Banks traditionally offer the least risk to an investor, but are often not competitive when compared to other major lending institutions, such as building societies. This is due to the fact that although banks may lend some of their deposits, the excess is normally placed on the international money markets.
Offshore banks normally provide two major types of interest earning accounts. The first are Call or Interest Bearing Accounts. These provide you, the investor, with immediate or two-day access to your funds - without the loss of interest. Interest rates are not high on these accounts because, in anticipation that the money may be withdrawn at any time, the bank can not place these funds for fixed periods.
The second type of offshore banking account are Fixed Deposit Accounts. With this option, funds are placed for a fixed term (one week, one, two, three, six and twelve months) and in return a rate of interest is paid. Higher rates can be obtained if certain value thresholds are met or the funds are placed for longer periods. Fixed deposits can be broken, but you will usually have to pay a penalty, such as the loss of interest. This is because even though you have regained your cash, the bank will remain out of pocket for the remaining fixed period, as it has already tied up the funds on the money markets or loaned it out.