Cayman Concludes Banking Pact With US

by Phillip Morton, Investors Offshore.com

25 August 2010

The Cayman Islands Monetary Authority (CIMA) has announced that it has formalized procedures with the four main United States banking regulators for the exchange of supervisory information relating to banks and banking institutions that operate in both territories.

The US agencies that are parties to the Statement of Cooperation are: the Board of Governors of the Federal Reserve System; the Office of the Comptroller of the Currency; the Federal Deposit Insurance Corporation; and the Office of Thrift Supervision.

After many months of negotiations, CIMA, on August 17, announced that the agreement had entered into force. The pact, CIMA said, will make it easier for both territories’ regulators to access pertinent information and supervisory assistance from each other, to achieve more effective supervision of entities with operations in both territories.

According to CIMA, the accord covers the sharing of information when a Cayman Islands or US regulated bank or banking institution is seeking approval in the other jurisdiction to set up a branch, subsidiary or affiliate in that jurisdiction. This way, the home regulator will be aware when its entities are seeking to set up establishments in the other jurisdiction and the host regulator will know, when it is considering an application for authorization, if the institution is in good regulatory standing. Additionally, the agreement establishes protocols for information exchange and general cooperation to facilitate ongoing consolidated supervision of these cross-border institutions as permitted by the laws of both jurisdictions. It also sets the framework for handling confidential information on both sides.

Since CIMA’s inception it has put in place some 17 other cooperation and information exchange agreements with foreign regulators.

Managing Director, Cindy Scotland, explained that entering into this agreement with the US banking regulators is also consistent with one of the recommendations of the International Monetary Fund in its 2009 report on the Assessment of the Financial Sector Supervision and Regulation in the Cayman Islands. “The report recommended that CIMA enter into agreements with home supervisors of international financial institutions it regulates in order to manage the risks involved in the cross border operations of such institutions," she noted. "This is something that we accepted and moved speedily to implement.”

Cayman Islands Premier and Minister of Finance, McKeeva Bush commended the memorandum of understanding as important both from a regulatory and from a business perspective. Bush said:

“This agreement will certainly enhance CIMA’s effectiveness and that of the other regulators in executing their supervisory responsibilities with regard to cross-border banking entities. For international banks and banking institutions with entities in Cayman, as well as their Cayman service providers, this is a reputational boost that should enable them to attract more business. It provides further evidence of the Cayman Islands’ commitment to sound regulation and international cooperation and shows our increasing stature as an international financial centre.”

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