The origins of the offshore banking industry are found in a group of islands off the northwest coast of France: the Channel Islands.  Several years ago a group of like minded bankers and government officials decided to offer an offshore remedy of lower taxation and promises of anonymity and confidentiality.  The intent was to seize upon the frustration of UK and European residents fed up with oppressively high rates of taxation and insufficient safeguards to privacy and confidentiality in their home countries.  These offshore banking institutions and new offshore financial centers gained instant notoriety and popularity.  The offshore banking industry was born.  As word spread across Europe and indeed throughout the world, other small island nations and jurisdictions seized upon the opportunity and began strengthening regulations regarding banking practices and client confidentiality in the hopes of attracting foreign depositors; thus becoming offshore banking jurisdictions and offshore financial centers. This became particularly popular in the small island nations of the Caribbean which is what many tend to associate with offshore banking jurisdictions. Investors and depositors seeking politically and economically stable jurisdictions found their way to these offshore financial centers and this practice continues today.  Although an abbreviated and perhaps oversimplified version of history, these are, fundamentally, the roots of the modern offshore banking industry.

Similar to offshore companies, offshore banking is really just the practice of banking in another country; however, the term is generally associated with "tax haven" jurisdictions characterized by low or zero taxation on interest, dividends, royalties and foreign derived income as well as having some degree of banking confidentiality.  Over time this term has evolved to include other onshore popular banking jurisdictions such as Switzerland, Austria, Lichtenstein, Luxembourg and more recently Asian jurisdictions such as Singapore and Hong Kong  These jurisdictions gained considerable popularity for the same reasons as the small island offshore financial centers:  they implemented sound banking practices codified in law and regulations guaranteeing confidentiality, low taxation and security.