Choosing offshore bank account can be difficult

Q: I am putting some money in my bank account which gives a rate of interest of 3.1 per cent per year). Is that a good return or should I invest it somewhere else? Are there other banks in Europe that can offer a better interest rate?

A: The term good return is very subjective. It depends on what you want to achieve from your money and your risk/reward profile. If you are interested solely in deposits then shopping around to secure the best interest rates can be a lengthy process. There are banks which offer almost double the interest rates mentioned above, depending on various factors, in particular the base currency.

One can achieve double digit deposit interest rates but it will be in a currency that is weak and volatile. When converting the deposit back to a currency that is strong and secure, your double digit returns could be massively diminished.

Selection

Choosing the right bank account can be a difficult process when placing your money either in an offshore or onshore bank account.

Onshore and Offshore Banks are fairly similar broadly speaking but it is their confidentiality that sets them apart from each other.

Confidentiality offers the international investor an environment where he/she can manage their affairs in the most efficient manner possible.

It is likely that you require a local account in the country in which you live for day-to-day or business costs. However, the bulk of your capital may be better served offshore.

Typical offshore centres are Jersey, Switzerland, Isle of Man, Bermuda, British Virgin Islands, Guernsey, Dublin and Lichtenstein.

When selecting a suitable offshore account, the basic criteria are not that different from the ones when choosing your bank at home - service, convenience and financial stability.

You should look for banks that make it easy and convenient to transfer funds - from any location in the world.

The bank should provide maximum confidentiality, tax advantages in addition to political stability.

You will also need to decide how your interest match the geographic location. Could the EU Savings Directive affect you? As always, it is worth seeking professional advice because careful selection is indispensable.

A popular misconception is that offshore banks are associated with sophisticated financial transactions.

The reality is far from it because offshore banking and investing can be an important financial tool for many individuals.

An important point to take on board is that interest rates should be roughly the same around the world if quoted in the same currency.

If there is a large discrepancy to the contrary then one should examine carefully why that is the case.

If the headline rate sounds too good to be true then have a financial expert cast a wary eye over the offer to identify any conflicts to you securing the best rates and ensuring your money remains safe.

The writer is senior financial consultant at Globaleye Group. The opinions expressed above are the writer's and don't necessarily represent views of Gulf News. Readers are encouraged to thoroughly investigate all investment decisions. Please send your questions to advice@gulfnews.com.