BANKING SYSTEM OF CAYMAN ISLANDS

The Cayman Islands is a major supplier of cross-border financial services, particularly in ranking, with over US$1 trillion in international banking assets of banks headquartered in over 55 different jurisdictions in 2005, the second largest jurisdiction in terms of the number of captive insurance companies, and an important domicile for hedge funds.
Banking system in the Cayman Islands is regulated by independent Cayman Islands Monetary Authority (the Authority) acting the role of a central bank. The Authority is responsible for issuing the Caymanian dollar and holds sufficient assets (i.e. U.S. Treasuries) to back all the local notes and coinage in circulation. There are approximately 500 banks and trusts companies operating within the Cayman Islands.
Banks serve a large variety of, primarily institutional, functions, with over 90 percent of their business made up of interbank bookings. At end 2002, 30 had an “A” license and 353 a “B” license (five of which had a restricted license). Among the “A” banks are one private, domestically-owned bank, Cayman National Bank, and four international banks serving the domestic market. These banks are universal banks offering both banking and investment services, including mutual funds. The majority of the predominant U.S. banks provide overnight accounts to pay clients more favorable interest rates through the offshore branch (sweep accounts). In addition to retail banking by “A” licensees, and structured finance products for the institutional market, some provide corporate banking services only for their own group, carry out corporate investments for their headquarters, provide private banking, administer mutual funds. In both banking and insurance, an “A” license permits the licensee to carry on the full gamut of domestic and international business, while a “B” license restricts the business to international markets. Several pieces of sectoral legislation (banking, insurance, mutual funds) allow for a restricted license that permit the licensee only to do business with persons or companies listed in the license.

The Cayman banking sector has received an Aa3 country risk ratings from the leading ratings services and 47 of the 50 largest banks in the world are licensed there. The Cayman Islands banking sector adheres to the guidelines of the Basle Committee on Banking Supervision. The Cayman Islands are a member of the Offshore Bank Supervisors and the Caribbean Group of Banking Supervisors, both of which were formed under the auspices of the Basle Committee. Banks adhere to the ‘know your client’ rule. These rules have been approved by the U.S. Internal Revenue Service, enabling institutions in the Cayman Islands to become qualified intermediaries under the U.S. Withholding Tax Rules introduced on 1 January 2001.
In February 2002, the Cayman Islands authorities signed a bilateral information-sharing agreement with the United States. The issue of bank privacy within the Caymans has been modestly compromised by a judgment awarded to the US Internal Revenue Service allowing for access to MasterCard and American Express records for U.S. citizens with offshore assets in the Caymans. Those U.S. citizens with suspected criminal behavior maybe subjected to further investigation.

The Cayman Islands Monetary Authority
The Cayman Islands Monetary Authority (the Authority) was established as a body corporate under The Monetary Authority Law (the Law), which was brought into force on 1st January, 1997. The former responsibilities, duties and activities of the Financial Services Supervision Department and the Cayman Islands Currency Board now fall to the Authority, which was created, from the merger of these two bodies.
The principal objectives of the Authority, as stated in the Law, are:
- to issue and redeem currency notes and coins; and to manage the Currency Reserve;
- to promote and maintain monetary stability;
- to promote and maintain a sound financial system;
- to advise Government on banking and monetary matters;
- to provide assistance to overseas regulatory authorities; and
Within the Authority there are ten divisions, namely:
- Operations;
- Currency Operations;
- Banking Supervision;
- Insurance Supervision;
- Investments & Securities Supervision;
- Policy & Development;
- Fiduciary Services;
- Compliance;
- Legal Division;
- Managing Director's Office.
In March 2003 the Authority became operationally independent under the Monetary Authority Law (2003 Revision). Independence significantly enhanced the ability of the Authority to meet international standards of supervising, accountability and transparency, and has more clearly defined its functions, duties, powers and obligations.
The Board of Directors of the Authority is comprised of leading local and overseas individuals. It is responsible for operational decision-making, including licensing and registration of regulated financial business in or from the Cayman Islands, powers previously vested in the Cabinet. This change has enhanced efficiency with respect to licensing and supervisory matters.

Financial Institutions Operating
Some of the major banking institutions operating in Cayman Islands:

Ansbacher (Cayman) Limited - Banking & Trust
Banco Comercial Portugues, S.A.- Banking & Trust
Bank Austria Cayman Islands Ltd.- Banking & Trust
Bank of America, National Association - Banking & Trust
Butterfield Bank (Cayman) Limited - Banking & Trust
Caledonian Bank & Trust Limited - Banking & Trust
Cayman National Bank Ltd. - Banking & Trust
Bank and Trust Company (Cayman) Limited - Banking & Trust
Coutts (Cayman) Limited - Banking & Trust
Deutsche Bank (Cayman) Limited - Banking & Trust
Dresdner Bank Lateinamerika Aktiengesellschaft - Banking & Trust
Fidelity Bank (Cayman) Limited - Banking
First Caribbean International Bank (Cayman) Limited - Banking
Firs Caribbean International Finance Corporation - Banking & Trust
Fortis Bank (Cayman) Limited - Banking & Trust
HSBC Financial Services (Cayman) Limited - Banking & Trust
Merrill Lynch Bank and Trust Company (Cayman) Limited - Banking & Trust
Morval Bank & Trust Cayman Limited - Banking & Trust
Royal Bank of Canada - Banking
Royal Bank of Canada Trust Company (Cayman) Limited - Banking & Trust
Scotiabank & Trust (Cayman) Ltd - Banking & Trust
UBS Fund Services (Cayman) Ltd - Banking & Trust.