Terms and conditions for setting up a licenced bank with offshore funds in UK.
What is the minimum required capital? What are the necessary steps to
apply for a licence? Where to find all the necessary instructions?

The UK banking business is closely regulated by The Bank of England.
It is VERY difficult to gain entry. Ask them and see.

You have asked a question which is difficult to answer in this type of
environment. The full details of your business would be required, your
previous experience in banking and your proposed activities which
would come under the Financial Services & Markets Act 2000 (FSMA),
your ability to pay their fees, etc., etc. I suggest that you seek
business and legal advice from banking experts and review the pages
and pages of guidance on the Financial Services Authority web site
starting with this page and the link titled: Do I need to be
authorised?
http://www.fsa.gov.uk/Pages/doing/index.shtml

Who said The Bank of England?

Well, it did use to be.

If your starting point is a question to Google Answers, then I suggest
you forget the whole idea.

First of all I would like to point out the general procedure to create a bank.
To fully operate your bank, you need to have:
- 2 qualified Directors, all jurisdictions requires to show diploma
and/or past jobs' experiences as a Director of a bank. Financial
Authority of the jurisdiction may require in person interview with the
board of directors, as well as documents like professional bank letter
of reference or criminal records (extracted from the country of
citizenship of the Directors).
- a place of business within the said jurisdiction (may be a simple
Registered Agent in some places ;).
- a lot of money (see capital requirements below).


It seems that you want to constitute, on a first step, a bank in an
offshore jurisdiction. Here is the different procedure you will need
to go through in every jurisdiction:
1-form a local company entity (refered as "incoporating"), banks are
always an entity with limited shared. Once incorporated, the company
is not yet a bank, but a simple company.
2-ask for a bank licence to the Financial Authority of the said
jurisdiction. You will need to pay:
  a-capital requirements: from US$100,000 to US$500,000; depending on
the jurisdiction and the CLASS of the bank you want to create (see
below).
  b-bank licence application fee: from US$10,000 (may need to pay this every year).

The total cost depends on the choosen jurisdiction, every step having its fees.


There are 2 CLASSes of banks (or licences):
- Class A (or Class 1): for local and offshore used.
- Class B (or Class 2): usually for offshore used (you can use this
licence for clients in the incorporated jurisdiction).


When your offshore bank is established, your bank is regarded as an
usual company in other countries. That company can open a bank account
anywhere in the world for the needs of the company (usually to place
your funds for investing). So: your offshore bank can open a bank
account in the UK without a licence (because it's regarded as a
foreign company). Licence or Authorization from the UK Financial
Authority is needed if you (for example) starts to provide financial
services to UK residents USING the said bank account. I don't know
what is your goal, but if you plan to form a bank having its office in
the UK, your offshore bank is no use. The legal offshore use is,
however:
- UK clients shouldn't know the existence of the UK "bank" office.
- UK clients should always communicate with the offshore bank
directly, and send money to the offshore bank. (once in the offshore
bank account, you can invest it in the UK, or elsewhere).



As said, every jurisdiction it's different, so you need to check with
individual offshore Financial Authority for exact cost.

Corrections regarding the CLASSes:
There are 2 CLASSes of banks (or licences):
- Class A (or Class 1): for local and offshore USE.
- Class B (or Class 2): usually for offshore USE (you can'T use this
licence for clients LOCATED in the OFFSHORE incorporated jurisdiction).