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How To Open a Bank Account for Subsidiaries of International Corporations

Epico Finance

Updated: Jan 23


Expanding an international corporation into new markets often involves establishing local subsidiaries. One of the most critical steps in setting up a subsidiary is opening a local bank account. This enables efficient financial operations, facilitates transactions in the local currency, and ensures compliance with local regulatory requirements.


how-to-open-a-bank-account-for-subsidiaries

Why a Local Bank Account is Crucial for Subsidiaries


Establishing a local bank account for your subsidiary offers several advantages:


  1. Efficient Financial Management:

    Manage payroll, supplier payments, and other operational expenses in the local currency.

  2. Compliance with Local Laws:

    A local account is often a legal requirement to comply with tax and financial regulations in the subsidiary's country.

  3. Faster Transactions:

    Local bank accounts ensure quicker payment processing compared to cross-border transactions.

  4. Building Local Credibility:

    Having a local account builds trust with clients, employees, and suppliers in the region.

  5. Reduced Transaction Costs:

    Avoid high international transfer fees and exchange rate fluctuations by conducting transactions locally.



Challenges in Opening a Bank Account for Subsidiaries


International corporations often face specific challenges when trying to open a bank account for a subsidiary:


  1. Regulatory Requirements:

    Banks require extensive documentation to ensure compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations.

  2. Local Bureaucracy:

    Each country has unique banking laws and procedures, which can be time-consuming and complex to navigate.

  3. Parent-Subsidiary Structure:

    Banks may need detailed information about the relationship between the parent company and the subsidiary.

  4. High-Risk Perception:

    Some banks consider international corporations as high risk, especially if the subsidiary operates in industries like fintech or crypto.



Step-by-Step Guide to Opening a Bank Account for Subsidiaries


Step 1: Choose the Right Banking Partner

Identify banks in the subsidiary's country that offer services tailored for international corporations. Factors to consider include:


  • Global Reach: Choose banks with international networks for seamless global transactions.

  • Multi-Currency Accounts: Essential for subsidiaries that handle payments in different currencies.

  • Digital Banking Features: Look for user-friendly online platforms for easy account management.


If you would like to get an up to date list of digital banks for account opening in your specific geography, fill out our contact form with your details and we will send it to you by email.


Step 2: Gather the Required Documentation

Prepare the necessary documents to streamline the application process. These typically include:


  1. Parent Company Documents:

    • Certificate of incorporation.

    • Articles of association.

    • Ownership structure and proof of shareholders.

  2. Subsidiary Documents:

    • Certificate of incorporation for the subsidiary.

    • Tax identification number (TIN).

    • Proof of registered address.

  3. Identity Documents for Directors:

    • Passports or national IDs.

    • Proof of residential address.

  4. Business Operations Documents:

    • Business plan outlining the subsidiary’s operations and objectives.

    • Projected financial statements or revenue forecasts.

    • Details of local suppliers and clients (if available).

  5. Compliance Documents:

    • AML and KYC policies.

    • Proof of adherence to local regulatory requirements.


Step 3: Submit the Application

Once you’ve selected a bank and gathered the required documents, submit your application. This can often be done online for international banks, but some countries may require in-person visits.


Tips for Application Success:

  • Clearly explain the relationship between the parent company and the subsidiary.

  • Highlight the subsidiary’s expected transaction volumes and sources of funds.

  • Be transparent about the business model to avoid delays in the approval process.


Step 4: Undergo Due Diligence

Banks will conduct rigorous due diligence to ensure compliance with local and international regulations. They may evaluate:


  • The legitimacy of the parent company and subsidiary.

  • The nature of the subsidiary’s business operations.

  • AML and KYC compliance.


Respond promptly to any requests for additional information or clarification to avoid delays.


Step 5: Integrate Banking Services with Business Operations

Once the account is approved, integrate it with your financial systems:


  • Link the account to your accounting software for automated reconciliation.

  • Set up payment gateways for local and international transactions.

  • Enable multi-currency capabilities for seamless operations.



Best Practices for a Smooth Banking Setup


  1. Partner with Local Experts:

    Work with legal and financial consultants familiar with the banking landscape in the subsidiary’s country.

  2. Prepare for Ongoing Compliance:

    Ensure the subsidiary adheres to local tax, financial reporting, and regulatory requirements.

  3. Consider Digital-Only Banks:

    In countries with advanced fintech ecosystems, digital banks may offer faster and more flexible account-opening processes.

  4. Leverage Parent Company Reputation:

    Use the credibility of the parent company to build trust with the bank.

  5. Diversify Banking Relationships:

    Open accounts with multiple banks to mitigate risks and improve flexibility.



FAQs About Opening Bank Accounts for Subsidiaries


1. Can a parent company directly manage a subsidiary’s bank account?

Yes, but it depends on the local laws and the bank’s policies. Some countries allow parent companies to have signatory rights over subsidiary accounts.


2. How long does it take to open a bank account for a subsidiary?

The timeline varies by country and bank but typically ranges from 2 weeks to 2 months, depending on the complexity of the application.


3. Are there additional fees for international corporations?

Some banks may charge higher fees for international transactions or multi-currency accounts. Always clarify fee structures upfront.



Conclusion


Opening a bank account for the subsidiary of an international corporation is a critical step in establishing a local presence. By choosing the right banking partner, preparing comprehensive documentation, and maintaining compliance, you can streamline the process and ensure efficient financial operations.


 

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