Cayman Islands: Banking Still At The Heart Of Business

Although the hedge fund and captive insurance industries have taken most of the limelight of late when it comes to the success of Cayman's financial services industry, it should not be forgotten that the jurisdiction's success in banking was instrumental in shaping its financial services success story. Today, the banking industry still remains very much a solid part of the Islands' phenomenal global success.

Banks first opened their doors in the Cayman Islands in 1953 when Barclays Bank established a presence on Grand Cayman. A handful of retail banks joined Barclays over the next two decades or so until the industry began to expand at a rapid rate, born from a need to service the growing residential population as well as complementing the newly developing industries of fund, trust and company administration.

Today Cayman's banking industry services the needs of its 57,000 or so residents, its commercial clients, and sophisticated investors and high- net-worth individuals looking for tailored investment solutions to suit their specific and unique requirements. The high number of Cayman's licenced banks (221 in all – including 40 of the world's 50 largest banks), underscores the continued success of the banking industry. Seven of the 221 are retail category 'A' banks licensed to conduct business with domestic and international clients.

Private banking continues to flourish in the Cayman Islands for a number of reasons. As a British Overseas Territory, it has the protection of the Crown and operates under Common Law. Regulated by the Cayman Islands Monetary Authority (CIMA), Cayman's financial services industry has been recognised by the International Monetary Funds (IMF), the Financial Action Task Force (FATF) and the Caribbean Financial Action Task Force ( CFATF) and other high-level international entities as possessing a comprehensive regulatory and compliance framework. CIMA has membership in the Offshore Group of Banking Supervisors, the Caribbean Group of Banking Supervisors, and the Association of Supervisors of Banks of the Americas, all of which give the jurisdiction important access to the Basel Committee, which sets out banking principles globally.

What Makes Cayman a Top Choice

As an offshore jurisdiction, Cayman offers far more investment solutions than onshore counterparts and remains a hub for clients looking for estate-planning and asset-protection services, due in part to Cayman's trust structures, in particular its STAR trusts which are based upon a unique form of non-charitable purpose trust legislation introduced in 1997, called the Special Trusts (Alternative Regime) Law.

Cayman offers clients a number of international investment options, including global equities, fixed- income instruments, electronic- traded funds and international mutual funds. Derivatives such as options and futures are also available.

When it comes to service, Cayman's banks have a wealth of experience on board, with international private bankers able to take a holistic approach with regard to their clients' needs. In addition, they can obtain solutions in multiple jurisdictions as most of Cayman's service providers are global entities.

Banking services tailored to the needs of private clients include multiple currency accounts, customised credit solutions (such as loans against investment portfolios) and online banking services. Dedicated relationship managers have a depth of knowledge and expertise in a variety of areas, including investments, trusts, estate planning and general banking, and thereby offer a high-touch service for high-net-worth clients.

Cayman Banks Gain Top Awards

In comparison to its competitors, this jurisdiction offers an extremely high level of banking services, with banks enjoying global accolades on a regular basis. The Banker's Bank of the Year awards regularly feature Cayman Islands banks and they have also been recognised in Euromoney's Global Private Banking Survey for a range of awards.

The Big Picture

David Foster, board member of the Cayman Islands Bankers' Association, gave a broad overview: "For private-banking clients, Cayman still features as a leading global offshore financial centre," he said. "With its strategic location, business can be conducted with all of the Americas and most of Europe during a normal working day".

In addition, Mr. Foster said Cayman's modern infrastructure compares favourably with those of many other jurisdictions within the region.

"As a leading global offshore financial centre, the fact that it is also home to many of the world's biggest accountancy, law and taxation firms, means that the local infrastructure is well placed to handle the related demands," he explained. "Undoubtedly, the political and economic stability and robust regulatory environment in Cayman play a big part - no wealthy family will want to be associated with a jurisdiction that can't demonstrate it is keeping up with the changing landscape around anti-money laundering and tax transparency."

About the Author

Paul Muspratt is Co-Managing Director of Caledonian Bank Ltd., a financial services firm based in the Cayman Islands and specialising in banking, custody and trade execution. Paul is responsible for strategic business development and client relationships.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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