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Cayman Islands Banking Regulations Compliance: A Key Aspect of Financial Stability

The Cayman Islands Monetary Authority (CIMA) plays a crucial role in ensuring the financial stability of the jurisdiction by regulating banking and trust businesses through various laws and regulations.

Definition of Banking Business

Section 2 of the Banks and Trust Companies Act defines “banking business” as:

The receipt and holding of current, savings, deposit or other similar account money that is repayable by cheque or order, which may be invested in advances to customers or otherwise.

Regulation of Banking Business

The Monetary Authority Act and the Banks and Trust Companies Act give CIMA the responsibility for licensing and regulating banking and trust business in the Cayman Islands. The Acts provide the legal framework for the operation of banks and trust companies, while the Development Bank Act governs the sole development bank in the jurisdiction.

Licence Categories

CIMA may issue various categories of licences under the Banks and Trust Companies Act, including:

Category A Banking Licence
Category B Banking Licence
Trust Licence
Restricted Category B Banking Licence
Restricted Trust Licence
Nominee (Trust) Licence

Standards of Regulation & Supervision

CIMA regulates banking and trust business in accordance with specific acts and regulations, as well as international supervisory standards articulated by:

The Basel Committee on Banking Supervision
Other international bodies
The Offshore Group of Banking Supervisors (OGBS)
The Caribbean Group of Banking Supervisors (CGBS)
The Association of Supervisors of Banks of the Americas (ASBA)

Capital Adequacy

The Authority follows the principles of the Bank for International Settlements’ capital adequacy regime, setting minimum threshold levels of:

12% for subsidiaries of banks subject to consolidated supervision
15% for locally incorporated banks

Supervision

CIMA’s Banking Supervision Division is responsible for:

Processing applications for licences and making recommendations on their issue or non-issue
Conducting ongoing supervision and regulation of banking activities, promoting a sound financial system in the Cayman Islands through integrated off-site and on-site monitoring

Compliance and Enforcement

The objective of the supervisory system is to foster prudent banking practices that will enhance the financial sector. In instances where a bank engages in conduct detrimental to the public interest or threatens the safety of depositors, CIMA has remedial powers at its disposal.

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