Financial Crime World

Cayman Islands Tightens Regulatory Grip on Financial Institutions

Overview

The Cayman Islands Monetary Authority (CIMA) has taken significant steps to regulate banking business in the jurisdiction, with a focus on maintaining a sound financial system. This article provides an overview of CIMA’s regulatory framework and its responsibilities.

Responsibilities of CIMA

According to the Banks and Trust Companies Act, CIMA has the responsibility for licensing and regulating banking and trust business in the Cayman Islands. The Authority issues various categories of licenses, including:

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

Regulatory Standards

CIMA regulates banking and trust business in accordance with international supervisory standards articulated by the Basel Committee on Banking Supervision and other international bodies. The Authority has membership in several global supervisory groups, including:

  • Offshore Group of Banking Supervisors (OGBS)
  • Caribbean Group of Banking Supervisors (CGBS)
  • Association of Supervisors of Banks of the Americas (ASBA)

Capital Adequacy Requirements

The Authority follows the principles of the Bank for International Settlements’ capital adequacy regime, with 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 licenses and making recommendations on their issue or non-issue. The division also conducts ongoing supervision and regulation of banking activities, including:

  • Risk-based on-site inspections that provide significant additional insight into the risk management practices and operations of banks

Compliance and Enforcement

The Authority has remedial powers to address instances where a bank engages in conduct detrimental to the public interest or threatens the safety of depositors. CIMA’s supervisory system aims to foster prudent banking practices that will enhance the financial sector.

Regulatory Framework

CIMA regulates banking business in accordance with:

  • The Banks and Trust Companies Act
  • The Monetary Authority Act
  • International supervisory standards articulated by the Basel Committee on Banking Supervision and other international bodies
  • Relevant rules, guidance, policies, and procedures issued by CIMA

The Cayman Islands Monetary Authority’s regulatory framework provides a robust and effective system for maintaining a sound financial system in the jurisdiction.