opening a Dutch bank account part II
More Challenging Than Ever
This article is a continuation of the blog post about the struggles of opening a Dutch bank account, which we have posted back in October 2018. In case if you have not read that article yet, we highly suggest getting acquainted with the post in order to fortify your knowledge about the Dutch Banking system.
As we have received numerous reactions on our first blog post about Banking in the Netherlands, from entrepreneurs from all over the world, we decided to dig into the subject even further and to elaborate on the Dutch Banking as a whole, as we have recognized that the system is, indeed, so much different than in other countries around the globe. The post is divided into sub-topics below, in order to capture the full picture, while also focusing on those important details you should be aware of!
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Introduction in Banking (in the Netherlands)
Dutch banks, as everywhere in the world, specializing in various different products and services, meaning that not every bank is capable and eager to accept all kinds of clients.
Same as everywhere, there are Private, Retail, Investment, Mortgage, Leasing, Saving and many more different service-oriented banks, which deal with very specific kinds of clients in order to bring and derive maximum value.
Most of the major banks, like ING, ABN Amro, Rabobank, SNS, etc., are recognized as retail banks, yet most of them also have affiliated subsidiaries, which focus on more specific operations, like for example, MeesPierson is the Private Banking arm of ABN Amro.
The difference here is that as an entrepreneur in the Netherlands, you should rather focus on building a relationship with a Retail Bank, than with a Private Bank, as Private Banks typically have quite an extensive turnover, account balance, and bank product use requirements, which are not fulfillable by an SME company, and can damage your liquidity (for example in order to open an account with the Private Banking arm of ING Bank, you should expect to invest or deposit at least 500 000 EUR!).
Most of our clients have taken this consideration into the account and did account applications with the major Retail Banks, as their acceptance procedure is more affordable.
The Client Acceptance Procedure of Dutch Banks
The acceptance procedure slightly varies from bank to bank, yet there are certain major points to mention in order to sum it all up.
In the Netherlands the application is done based on an interview basis, hence you should keep in mind, that often doing a pre-check or having a discussion with a Private Banker / Account Manager is not possible prior to submitting your application
Most banks only accept companies incorporated by Dutch Company Law or even companies managed by Dutch nationals.
It is possible to apply for a corporate bank account in the Netherlands, without being a resident yourself. Though you should expect to arrange certain things prior to the application, like for example arranging a social security number for the members of the board.
The interview then can result in several outcomes, which can be generally divided in the following categories: Account is Opened after the Interview; the Bank initiates a more enhanced compliance procedure (typically would mean that the answer will be provided within the next 2 weeks); a Client gets Rejected by the Bank after the Interview.
The decision on the account opening is always made by the bank, hence there is no realistic way that a third party could anyhow affect the procedure and guarantee a solution, which is often claimed by corporate service providers around the world.
As per the policies of the European Union, any bank has a right NOT to express the reason of rejection of a client, hence typically you would never know why it occurred (if occurred)
Nevertheless of a common misconception, if a bank does reject you it does not always mean something bad, and typically you can apply for the account opening at the same bank in about 6 months of time.
What are the things you should bear in mind prior to applying for a bank account?
Though there is no restriction on non-residents in Dutch banks, every entrepreneur, who owns a Dutch company and aims for a Dutch bank account, should bear in mind that banks strongly prefer clients, who have invested in their Dutch operations, hence it is more likely to become a client of a bank in case if your company has a physical office and/or has employees/management based in the Netherlands.
Frequently such arguments have a flip-side question: “How shall I start my local operations, without a local account? How can I pay up my expenses?” - First of all, you should understand that this is more of a practical, not legal issue, as a Dutch Company is not obliged to have a Bank Account located in the Netherlands. We have elaborated on the alternatives to a classic bank account further in the post, but at this stage, this comes to more of a practical narrative of whether this could possibly be a reason for a bank to consider you as a client.
Long story short the answer would be “No” because there is also no legal requirement for a company to reach levels of physical substance within the Netherlands in order for a bank to accept it as a client. Banks can work with “shell” companies with literally no physical presence in the Netherlands, but of course acceptance procedure of such companies revolves around due diligence procedure way more than for a “resident company”.
What plays a role here is the fact that banks just feel more comfortable while dealing with companies with local substance, but it does not mean that you should definitely aim towards building the substance, in case if it not in line with your business model/plan.
Alternative Banking for a Dutch Company
As you already know from this article - a Dutch Company is not obliged to have a local bank account, which results in many positive advantages for foreign entrepreneurs. Not only many businessmen are reluctant to start a new relationship with such a strategic partner like a Bank, as they already have a well-sustained relationship with another bank, but also many entrepreneurs’ ambitions pull off due to the reason that they do not want to invest additional time and money for the opening of a local bank account. This said we would like to provide some food for thought about alternative banking for a Dutch company.
Taking into account the rapidly changing finance industry in the EU, there are many alternatives, which can substitute a traditional bank account. In the table below, we would like to present the most commonly used alternatives for a traditional local bank account and some advantages of considering this or that alternative.
Nowadays mobile banking is a billion-euro industry. There are quite some major reliable players already in place, like for example Bunq Bank and N26 Bank to name but a few.
In case if you have a biometric passport, the account opening would take only a couple of minutes of your time.
Transfer costs are very low in mobile banks EU deposit guarantee covers mobile banks, as they possess a fully-fledged banking license
Accounts are opened remotely (via a video chat)
The acceptance procedure is quite down to earth
In case if you don’t aim to use complex banking products like Letter of Credit; Trade Financing; Incasso etc., the mobile bank would be more suitable, as having a traditional bank account is a bit of an “overkill” with such convenient tech available
Payment Institution (PI) / sometimes called fintech
Payment Institution differs from a bank slightly, as typically it is an institution, which possesses a PI license, not a banking license, yet can execute transfers, issue payment cards and issue IBAN numbers (typically facilitated by another bank)
The pros of a PI are quite the same as for a Mobile Bank, yet PIs typically are more flexible in transferring funds and often do not have limitations. A PI can often send funds to more locations than a mobile bank could, as they use payment facilities of other banks, which might have a wider correspondent bank network than a standalone mobile bank, as well as to have more currencies available
Banking in your own country / existing bank
Opening up an account with your current bank is often an unexplored opportunity for international entrepreneurs, as often there are certain requirements of having a local account in various popular expansion-jurisdictions around the world.
Taking into account the previously covered fact of your Dutch company not being obliged to have a local account, after all, banking in your own country is a sound alternative to investing in a new strategic partnership in a previously unknown country.
Working with a bank, who already knows you as a reliable client and understands your business is always more convenient. Moreover, there is a higher chance that your current bank would allow you to use complex banking products for your new company, as they already have seen your track record with your main accounts.
Many entrepreneurs open sub-accounts or independent accounts for the new company in their existing bank, not only for business reasons, but also for the practical reasons of speaking in their own language, working with a previously known account manager/banker, and being able to contact the bank during the working hours in your home country
Banking in another country (not your home country) / Banking with a Private Bank
Banking in countries like Luxembourg, Switzerland, Liechtenstein, as well as others, always was a common decision to make for foreign entrepreneurs. Although the cost of opening such an account might be quite high, you can always rely on the quality of the services you get.
Such worldwide renowned banking hubs like Switzerland, Singapore, Luxembourg, and others, typically have a very high quality of services, personal approach and flexibility, which a retail bank would not be able to deliver. Having an account with a Private Bank always means that you will get the right attention and problem solved, as Private Banks have occupied the niche of being the boutique service providers.
The costs of opening and maintaining a Private Bank account can be higher than in a retail bank, however, the added value you get can be seen with a bare eye.
Although we do recognize the needs and desires of many international entrepreneurs to have a local bank account, we also always say that the location of your bank accounts should not anyhow affect your growth ambitions, and after all a bank account is just a tool for performing your activity, but should not play a major role during your international expansion.
INCO is able to assist you in the process and field of banking*, as well as feel free to book a consultation with one of your experts to discuss your exact situation!
* Please note that INCO has no direct arrangements with Dutch or overseas banks to facilitate the opening of a bank account. Due to Dutch regulations (supervised by AFM), INCO is not allowed to perform any activities focused on opening a bank account, except for making basic introductions (forwarding contact details). In case more bespoke services are required, we work with third parties that are regulated by the Dutch Central Bank or AFM. These parties will fully assist you with your financial matters.
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