The Government of Nauru hopes a mostly privately owned bank can be in operation by the middle of next year.
The finance minister Dr Kieren Keke says a lack of banking facilities in the country is stifling commercial activity.
While consultants KPMG had concluded that the island had the potential to support viable banking services, Australian banks refused to step in despite encouragement from the Australian Government.
Dr Keke says they are now looking at a model built around local private investment and possibly with some government input.
"Ideally it would be essentially a private bank that may have a mix of shareholding and we seeking assistance from Australian service providers in establishing that bank in terms of the systems in the banking and the systems in the back room and to ensure that it is fully compliant with international standards and our hope is also to have it regulated by the Australian financial regulator, APRA.[ Australian Prudential Regulatory Authority]"
Dr Kieren Keke