Corb7 Blog

South of Cuba and Northwest of Jamaica, this small island territory is a major international hub and the fifth largest banking center in the world.  It is a location where myth and fact have often been blurred by those willing to buy into what has become known as the “Grisham effect.”  As you may recall, the famous fiction writer John Grisham used the Cayman Islands as a backdrop for several of his books.  Some of his works were turned into movies with the most famous one being, “The Firm,” which starred Tom Cruise and was released in 1993.  For many years, the Cayman Islands suffered from the “Grisham effect”, as it was painted within his books as location where money can be stashed away by criminals.  The beauty of the location added a certain romance to the idea of ill-gotten funds being placed in illicit Cayman banks. The reality, however, is far more boring.  The Cayman Islands is a highly regulated and full compliant jurisdiction and as such not exactly an ideal location for drug dealers or anyone else to launder their funds.

It is possible to become an owner of a Cayman Island bank and previous banking experience is not necessary needed.   Although in reality, it greatly improves your chances of approval and the odds are that your directors will need a stellar CV demonstrating financial experience.  There are three types of licenses: Class A, Class B unrestricted and a Class B restricted.  Class A allows for doing business with the locals and will not be part of our discussion since it has little practical application for our needs.  The other two classes is where we will concentrate.

As at December 31, 2013 there were 199 category B banks authorized. A Category B bank permits the holder to undertake full banking services from within the Islands or elsewhere, but prohibits the taking of deposits from any person resident in the Islands, other than another Licensee, or an exempted or an ordinary non-resident company that is not carrying on business in the Islands.

The initial application must be accompanied by a fee of US$2439.02 payable to the Cayman Islands Monetary Authority.  If the application is successful, a fee of US$85,365 will be payable upon the granting of the Category B licence. The fees for the licensing process can range from US$45,000 and upwards, however, before we can give a better estimate on fees, we would need to understand the full nature of your client’s proposed business operations.  Thereafter, the Annual Fees will be dependent on the amount of assets the bank holds:

Under the Bank and Trust Companies Law (2013 Revision) all locally incorporated banks are required to maintain (on a paid up basis) a minimum net worth of CI$400,000 or its equivalent in other currencies except for licensees that hold Restricted Banking Licenses. Restricted Category B Licensees 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 (risk asset ratio). The Basel Committee recommends a minimum risk asset ratio of 8%. However, the Cayman Islands Monetary Authority requires subsidiaries to maintain a minimum risk asset ratio of 12% and privately owned banks are required to maintain a minimum of 15%.