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Offshore Banking Unit (OBU)

Written By
Paul Tracy
Updated October 19, 2020

What is an Offshore Banking Unit (OBU)?

An offshore banking unit is a bank branch in another country.

How Does an Offshore Banking Unit (OBU) Work?

For example, let's assume that Bank XYZ is an American bank with a branch in Bermuda. As on offshore banking unit, the Bermuda branch does not accept deposits from anyone except other foreign banks, and it will make Eurocurrency loans.

Why Does an Offshore Banking Unit (OBU) Matter?

OBUs are common in the Caribbean and Asia but are found all over the world. They are far less restricted in terms of their allowed activities because they usually are not subject to many of the financial regulations of the country in which they are located. For this reason, investors may be able to obtain better interest rates from OBUs and they may be able to avoid taxation or retain privacy by moving money to an OBU. Secrecy, however, is not guaranteed.

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