ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, October 11, 1996 TAG: 9610110036
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: LONDON
SOURCE: DIRK BEVERIDGE ASSOCIATED PRESS
THE EUROPEAN UNION BANK on the Caribbean island of Antigua has just $10 million in capital and no deposit insurance. But it boasts interest rates of up to 9.91 percent.
It bills itself as the ``first offshore bank on the Internet,'' with plenty of secrecy for depositors and high interest rates because it pays no taxes in its Caribbean home base of Antigua.
But the Bank of England warned investors on Thursday to be careful about putting any money into the European Union Bank.
``The bank is not authorized in the [United Kingdom] and has not sought authorization,'' the Bank of England said in an unusual cautionary statement.
``As with any other offshore deposit, we would advise any intending depositor to carry out appropriate due diligence on the bank and to establish what if any deposit insurance is available,'' it said.
To clarify that point, the European Union Bank's manager, Ian Benn, says there is no insurance on deposits.
``It is at your own risk,'' Benn said, like virtually any other offshore bank in the Caribbean.
Benn wondered why the Bank of England should meddle with the affairs of the small bank, which says it has just $10 million in share capital and is apparently run by an Eastern European named Sergei Ushakov.
``I consider him my boss,'' said Benn, although he speaks to Ushakov through an interpreter and does not know where Ushakov is based. ``I don't consider that any of my business.''
In Washington, Federal Reserve Board spokesman Joe Coyne said he was unaware of a similar warning about European Union Bank being sounded by U.S. regulators.
``We haven't issued any alerts along those lines,'' he said.
The little-known European Union Bank could at once show the potential for more efficient operations by moving money through the Internet - as well as the risks inherent in depositing money offshore and beyond the reach of most banking regulators, analysts say.
The possibilities for banks are great. Anyone who has access to the Internet is a potential customer.
But big banks are delaying the use of similar technology, because if they used the Internet to transfer money quickly, it would wipe out their ability to make money on the ``float,'' or the interest they earn on customers' funds while the customers wait for checks or other transactions to clear, said Andrew Klein, founder of Whit Capital Corp., a New York investment bank that handles public offerings on the Internet.
The Bank of England said it had not received any complaints from depositors in European Union Bank, which touts high interest rates such as 9.91 percent on a one-year $1 million certificate of deposit.
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