Cayman Islands Introduces New Capital Requirements for Banks and Trust Companies

The Cayman Islands Financial Authority has introduced new capital requirements for banks and trust companies operating in the jurisdiction. These measures aim to ensure the stability and security of the financial system by requiring licensees to maintain a minimum level of net worth and capital adequacy.

New Regulations for Nominee Licences

According to the new regulations, a nominee licence will not be granted to a trust company unless it provides a guarantee from its parent undertaking for liabilities up to $200,000 or its equivalent in other currencies. The Authority may also require licensees to increase their net worth by increasing their paid-up capital to a greater sum as determined by the Authority.

Minimum Net Worth Requirements

All licensees must maintain a minimum net worth at all times, unless exempted by the Authority. The parent undertaking of a Cayman banking group is required to ensure that its subsidiaries maintain the required net worth on both a solo and consolidated basis.

Capital Funds Requirements

The Authority has also introduced new capital funds requirements, which require licensees to maintain a certain portion of their issued capital in cash or cash equivalent instruments. The amount and manner of these holdings will be determined by the Authority based on the risks arising from the activities of the licensee and other relevant factors.

Capital Adequacy Ratio

Banks and trust companies holding a licence for banking business are required to have a capital adequacy ratio of at least 10% (or such other percentage as may be determined by the Authority). The Authority may vary this ratio in certain circumstances based on the risks arising from the activities of the licensee and other relevant factors.

Consolidated Capital Requirements

The regulations also require the parent undertaking of a Cayman banking group to ensure that its subsidiaries meet capital requirements and other prudential measures issued by the Authority on a consolidated basis. Failure to comply with these requirements may result in the Authority treating the licensee as carrying on business in a manner detrimental to the public interest, depositors or creditors.

Restricted Use of Certain Words

The use of certain words such as “bank”, “trust”, “savings” and their derivatives is also restricted unless approved by the Authority. No person or company can use these words without approval from the Authority, except for licensed banks and trust companies.

Effective Date

These new regulations aim to enhance the stability and security of the financial system in the Cayman Islands and are effective as of [insert date].