Authorized capital of companies with a financial license

The financial sector has always been an area where the reliability of companies and the trust of customers play a crucial role. And what makes financial institutions resistant to crises, guarantees the fulfillment of obligations to clients and creates a reputation as a stable player in the market? The answer lies not only in effective business strategies, but also in such a critically important element as authorized capital.

For companies seeking financial licenses, the authorized capital is not just a formality. This is a kind of "air bag" that demonstrates the company's ability to meet the requirements of regulators, cope with risks and maintain stability in changing market conditions. In the world of financial licenses, every number in the capital counts, and this becomes a guarantee for both regulators and customers.

Let's find out why the authorized capital is so important, what the minimum requirements are in different jurisdictions and how it affects the activities of companies in the financial sector.

What is authorized capital?
Authorized capital is the amount of assets that the owners (founders) of the company invest in the initial stages of its creation. These funds can be used for operational activities, and also serve as a kind of guarantee for customers and counterparties in case of financial risks or crisis situations.

In the financial sector, especially when obtaining licenses, authorized capital has not only a symbolic value, but also performs specific regulatory functions. Regulators set the minimum amount of authorized capital that a company must have to ensure its solvency.

Requirements for authorized capital on the example of financial licensesIn different jurisdictions, the requirements for authorized capital for companies holding financial licenses can differ significantly. Let's consider several examples.

Payment institutions in accordance with the PSD2 Directive for payment institutionsCompanies seeking to obtain a Payment Institution license must have a minimum authorized capital. The authorized capital may differ, depending on the type of services that payment institutions will provide, namely:

1.  €20,000 for companies providing payment initiation services.

2.  €50,000 for those providing fund collection and custody services.

3.  €125,000 for companies offering a wider range of payment services.

Investment institutions, on the example of Cyprus
Investment companies receiving a license in Cyprus (CIF License) must have the following minimum authorized capital:

1. €125,000 for companies providing only investment advice.

2. €730,000 for companies that trade, hold client funds or provide other high-risk investment services.

United Kingdom (FCA Licensing)
To obtain a financial license from the FCA (Financial Conduct Authority), the requirements for authorized capital depend on the type of activity and are:

1. Companies providing payment services must have a minimum of £20,000 - £125,000 depending on the specifics of the services.

2. For companies providing investment services, claims can reach £730,000 or more for complex structures.

Ukraine
For non-bank financial institutions that provide credit or payment services, the requirements for authorized capital also depend on the type of activity and may be:

1. UAH 3 million for pawnshops.

2. UAH 5 million for credit unions.

3. UAH 30 million for financial companies engaged in factoring or leasing.

Why are the requirements for authorized capital necessary?
Establishing minimum requirements for authorized capital for financial companies serves several important functions.

First of all, it is a guarantee that the company has enough funds to cover its expenses and obligations during periods of instability. In addition, large authorized capitals allow companies to fulfill their obligations to customers, which is especially important in sectors such as insurance or credit.

For many investors and clients, the requirements for authorized capital are an indicator of the seriousness of the company and its ability to withstand long-term obligations. And, most importantly, the size of the authorized capital is one of the key tools of supervision of companies by regulators. Failure to comply may result in license revocation or sanctions.

Authorized capital is a fundamental element for any financial company seeking a business license. It provides not only initial financial stability, but also serves as a guarantee for customers and regulators. Legal minimum capital requirements may vary by jurisdiction and type of license, but their main purpose remains the same — to ensure the stability and responsibility of the financial market.