The Cayman Islands is home many international banks engaging in a wide range of banking activities. Some banks are set up specifically to facilitate Euro-Dollar deposit-taking or Intra Company lending. The law that regulates the activity of banks in the Cayman Islands is the Banks and Trust Companies Law, (2013 Revision), (the "Law"). Under the Law, no banking business may be transacted from within the Islands (whether or not such business is carried on in the Islands), other than by the holder of a valid banking licence ("Licence") granted by the Cayman Islands Monetary Authority ("the Authority") authorising such business.
Cayman's bank licensing regulations allow for a variety of applicants, including branches and subsidiaries of international banks incorporated either in the Cayman Islands or abroad. Applicants falling outside of the above group would be considered by the Authority on a case by case basis and may be granted in exceptional circumstances. Under the Law, there are three categories of banking Licence available. These are Class A Banking Licence, Class B Banking Licence and Class B (Restricted) Banking Licence (see below for details). Each class of Licence carries with it specific permissions and restrictions.
Solomon Harris is able to analyse your circumstances with you to determine which Class of Licence may be most appropriate to your needs.
Capital Adequacy Requirements and Capital Adequacy
The Bank for International Settlements' capital adequacy regime is followed in the Cayman Islands and the Authority has set minimum threshold levels of 12% for subsidiaries of banks subject to consolidated supervision and 15% for locally incorporated banks. Differing capital requirements apply depending on what Class of banking Licence is sought. Solomon Harris advises and assists in applications to the Cayman Islands Monetary Authority ("CIMA") for approval of Bank and Trust licences under the Law. Please contact us for legal advice relating to the Licence application process, bank supervision, ongoing compliance obligations or reporting requirements.
A Company intending to carry on 'banking business' or intending to carry on trust business must first obtain a valid licence from CIMA. 'Banking business' is defined as 'the business of receiving (other than from a bank or trust company) and holding on current, savings, deposit, or similar account, money which is repayable by cheque or order and maybe invested by way of advances to customers or otherwise'. Any such Company will be governed under the Bank and Trust Companies Law (2013 Revision).
CIMA will as a policy only consider applications from the following:
- Direct branches of international banks world-wide;
- Wholly owned or controlled subsidiaries of international banks worldwide;
- Affiliates of international banks worldwide; and
- In exceptional circumstances, a banking licence may be granted to a bank falling outside the categories listed above.
In general, upon application for a licence under the Law, CIMA will seek assurance from the home country supervision authority of consolidated supervision and good standing of the applicant as set out in CIMA's Statement of Guidance on Licensing of Banks.
The categories of Bank licences available under the Law are as follows:
"A Licence" - Unrestricted Bank Licence
This type of licence allows its holder to provide service to domestic and international markets. It will usually be granted only to a branch or subsidiary of a major international bank which has a net worth of no less than US$50 million.
"B Licence" - Unrestricted Offshore Bank Licence
Although this licence is restricted to servicing non-residents of the Cayman Islands this type of licence permits the holder thereof to carry on unrestricted banking business anywhere in the world from the Cayman Islands except, in general, service in the Cayman Islands.
"B Licence" - Restricted Offshore Bank Licence
This licence is restricted to named clients of the holder of the licensee, who are located offshore. This type of licence would be granted where the licence holder has a supervised banking entity in another country or, the licensee is a well established overseas corporate group establishing a bank in the Cayman Islands to perform a treasury function for the individual corporate members of that group only and there is no intention of taking third party deposits.
It is a requirement of a holder of a B licence which is not a subsidiary or branch of a bank licenced in a country or territory outside the Islands that it have such resources (including staff and facilities) and such books and records as the CIMA considers appropriate having regard to the nature and scale of the business. Generally the Authority will require a minimum of two persons located in the Islands having suitable experience, one of whom would be the Managing Director and the other the Assistant Managing Director.
This will be issued in the same categories as the "B" bank licences and permits the carrying on of trust business anywhere in the world from the Cayman Islands or in the Cayman Islands depending on the category of licence issued.
Capital Requirements and Government fees
The minimum capital requirements depend on the type of licence to be issued, however please note that the actual paid-in capital for the licensee will also be determined by the projected balance sheet based on the capital adequacy methodology developed by the Basel Committee on Banking Supervision (which in general shall not be less than ten percent).
The capital, upon approval by CIMA (the statutory board which regulates the banks and administers the Law) may be invested with the parent bank or trust company in some cases.
Company vehicle for establishing Cayman Islands Bank
One may either register an existing foreign bank, as a branch of a foreign bank having a place of business in the Cayman Islands, or a Cayman Islands company may be incorporated for the purposes of conducting banking business.
Either an Ordinary Company or an Exempt Company may be used for a category B Bank licence and an Ordinary Company may be used for category A Bank licence, as an Exempt Company cannot carry on business locally. Among the advantages of using an Exempt Company for a category B Bank licence is that the company receives a guarantee from the Government that for a period of twenty years (as of the date of incorporation) the company will not be required to pay taxes, and that it may issue shares of no par value and it need not have "Limited" or "Ltd." in its name.
Supporting Documentation for Licence applications
The company licence holder must have no less than two directors and the company must appoint at least two individuals resident or a body corporate registered in the Cayman Islands to be its agent. All Officers, Agents, Directors and Shareholders of any licensed Cayman bank must first be approved by CIMA. There are personal questionnaire forms that are required to be completed by the Directors and Shareholders, Controllers and major corporate officers, together with supporting documentation, to be submitted to CIMA for all such persons.
Solomon Harris will assist in compiling all of the requisite documentation required to support the licence application, as required by the Law and as set out in CIMA policy, inclusive by not limited to, the above referenced questionnaire form, supporting documents required from the parent company and its supervisory authority, detailed business plan, management structure and letters of undertaking etc.
Solomon Harris will also assist the applicant in liaising with all other necessary local service providers required under the Law in furtherance of the licence application, such as local auditors.