Cayman banks need to reveal accounts

(CNS): Local retail banks should be more open and transparent, said former chair of the Cayman Islands Monetary Authority, Tim Ridley, yesterday when he criticized at least three of the islands’ high street class A banks for not being willing to show their balance sheets and reassure the people given the global financial crisis. He also said CIMA faced a number of hurdles, not least its inability to chase fees and fines.

Speaking at a regulatory seminar on Wednesday, 15 October, at the Ritz hosted by FTS, where the former chair of CIMA delivered a presentation about how to work with Cayman’s regulator, he also spoke about a number of other issues. Answering questions from the floor he said he believed that the domestic banking in Cayman was sound, but given that banking is a matter of confidence, he was disappointed that despite peer pressure First Caribbean, Scotia and HSBC do not publish their accounts.

“When I have spoken to them about this their answers have ranged from, it’s too much bother or it’s too expensive and we will do it when the law says we have to,” he said.

He explained that Butterfield Bank and Cayman National Corporation do publish their accounts and Fidelity Bank will give customers copies of its financial statements on request. He explained that as the Royal Bank of Canada is a branch and not a subsidiary of the Canadian bank their statistics are published within the wider company accounts.

He said there is no reason to believe that any local retail banks were in trouble, but if everyone was to pitch up and take their money anything could happen. He said Cayman’s local banks had been criticized in the pastfor not lending enough money and for interest rates that were too high; onshore banking was not at major risk but the accounts would prove it.

“These banks are doing themselves and the Cayman Islands a disservice. So why not contribute to transparency and good governance and provide reassurance to the community by publishing the financials of the Cayman operations at the same time as they file them with CIMA?” he asked.

He said that in general there was room for improvement with regards to the onshore financial system when it came to transparency. He also confirmed that Cayman’s retail banks do not offer insurance to customers, and if the industry did those costs would be incurred by the customers in the long run through even lower deposit interest rates.

Speaking about the issues of regulation for offshore entities, he said that CIMA’s relationship with the industry was good and that it does work with the industry to resolve problems. However he noted that there was room for improvement and that the authority was under resourced. He also said the body was inhibited by the fact that it cannot enforce payment of fees and penalties, and Ridley noted one major problem was that CIMA can only levy $1,000 for a breach of the rules, which he said was hopelessly inadequate.

“This must change in the future as it reflects poorly on the credibility of the jurisdiction and its commitment to enforcement in appropriate circumstances,” Ridley said.

He explained that CIMA does not have the standing or power to bring proceedings for payment because, although the fees are collected by CIMA, they are payable under the laws to the Financial Secretary, i.e. the Cayman Islands Government.

“CIMA is a separate statutory body and thus does not have the necessary authority to act. This is most inefficient, results in loss of revenue to the Islands and should be changed so that CIMA can pursue delinquents,” he added.

Offering the benefit of his experience, Ridley told the delegates how best to deal with CIMA and how to maintain a good relationship, but he also raised his concerns that Cayman is not doing enough check that the directors on many of the companies registered here are fit and proper. And although CIMA has considered taking action against directors before, it has never actually done so. Given the current situation, however, Ridley warned that if we see a lot of insolvencies over the coming months CIMA may well take action against individual directors.