How to open a deposit in a foreign bank. Practical tips

The main purpose of such a step may be to protect your savings. The interest on such deposits is rather low at present. Besides, European banks set an entry threshold fairly high.

However, despite all current realities, foreign banks are considered quite stable and reliable. And in case of a bank’s liquidation, revocation of licence or acquisition by a larger competitor, clients are insured against possible risks and do not lose their money.

Another reason why you may be interested in a foreign bank is a purchase of property, business or making regular payments for studying abroad.

You start by choosing a country.

Not that long ago, the most popular destinations for opening an account, including a deposit account, were Cyprus and the Baltic states. But what happened in their banking sectors is well known and need not be reminded of.

Those looking to safeguard their money now opt for such countries as Switzerland, Austria, Liechtenstein and Luxembourg.

When choosing a country (unless already linked to a jurisdiction by business or property), you can be guided, for example, by its credit ratings.

The first thing to look for in a bank is reliability: a licence (obviously), the bank’s history and experience. Nowadays the Internet provides enough information based on which you can draw your own conclusions about the institution’s reputation.

Confidentiality is also important. However, not from the viewpoint of client anonymity, but from the position of data protection. Since we live in an era of universal transparency, the information being collected is rather detailed. Therefore, guaranteeing data protection is crucial.

Other things to note are the terms and conditions offered: interest on deposits, bank fees for services and transfers, minimum deposit, possible penalties for early termination of the agreement, and so on.

Usually you can always choose a currency in which your money will be stored. Pay attention to the interest rates: they are not particularly high, but, then again, it is not about earning income, it is about protecting your money.

The main currencies for deposits are traditionally the US dollar, the euro, and the Swiss franc. It can also be the national currency of the country where you are making a deposit.

Once you have decided on the country and chosen a particular financial institution, the next step is to research what it offers to and requires from its future clients. It is also necessary to study the interest rates and the fee schedule.

The first thing any potential client is required to do is to confirm the origin of the funds to be deposited. Banks must satisfy themselves that everything is proper and transparent. In this respect, non-residents are subject to a greater scrutiny and more requirements than locals.

One of the main conditions for putting your money on deposit is the entry threshold. This is the minimum sum required by the bank to be held in the account at all times.

In Europe, this minimum balance of account varies from tens of thousands to millions of euros, US dollars or Swiss francs.

Some bankers allow you to make a smaller deposit (known as initial payment) at the time of opening. But in this case, there is always a time limit for depositing the full minimum.

Interest rates abroad are generally quite low.

For the euro, they range from 0.5% to 1.5% per year.

For US dollar deposits, they can be slightly higher – from 1% to 4.5%.

You should also remember about bank fees for opening and maintaining a deposit, and other fees and charges.

Most foreign banks offer more or less the same interest rates on deposits. We have compiled our top 10 of banks that we, with our 20 years of experience with foreign credit institutions, find most economically attractive and convenient for clients.

You can do this personally or engage an intermediary. Either option has its pros and cons. Intermediaries can be branches of foreign credit institutions in your home country, as well as foreign or local professional firms that provide such services.

If you have decided to open an account on your own, you will most likely have to travel to another country. This will increase the overall cost by at least travelling and accommodation expenses. You should also bear in mind that not every bank has employees who speak your native language, which may create difficulties with, say, filling in forms or providing documents. Although some people, on the contrary, find this option more preferable.

The involvement of an intermediary makes the account opening process much easier, but also more expensive. Although not that much more expensive if you take into account the travelling expenses in the case of opening an account on your own.

Intermediary firms usually have arrangements with bankers: it is bank representatives that will travel to your country, and they can hold a meeting with you in the offices of such an intermediary firm.

Besides, the consultants will do all the major work for you, you will only need to provide the documents and put your signatures where necessary.

Some intermediary firms have also recently started offering their clients a pre-approval procedure: when all issues are agreed with the bank in advance, which increases the chances of opening an account.

However, it is very important to choose an intermediary carefully. It should be a firm with a good reputation and relevant experience. Otherwise, the consequences can be unfortunate.

So, you have chosen the country and the bank, studied all the terms and requirements. Now it is time to meet the bankers.

You need to collect a package of necessary documents and present them at the meeting.

You can do this in person, or have your intermediary firm do it for you. That same intermediary can also organize the meeting and signing of the relevant forms and applications.

The documents will then be reviewed by the bank and a final decision will be made.

There is a general list, but remember that each bank can add something different to it.

As a rule, you will be asked to provide the following:

• notarized copy of passport
• visa (if you need one to enter the country and the meeting is held abroad)
• proof of address – utility bill (electricity/gas bill, etc.)
• CV
• completed bank forms (purpose, time limits, expected profit)
• clean criminal record certificate
• letters from other credit institutions where you hold accounts
• proof of income
• title deed for an overseas property (if any)
• certificate of household composition
• optionally: reference letters from business partners or financial institutions you work with

Once the documents are provided, they go to the compliance department. All banks cherish their reputation, especially in light of the global anti-money laundering and terrorist financing trends. Therefore, they carefully examine the information and documents submitted by a potential client.

The compliance department divides all clients into ‘risk categories’ using special databases (WorldCheck, World Compliance, and others) and collects the information available on the Internet.

Here, having a website and a social media profile will do you good.

Only after such a check can a potential client become an actual one.

One of the undoubted advantages of undergoing a compliance check with the help of a qualified intermediary is that specialists are familiar with the procedure and all the specific requirements and can therefore make the whole process much easier and quicker for you.

The bank has made a decision to open an account for you. What do you do next?

First of all, you transfer a sum of money equal to the minimum balance agreed earlier. Now that an online system – Internet banking – is almost ubiquitous, there is no problem operating an account.

If you open a deposit account, bear in mind that such accounts often have limits on the number of transactions, plus payments must be associated with personal needs (purchase of real estate, payment for utilities, tuition fees, etc.).

Banks sometimes set limits on transactions and cash withdrawals too.

Transactions may be suspended if the bank thinks that the information provided by you is insufficient or untrue.

Therefore, our advice is to be completely honest and responsible when providing documents.

A deposit in a foreign bank can offer more benefits in addition to protecting the savings.

The advantages include:

• possibility to use it in obtaining citizenship or residence permit in some countries;
• possibility to take out a loan;
• choice of currency for your savings;
• useful for those planning to study or work abroad, and for owners of foreign property;
• high compensation rates in the case of liquidation of a financial institution.

The drawbacks include:

• large deposit amounts at low deposit rates;
• complex checks and a large number of documents.

In general, given all the pros and cons, you can always choose the most suitable option for you.

The initial deposit is the sum to be deposited into a foreign bank account in order to activate it. Most savings banks require the initial deposit equal to the minimum balance of the account. However, some Swiss banks offer their clients a different procedure for depositing these amounts.

Settlement banks require a much smaller initial deposit than savings banks: usually it does not exceed USD 5 000 or EUR 5 000. Besides, some banks allow to use this amount later on, while others do not.

Banks that open accounts for commercial transactions generally allow a zero balance. However, there are some banks that require a certain sum to stay in the company’s account at all times (that sum depends on the requirements of the particular bank). If the balance of account drops below a certain threshold, the bank reserves the right to charge an additional fee for account maintenance. In some cases, the bank may also inform the client that the account can be closed.

As for the specific figures, Swiss banks currently require the minimum balance between CHF 1 000 000 and CHF 2 000 000; Austrian banks – between EUR 500 000 and EUR 1 000 000.

Banks specializing in settlement accounts and settlement-savings accounts do not normally have a minimum balance requirement. For example, there is no minimum balance requirement in Baltic banks. By contrast, Austrian or Liechtenstein banks that open settlement accounts do require a minimum balance.

There are various conditions under which it would be possible to spend money held in a foreign account as a minimum balance. Moreover, the minimum balance is often part of the initial deposit.

Generally, it is acceptable to use some of the initial deposit, but there is a certain sum that is ‘frozen’ in the foreign bank account. This practice is common for many settlement-savings banks. For example, one Liechtenstein bank requires the initial deposit and the minimum balance of CHF 300 000 each, while another bank in the same country wants the minimum balance of CHF 100 000 but allows the initial deposit of at least CHF 10 000.

Some banks do not permit spending the minimum balance under the threat of blocking the account. Other banks allow their clients to spend the minimum balance, but introduce additional fees and charges for it. For example, one of the Baltic banks does not charge for account maintenance if the average monthly account balance is more than EUR 100 000, but if the balance is lower, the bank charges a monthly maintenance fee.

In savings banks, the minimum account balance is normally equal to the initial deposit. Depending on the bank’s policy, it is acceptable to reach the minimum within a certain period of time, such as one to six months; once the minimum is achieved, it cannot be to reduced.

With some banks it is possible to agree, for example, on a one-off temporary reduction of the balance (in case a large amount is urgently needed). Such a step can be agreed with the bank in advance, with a promise that the profit made will be channelled back to the account after a while.