The requirements for the appointment of of directors and senior officers also apply to a change in shareholders/ beneficial interest. Shareholders should submit a full due diligence package as well as the applicable documentation stipulated in the Regulatory Policy - Criteria for Approving Changes in Ownership and Control.
Under the Banks and Trust Companies Law (2013 Revision), locally incorporated banks and trust companies are required to maintain a minimum net worth of CI$400,000, or its equivalent in other currencies. There are exceptions for Restricted 'B' Banking or Restricted Trust Licences, which are required to maintain a minimum net worth of CI$20,000, or its equivalent in other currencies.
The Cayman Islands Monetary Authority adopts the guidelines set by the Basel Committee for Bank Regulation and Supervisory Practices for the calculation of the capital adequacy ratio. The Basel Committee recommends a minimum capital adequacy ratio of 8%. However, the Cayman Islands Monetary Authority requires subsidiaries to maintain a minimum capital adequacy ratio of 12% and privately-owned or affiliated banks are required to maintain a minimum of 15%.
Annual licence fees are determined by the type of licence as set out in the Banks and Trust Companies (Licence Applications and Fees) Regulations (2013 Revision).
All licensees are required to pay an annual fee on or before 15 January each year as prescribed by Section 6(8) of the Banks and Trust Companies Law (2013 Revision). This amount should not be confused with the payment required under the Companies Law which is payable to the Registrar of Companies by 30 March each year without penalties. Annual licence fees received by the Authority after 15 January are subject to a surcharge not exceeding one-twelfth of the fee for every month or part of the month that the fee is not paid. Payment is accepted in either Cayman Islands or United States dollars (exchange rate CI/US 0.82). Cheques are to be made payable to the Cayman Islands Government.
See: Banking Services Fees for additional information.
The Authority should be formally notified of all appointments, resignations, or removals of directors and senior officers.
Unless an exemption was granted from Section 16(2) of the Banks and Trust Companies Law (2013 Revision), licensees must also receive the prior approval of the Authority before appointing directors or senior officers. In carrying out its assessment of fitness and propriety, the Authority requires the following minimum documentation:
1. A completed Personal Questionnaire;
2. Not less than three references acceptable to the Authority, including at least two character references for the person, and one reference verifying the good financial standing of the person, all dated within six months of submission to the Authority;
3. A police or other certificate satisfactory to the Authority, such as an original affidavit, must be obtained from the last country of residence where the person was ordinarily resident for at least 12 months, and state that the person has not been convicted of a serious crime or any offence involving dishonesty.
Where an exemption from Section 16(2) has been granted, licensees should ensure that an updated Personal Questionnaire form and a police clearance certificate/sworn affidavit are forwarded to the Authority.
There are several reporting requirements and filing deadlines for each licensee. For a complete list, please click on the following link:
The BTCL, as well as other key laws and regulations, can be found at the Laws and Regulations webpage.
Kindly note that copies of the various laws and regulations are provided for informational purposes only. Official copies of the laws and regulations can be obtained from the The Legislative Department at minimal cost.
The Authority reviews banking-related complaints filed against licensees from a regulatory standpoint. As such, investigations usually determine whether licensees have breached any regulatory laws or guidance and whether there are any weaknesses in institutions’ systems and processes. The Authority acts mainly as an intermediary between the complainant and the licensee and not as an arbitrator.
Therefore, the Authority cannot interfere with a licensee’s commercial decisions and does not have legal powers to settle disputes, adjudicate or order a licensee to pay compensation. Importantly, the Authority will not intervene in matters relating to commercial decisions, interest rates charged, fees levied on products and services and where both parties to a complaint have secured legal representation.
When should I file a complaint with the Authority?
Many complaints arise from misunderstandings, or a mismatch of expectations, which can be resolved after communicating directly with the licensee. Customer complaints should be filed with the Authority after the relevant licensee has been notified, and where the customer has:
i. Not received a response from the licensee within 30 business days of filing; or.
ii. Received an unsatisfactory response.
Can I make a complaint by telephone?
All complaints must be forwarded to the Authority in writing, advising of the facts chronologically and succinctly.
What should be included in the complaint?
The correspondence, which should be dated and addressed to the Head of the Banking Supervision Division, must include the following:
i. Complete mailing address;
ii. Contact number(s) and email address(s);
iii. Signature of the complainant;
iv. Account number(s), where applicable;
v. Type of accounts held with the licensee;
vi. Summary of the licensee’s response to the complaint, attaching copies where possible; &
vii. Name of the individual(s) who responded to the complaint.
All documents can be submitted by any of the following:
a) By hand to the receptionist in Eden House, Elizabethan Square, 80E Shedden Road, George Town, Grand Cayman;
b) By post:
P.O. Box 10052
Grand Cayman, KY1-1001
c) By emailing Contactbanking@cimoney.com.ky.
What happens once CIMA receives a complaint?
Once a complaint is received, it is reviewed internally via the following process. CIMA will:
i. Contact the complainant, acknowledging receipt of the complaint and clarifying the contents where necessary;
ii. Send a letter to the licensee seeking its commentary on the situation;
iii. Assess the licensee’s response; &
iv. Respond to the complaint.
Where our assessment reveals supervisory concerns (e.g. breaches in laws, rules or the guidance notes) or disciplinary concerns (e.g. there appears to have been misconduct on the part of the bank or its staff), CIMA will take the necessary course of action against the licensee. Such action may include conducting an onsite inspection to verify the deficiencies identified; however, CIMA will not provide the complainant with information arising from internal assessments due to Section 50 of the Monetary Authority Law (2016 Revision).
To facilitate the investigation, please note that CIMA may need to disclose some details from the complaint to the licensee. Where the complaint falls outside of our purview, the complainant will be encouraged to seek independent legal advice.
No, there are currently no usury laws in the Cayman Islands. The Authority does not have power under the Monetary Authority Law (2013 Revision) or the Banks and Trust Companies Law (2013 Revision) to prescribe the maximum/minimum interest rates that may be charged or paid by retail banks and other deposit-taking institutions.
No. The retail banks collectively set the Cayman Islands Prime interest rate. The Cayman Islands Bankers Association advertises any changes to the Cayman Islands Prime interest rate through local media.
More than 40 of the world’s top 50 banks have chosen to establish operations in the Cayman Islands. The reasons influencing their decision include the jurisdiction’s strong reputation for fair and balanced regulation, political and economic stability, professionalism, tax neutrality, asset protection, a well-developed infrastructure and Cayman’s geographical location.
Both institutions and clients alike are assured that establishing a bank or placing assets in Cayman will afford them the best opportunity to maximise the potential of their assets. This assurance is as a result of the high ethical standards in government and among financial services providers, a sound regulatory regime based on international standards, and an internationally recognised legal system based on English common law.
The Framework is intended to promote a more forward looking approach to capital supervision that encourages banks to identify risks and to develop or improve their ability to manage those risks. As a result, it is intended to be more flexible and better able to evolve with advances in markets and risk management practices. A key objective of the revised Framework is to promote the adoption of stronger risk management practices by the banking industry.
Basel II Framework will apply to banks that are locally incorporated in the Cayman Islands (Category A and B banks), all home regulated banks and host regulated banks (subsidiaries of foreign banks), with or without a physical presence.
Locally incorporated banks should be compliant with the Pillar 1 Standardised Approaches of Basel II by December 31, 2010. CIMA will be conducting a parallel run period from July 1, 2010, to December 31, 2010. During this period banks will be submitting test returns along with the current Form BS return.
As of January 1, 2011, banks will be required to report to CIMA under the following Pillar 1 approaches:
1. Credit Risk – Standardised
2. Market Risk – Standardised
3. Operational Risk – Basic Indicator Approach, the Standardised Approach, or the Alternative Standardised Approach
The Basel II implementation will also include Pillar 2 – Supervisory Review Process and Pillar 3 - Market Discipline. However, given the scope of Pillar II and Pillar III and the possible impact to banks, CIMA proposes to implement them after the December 31, 2010.
Branches of foreign banks operating the Cayman Islands, will not be required to maintain a separate capital requirement, and as such will be excluded from the local Basel II requirements. However, these foreign banks, including the operations of the Cayman Islands branches, must maintain the minimum capital adequacy requirements as stipulated by their home jurisdictions.
Yes, since the majority of banks impacted by the application of the Basel II Framework are members of the Cayman Island Bankers Association (CIBA), CIMA has established a joint CIMA/CIBA Basel II Working Committee. The primary objective of the working committee is to provide banks and CIMA a forum for consultation, discussion and agreement on Basel II related issues.
Yes, the Forms BS have been renamed the Quarterly Prudential Returns (QPRs). The Basel II forms and QPRs now comprise 29 worksheets. While the QPR worksheets will be submitted by all banks, the information required from each bank for the Basel II forms depends on status of the institution and the kinds of investments managed by the institution.
The Basel II forms are hidden upon the initial opening of the Excel workbook. Banks will have to select their “Status”, i.e., Affiliate, Private or Subsidiary, in order for the Basel II templates to open. If banks select “Branch” as their status, the Basel II forms will not open as these forms are not relevant to branches. Note: Excel 2003, or higher and macros set to enabled, will be required to open, view and input data into the forms.
The Cover Sheet which requires banks to fill up information such as:
a) Institution Name
b) Licence Number
d) Quarter End
e) Fiscal Year End
g) Name of Person Authorising Returns
Additionally, banks will have to select their Credit Risk, Market Risk and Operational Risk methodology used to capture capital requirements under Basel II. However, not all banks are required to select all the methodologies.
Basel II Capital Forms:
a) Capital Ratios
b) Capital Constituents
Basel II Credit Risk Forms
a) On-Balance Sheet exposures
b) Off-Balance Sheet exposures
c) Counterparty Credit Risk exposures
d) Settlement Risk
e) Securitisation Exposures
Basel II Operational Risk Form
Basel II Market Risk Forms
a) Data - Interest Rate Risk positions
b) Data - Equity Risk positions
c) Data - Commodities
d) Interest Rate Risk Maturity Results
e) Interest Rate Risk Duration Results
f) Equity Results
g) Commodity Results
h) Foreign Exchange Result
i) Correlation Trade Portfolio
QPR Forms (Quarterly Prudential Returns)
a) Statement of Financial Position
b) Statement of Financial Performance
c) Ten Largest Depositors
d) Large Exposures
e) Asset Quality
f) Debt Securities
i) OTC & ETC
j) Off-balance sheet
k) Interest Rate
Methodology selected for Credit Risk Mitigation
a) Collateral Simplified Approach
b) Collateral Comprehensive Approach
Methodology selected for Counterparty Credit Risk
a) Current Exposure Method
b) Standardised Method
Methodology selected for Operational Risk
a) Basic Indicator Approach
b) Standardised Approach
c) Alternative Standardised Approach (i)
d) Alternative Standardised Approach (ii)
e) Alternative Standardised Approach (iii)
f) Alternative Standardised Approach (iv)
a) Methodology selected for Interest Rate Risk
b) Methodology selected for Commodities
iv. Maturity Ladder
c) Methodology selected for Options
The preferred method for filing Basel II and QPR submissions depends on the banks' familiarity with XBRL and the quantity of information an institution is required to submit. For most banks, the Excel form will be the easiest and quickest way to create a submission.
The validation rules are the set of criteria that CIMA will apply against all submissions to ensure data integrity and conformance to reporting requirements. Depending on the nature of the discrepancies found by each validation rule, an error or warning will be generated. A summary list of the warnings and errors generated by the validation rules will be provided to the filer along with the validation rules.
If the validation rules expose errors in a filing, the filing will be rejected by the system. If the submission only generates warnings, the submission will be accepted and the filer will be informed of the warnings.
This workbook contains hyperlinks to an externally-located Excel file, "CIMAReferenceTemplate.xlsx”. To enable these, the referenced file "CIMAReferenceTemplate.xlsx" should be saved within the same directory as the “Facts List and Validation Rules” Excel file.
Credit risk refers to the uncertainty in a counterparty’s ability to meet its obligations.
The risk weightings that are applied to claims secured by residential property are on an individual exposure basis, therefore those exposures that have LTV information may apply the 35% or 75% accordingly. However claims secured by residential property that do not have this information should be risk weighted at 50%.
It’s a technique that banks may use to mitigate its credit risk to which they are exposed. These techniques include:
a) Collateralisation - exposures may be collateralised by first priority claims, in whole or in part with cash or securities.
b) Use of guarantees and/or credit derivatives - a loan exposure may be guaranteed by a third party; in addition banks may buy a credit derivative to offset various forms of credit risk.
c) Netting - banks may agree to net loans owed to them against deposits from the same counterparty.
An unrated bank in an unrated country would carry the appropriate risk weighting for an unrated bank under Option 2, i.e., 50% for exposures over 3 months or 20% for exposures of 3 months or less.
Loans secured by hedge funds will have to apply the highest haircut applicable to any security in which the fund can invest.
Machinery and equipment are not considered eligible capital for credit risk mitigation.
The recognition of an undrawn commitment should be determined by the bank’s accounting and legal treatment. Commitments are usually reported off-balance sheet and CIMA uses the classification of commitments according to banks’ generally accepted accounting practice (GAAP).
Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. This definition includes legal risk but excludes strategic risk and reputational risk. The causes for operational risks are internal processes, people, systems and external events.
Other Fixed Assets are: furniture & fixtures, computer equipment, and other real estate owned which includes property held in satisfaction of debt. The risk weighting applied to other fixed assets is 100%.
Each individual bank would be better informed to answer that question. Banks may use the Basic Indicator Approach where they do not have to map gross income by business lines.
Banks must demonstrate to CIMA that they have the ability to meet the “Qualifying Criteria” set out in paragraph 11 of Rules, Conditions and Guidance on the Calculation of Operation Risk Capital Requirement.
Gross Income is defined as net interest income plus net non-interest income. It is intended that this measure should:
a) be gross of any provisions (e.g. for unpaid interest);
b) be gross of operating expenses, including fees paid to outsourcing service providers;
i. excluding realised profits/losses from the sale of securities in the banking book and;
ii. excluding extraordinary or irregular items as well as income derived from insurance.
In contrast to fees paid for services that are outsourced, fees received by banks that provide outsourcing services shall be included in the definition of gross income. Realised profits/losses from securities classified as “held to maturity” and “available for sale”, which typically constitute items of the banking book (e.g. under certain accounting standards), are also excluded from the definition of gross income.
Market risk is defined as the risk of losses in on- and off-balance-sheet positions arising from movements in market prices. The risks subject to this requirement are:
a) the risks pertaining to interest rate related instruments and equities in the trading book;
b) foreign exchange risk and commodities risk throughout Banks (i.e. the trading book and the non-trading book).
A bank’s trading book consists of all positions in financial instruments and commodities held either with trading intent or in order to hedge other elements of the trading book.
Where marked to market valuation is not possible, banks should mark to model, but this must be demonstrated to be prudent and reflect the economic substance of the transactions, using market-determined inputs or parameters, wherever possible. Banks should refer to paragraph 477 of the Rules, Conditions and Guidance of the Minimum Capital Requirements – Pillar 1 to understand the criterion when implementing its mark to model valuation framework.
Yes. Banks will have the capacity to add more rows to accommodate additional currencies as needed.
Positions of a structural, i.e. non-dealing, nature as outlined below, may be excluded from the calculation of the net open currency positions:
a) positions are taken deliberately in order to hedge, partially or totally, against the adverse effects of exchange rate movements on banks' capital adequacy ratio;
b) positions related to items that are deducted from banks' capital when calculating its capital base in accordance with the rules, conditions and guidelines in this module, such as investments in non-consolidated subsidiaries; and retained profits held for payout to parent.
The Authority will consider approving the exclusion of structural positions for the purpose of calculating the capital requirement, only if the following conditions are met:
a) the concerned banks provide adequate documentary evidence to the Authority which establishes the fact that the positions proposed to be excluded are, indeed, of a structural, i.e. non-dealing, nature and are merely intended to protect banks' capital adequacy ratio. For this purpose, the Authority may ask for written representations from banks' management or directors; and
b) any exclusion of a position is applied consistently, with the treatment of the hedge remaining the same for the life of the associated assets or other items.
For example, if a bank has its capital denominated in USD dollars and has a portfolio of foreign currency assets and liabilities in CHF that is completely matched; its capital/asset ratio will fall if the domestic currency depreciates. The bank may want to protect its capital adequacy ratio by running a short position in the domestic currency, although the position would lead to a loss if the domestic currency were to appreciate. Therefore any position deliberately taken in order to hedge partially or totally against the adverse effect of the exchange rate on its capital ratio may be excluded from the foreign exchange capital calculation.
(1) The Personal Questionnaire
form, completed for each director, senior officer, and for each shareholder or beneficial owner who is a natural person holding more than 10% of the applicant's issued share capital or total voting rights;
(2) The annual accounts (for the two years immediately preceding the year of application) of each major shareholder (10% as above), which is a corporate body, together with similar accounts for the parent body, where appropriate;
(3) A minimum of three character references acceptable to the Authority, including one character reference and one financial reference; and
(4) One police clearance certificate or sworn affidavit or other certificate satisfactory to the Authority that such director, senior officer or shareholder has not been convicted of a serious crime or any offence involving dishonesty.
If the applicant is a company incorporated in the Cayman Islands, refer to Section 9 of the Schedule of the Bank and Trust Companies (Licence Applications and Fees) Regulation (2013 Revision). If the applicant is a company incorporated outside of the Cayman Islands, refer to Section 10. See also the Regulatory Policy on Licensing Banks.
The legal requirements for obtaining a bank or trust licence in the Cayman Islands are governed by the Banks and Trust Companies Law (2013 Revision). Section 6 (1) of that law states: "...the Authority may, if satisfied that the carrying on of such business will not be against the public interest, grant a licence to such person or company subject to such terms and conditions, if any, as the Authority may deem necessary."
See: Banking Services Licensing Requirements for additional information.
As per Section 3 of the Banks and Trust Companies Law, in determining whether a person is "fit and proper", the Authority will consider a person's:
(a) honesty, integrity and reputation;
(b) competence and capability; and
(c) financial soundness.
See: the Regulatory Policy on Fitness and Propriety as well as the Regulatory Procedure on Assessing Fitness and Propriety on the Index of Regulatory Measures webpage.