Cayman Islands Monetary Authority Statement

Author: | Published: 5 Sep 2017
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The Cayman Islands continues to be one of the world's top 10 international financial centres. It is the leading domicile for hedge funds and healthcare captive insurers, as well as being home to licensed banks from over 40 countries, including more than 40 of the top 50 banks worldwide. As at June 2016, total international banking assets and liabilities were reported as $1.15 trillion and $1.21 trillion, respectively. These figures comprise cross-border positions in all currencies and domestic positions in foreign currency.

At the close of 2016, there were 167 licensed banks among the entities supervised and regulated by the Cayman Islands Monetary Authority (CIMA). Banks from Europe, South America and the US represent nearly two-thirds of the banking sector, followed by Asia, Australia and the Caribbean. As the trend in increasing global compliance costs continues, international banks have become increasingly cautious, reducing their risk profile by withdrawing from certain markets, product lines, customers and customer segments. This has been most discernible in the net decrease of European and US bank branches.

To date, the domestic retail banking sector has not undergone any changes in the composition or services offered. However, the importance of access to international markets through correspondent banking relationships continues to be emphasised. The jurisdiction's money service businesses and smaller banks continue to endure challenges as a result of de-risking exercises by US correspondent banks in recent years, as there are few banks in the jurisdiction that are providing banking services to this sector. CIMA, in partnership with other local, regional and international stakeholders, remains actively engaged in dialogue to identify a long-term solution.

As prescribed by the Basel II capital accord the jurisdiction has maintained a minimum capital adequacy ratio above the 8% threshold, together with the 10% requirement of the country's Banks and Trust Companies Law (2015 Revision). Private and affiliate banks are required to maintain no less than 15% of regulatory capital and banking subsidiaries are required to maintain 12%.

In 2016 the country's economic outlook remained positive. Real GDP growth is forecast at 2.5% for the 2016/2017 fiscal year and the growth of the financial services sector, which accounts for approximately 40% of GDP, is estimated at 1.8%, in comparison to 1.7% during 2015.

International credit rating agency, Moody's Investor Services, affirmed Cayman's sovereign debt rating as Aa3, and Aa2 for long-term foreign currency ceiling bonds and notes. In its February 2017 credit opinion, Moody's attributed the rating and stable outlook to a very high GDP-per-capita, a comparatively low and falling government debt burden, and a strong institutional framework with broad consensus on macroeconomic policies and fiscal oversight by the United Kingdom. The country's high economic development is forecast to grow at an average rate of 2.6% over the 2016-2018 period, and GDP per capita is noted as significantly higher than the median for Aa-rated countries. The rating agency anticipates continued budget surpluses, averaging 1.8% of GDP for 2017 and 2018, and a further decrease in the government's debt burden.

To uphold Cayman's reputation as a global leading financial services centre, CIMA will continue to assess the jurisdiction's regulatory framework on an ongoing basis to ensure successful compliance with international best practices.

 


 

 

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