important component of this business is a financial plan. When opening a financial institution, you need to clearly understand what financial injections from you (from the founders) will be required. Just want to make a reservation that spending is very considerable.

As for the payback period of the bank, there is no need to count on quick profits. The payback period will be at least five years under the best economic conditions. In some cases, this period is doubled.

A very important role is given to the compilation of a correct IT system for a banking institution. This is especially true for those structures that intend to work with online banking and develop their own applications. It is important to find a good and reliable IT provider who can individually approach this issue.

Offering Financial Products and Services

Offering Financial Products and Services
Source: leverageedu.com

Entrepreneurs also need to decide in which direction the activities of a banking institution will be carried out. There are some features for certain types of activities of financial institutions. These features lie in the exclusivity of certain types of activities that are provided by financial institutions, as well as the need to obtain licenses. Types of financial services that require a license:

  • Loan and financial lending at the expense of own funds;
  • Factoring;
  • Financial leasing;
  • Currency exchange;
  • Insurance activity;
  • Financial lending at the expense of borrowed funds;
  • Attraction of funds for deposits (for credit unions);
  • Activities involving direct or indirect attraction of financial assets from individuals;
  • Activities involving direct or indirect attraction of financial assets from legal entities;
  • Provision of guarantees and warranties;
  • Pension provision services;
  • Money transfer;
  • Financial clearing.


Financial Institution
Source: chubb.com

Thus, the legislation of any jurisdiction provides for the obligation of a financial institution to have appropriate qualified personnel with a certain education, work experience, qualifications, the availability of the necessary certificates, no criminal record and a bad business reputation. Establishing a bank is a rather complicated matter that requires a competent and qualified approach.

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