Financial Crime World

Cayman Islands Monetary Authority Compliance Report: Basel Core Principles

Overview

The Cayman Islands Monetary Authority (CIMA) has submitted a comprehensive report detailing their compliance with the Basel Core Principles for Effective Banking Supervision. The report highlights CIMA’s objectives, autonomy, and powers to supervise banks in the Cayman Islands.

Principle 1: Objectives, Autonomy, Powers, and Resources

  • Clear Objectives: CIMA’s objectives are clearly defined in the Banking Transactions Control Law (BTCL).
  • Autonomy and Powers: CIMA has autonomy to supervise banks and powers to revoke licenses and impose penalties.
  • Limitations: However, customer liquidation proceedings can hinder CIMA’s ability to arrange a takeover or merger of a failing bank.
  • Comprehensive Framework: The BTCL provides a comprehensive legal framework for banking supervision.
  • Guidelines for Non-Compliance: CIMA has issued guidelines on the ladder of compliance to clarify procedures for non-compliance.
  • Limited Liability: However, CIMA’s ability to hold managers and directors personally liable is limited.

Principle 3: Banking Regulation and Supervision

  • Supervisory Reports: CIMA requires banks to prepare supervisory reports on a globally consolidated basis.
  • International Expansion: Without prior approval from CIMA, no locally incorporated bank can open a subsidiary, branch, agency, or representative office outside the Cayman Islands.
  • Foreign Branches: CIMA assesses whether management is maintaining proper oversight of foreign branches, joint ventures, and subsidiaries.

Principle 4: Licensing

  • License Issuance: CIMA issues licenses to banks after assessing their suitability.
  • License Revocation: Licenses can be revoked if a bank fails to comply with regulations.
  • Limitations: However, customer liquidation proceedings can hinder CIMA’s ability to arrange a takeover or merger.

Principle 5: Prudential Regulation and Supervision

  • Capital and Liquidity Requirements: CIMA requires banks to maintain adequate capital and liquidity.
  • Prudential Reporting: Banks are subject to prudential reporting requirements.
  • Branches of Foreign Banks: However, branches of foreign banks are not subject to the same prudential requirements as domestic banks.

Principle 6: Implementation and Enforcement

  • Guidelines for Non-Compliance: CIMA has issued guidelines on the ladder of compliance to clarify procedures for non-compliance.
  • Enforcement Powers: CIMA can revoke licenses, require substitution of directors or officers, appoint a person to advise the bank, or appoint a person to assume control of the bank’s affairs.
  • Limited Liability: However, CIMA’s ability to hold managers and directors personally liable is limited.

Principle 7: Information Requirements

  • Annual Audited Financial Statements: CIMA requires banks to provide annual audited financial statements.
  • Approved Auditors: Auditors are approved by CIMA.
  • Effective Relations: Relations and cooperation between CIMA and the audit industry are effective.

Principle 8: Audit

  • Special Audits and Investigations: CIMA has powers to conduct special audits and investigations.
  • Obligations on External Auditors: An amendment to the banking law is being drafted to place an obligation on external auditors to report to CIMA on solvency, non-compliance with laws, and other significant matters.

Principle 9: Crisis Management

  • Appointment of Person to Assume Control: CIMA can appoint a person to assume control of the bank’s affairs in case of crisis.
  • Limitations: However, customer liquidation proceedings can hinder CIMA’s ability to arrange a takeover or merger.

Principle 10: Public Disclosure

  • Disclosure Requirements: CIMA requires banks to disclose information on a timely basis.
  • Notification of Attorney-General and Financial Secretary: However, CIMA may need to notify the Attorney-General and Financial Secretary before disclosing non-routine regulatory requests.

Principle 11: International Cooperation

  • Memoranda of Understanding (MOUs): CIMA can enter into MOUs for consolidated supervision by foreign supervisors.
  • Assistance to Overseas Regulatory Authorities: CIMA provides assistance to overseas regulatory authorities.
  • Prudential and Regulatory Reporting Requirements: Subsidiaries of foreign banks are subject to the same prudential and regulatory reporting requirements as domestic banks.

Principle 12: Enforcement and Sanctions

  • Powers to Impose Penalties: CIMA has powers to impose penalties on banks and management.
  • Limitations: However, customer liquidation proceedings can hinder CIMA’s ability to arrange a takeover or merger.

Overall, the report indicates that CIMA is generally compliant with the Basel Core Principles for Effective Banking Supervision. However, there are some limitations and areas for improvement, particularly in relation to customer liquidation proceedings and the ability to hold managers and directors personally liable.