Regulatory Requirements for Banks Licensed Under the Banks and Trust Companies (Revised) Act 2009
Overview
The Cayman Islands Monetary Authority (CIMA) regulates banks licensed under the Banks and Trust Companies (Revised) Act 2009 (BTC Act). This article provides an overview of key aspects, including application process, fitness and propriety, authorised agents, banking names, auditors, supervisory issues, capital adequacy, annual review, economic substance, and administrative fines regime.
Application Process
- Submit a detailed business plan to CIMA
- Provide proposed directors’ and officers’ information to CIMA for assessment of fitness and propriety
- Ensure compliance with section 30 of the Companies Act when choosing a name for your bank
Fitness and Propriety
CIMA assesses the fitness and propriety of proposed directors and senior officers using specific criteria outlined in its Regulatory Policy – Fitness and Propriety.
Authorised Agents
Licensees must either maintain a local staffed office or have their registered office at a Class A bank or trust company, with employees of such banks serving as authorised agents.
Banking Names
Care is taken when choosing a name to avoid duplication or confusion with existing banks worldwide and to ensure compliance with section 30 of the Companies Act.
Auditors
- Audited accounts are required annually
- A copy must be filed with CIMA within three months of the end of the financial year
- Local auditors approved by CIMA must conduct these audits for Cayman Islands companies
Supervisory Issues
CIMA conducts off-site analysis and on-site inspections to monitor banking practices and maintain a general review of banking business in the Cayman Islands.
Capital Adequacy
The statutory minimum risk-adjusted capital adequacy ratio is 10%, but CIMA requires higher ratios for specific types of banks, including subsidiaries subject to consolidated supervision and those not subject to such supervision.
Annual Review
Regular meetings between a licensee’s representatives and CIMA are advisable to discuss the licensee’s affairs.
Economic Substance
The International Tax-Co-operation (Economic Substance) Act requires certain entities to demonstrate economic substance in the Cayman Islands if they carry on specific activities.
Administrative Fines Regime
This regime provides CIMA with powers to impose administrative fines for breaches of regulatory acts and associated regulations and rules.
By complying with these regulatory requirements, banks licensed under the BTC Act can ensure a smooth operation and avoid any potential risks or issues.