Citizens Bank of Massa-chusetts is opening a new branch – a branch no one will ever see.

The financial institution applied last month to the state Division of Banks to open a so-called cubicle branch in the Cayman Islands. Citizens employees won’t get a chance to work on their tans, however; one person from a foreign bank will be the sole physical representative of the branch in the Caribbean.

The purpose of this new branch? To join the ranks of competitors already offering their business clients other investment options.

Our number-one reason for doing this is to give our corporate clients a term-deposit investment option so they can be paid higher returns, said Benjamin Schwartz, senior vice president and director of international banking at Citizens.

This is largely for the higher end of our middle-market client base – folks with surplus monies to invest.

Currently such clients can invest in repurchase agreements, or repos, which offer a fixed yield for terms as short as overnight. But with a term-deposit, clients can invest for a longer term with a fixed rate of interest; in general, the longer the term, the higher the yield.

However, while repurchase agreements must be backed up by a treasurer’s bill per order of the FDIC, offshore banking requires no such collateral, and therefore no guarantee.

Offshore money is not covered by FDIC insurance, so there is some risk, but our clients understand that, said Schwartz

This new investment offering will give clients the chance to invest in the Eurocurrency market, which offers a slightly higher yield than options presently available to corporate customers at Citizens, according to Schwartz. Eurocurrency refers to any currency banked outside of its country of origin, whether it be a Japanese yen or an American dollar.

Offshore banks can offer slightly higher returns for depositors because of interest rates that differ from those in the home market of the currency, the typically large size of the deposits, and the lack of government controls and associated costs.

Citizens plans to offer foreign currency accounts to clients of the new branch as well.

The Cayman Islands, a part of the United Kingdom, is one of the key international centers in the Eurocurrency market; in the Western Hemisphere, it’s either the islands or the Bahamas, and the Cayman Islands is the more popular of the two, according to Schwartz.

They have friendly regulations, and they have the infrastructure of accountants, lawyers and bankers already there that can support this. Next to tourism, it’s the second biggest industry there, said Schwartz, mentioning the advanced telecommunications available in the islands.

Schwartz also stressed that establishing an offshore branch is a common practice among large commercial banks, and that this new effort stems from the recent doubling or tripling of Citizens with the approval of its merger with USTrust last year.

This is very, very common. Of the top 120 banks in the country, I’d say that about 75 to 80 have branches in the Cayman Islands, Schwartz said, adding that client demand at Citizens for such opportunities has increased over time.

All of our competitors – Fleet, BankBoston – have these investment options … We knew what we needed to do.

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Steven Antonakes, senior deputy commissioner of the Massachusetts Division of Banks, agreed that the establishment of offshore branches is a routine process for big banks.

This is not uncommon … especially among larger banks, Antonakes said. The requirements are the same as establishing any branch.

Citizens applied to the Division of Banks on Jan. 14, and is in the midst of a public comment period that ends Feb. 22. Antonakes said he is unaware of any comments so far.

Once the comment period is over, assuming that Citizens’ application is complete, the division will render a decision. If it’s a favorable one, after a short time the branch can open.

Citizens aims to have the new branch in place by the end of March, a realistic goal if all goes well, according to Antonakes.

The only real challenge to Citizens will come after an offshore branch is established, Schwartz said.

The biggest challenge will be learning how to use the infrastructure properly, setting up a bank office to have the right financial, accounting and tax structure, and that’s really relatively simple, he said. We’ve been working on this for quite a while.

An employee of the Bank of Nova Scotia will represent Citizens in the Caribbean.

They specialize in this. They represent about 75 of the 100 or so banks I mentioned before, said Schwartz.

Ironically, Citizens will not be able to serve citizens of the Cayman Islands, as that would require a different license from that government, Schwartz said. The establishment of this offshore branch is not likely to be the start of a new focus for the bank, he added, as all capabilities necessary to take advantage of the Eurocurrency market are already located in the Cayman Islands.

There are no limitations essentially, other than demand, Schwartz said.

And, of course, one of the requirements of the government of the Cayman Islands: reporting certain financial information in an annual on-site visit.

I think I may end up going down for that, Schwartz laughed.