Shooting ourselves in the foot

| 14/07/2008

Currently at least five countries including the US, UK, India, Norway
and Germany, several international non-governmental organizations and
a number of academic institutions, including Oxford University, are
conducting serious investigations into what really goes on in the
world of offshore finance. More than ever the Cayman Islands needs to
defend its regulatory regime and to advocate its importance in global
finance.

Given this situation, the removal of Tim Ridley not only from the
chair of the Cayman Islands Monetary Authority (CIMA) but from the
Board as well is nothing short of stupefying. Love him or loathe him –
if the country is seeking to defend its position and to fly the flag
for free market global finance while maintaining a reputation for the
highest level of regulation in an offshore jurisdiction, the
government could have no better representative. Not only does Ridley’s
reputation stretch around the world, he is also a brilliant messenger
for Cayman’s cause. An eloquent and intelligent public speaker, Ridley
has been, according to many in the world of finance, an outstanding
ambassador for Cayman and for sensible solid regulation. He has flown
the flag and educated many on the idea that good regulation enhances
the ability of Cayman to do business, and that what Cayman does is
neither sinister nor illegal.

Yet, perhaps because Ridley is outspoken and an independent thinker,
perhaps because he does not toe what is perceived to be the
government  ‘line’, or perhaps because he is not ‘Caymanian’
enough, the country has lost its most effective advocate at a time
when we never needed one so badly.

In fact, we have no idea why we have lost him. The government has as
yet offered no information regarding the reasons for his removal, so
it could be any of the above or something entirely different. Ridley
is said to have beenmore than happy to continue his tenure, so the
decision has come from the administration and still, like so many
things in Cayman, remains a mystery.

It is no surprise that the local financial services sector is silently
seething, and it will be interesting to see who eventually breaks that
silence and says publicly what everyone else is thinking and asks the
question openly of government – what in hell are you doing?

Losing Richard Rahn, one of the last few remaining international
directors who has also advocated widely for Cayman’s cause and is a
leading columnist, was another blow to the country’s financial
industry. If these changes have been made for parochial reasons then
we all need to be concerned. Any damage to CIMA’s reputation for
efficiency and objectivity would damage the sector as a whole and, as
Ridley has often noted, we are all dependent on the offshore sector.
From the small car mechanic’s shop to Foster’s supermarket, our
domestic economy feeds off the success of the financial services
industry. Add to that the current worldwide focus on Cayman and other
offshore tax havens, losing the advocacy of Ridley and Rahn is a
significant blow.

As various interested parties wait on the explanation for Ridley’s
removal, it is likely to be a long wait. If government genuinely
believes that CIMA will do better without the services of Ridley then
it really should explain why. However, it is hard to feel anything but
a sense of unease that, in this case, any explanation will fall far
short of the truth. If this is indeed a case of nationalism raising
its very ugly head in a very inappropriate place or the desire to
silence someone that cannot be controlled, neither bodes well for the
future of the country’s golden goose.

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