Over 40 of the world’s top 50 banks have established operations in the Cayman Islands. Their decision is influenced by the jurisdiction’s strong reputation for fair and balanced regulation, political and economic stability, professionalism, tax neutrality, asset protection, well-developed infrastructure, and strategic geographical location.

Both institutions and clients are assured that establishing a bank or placing assets in the Cayman Islands offers the best opportunity to maximize their assets' potential. This assurance is due to the high ethical standards in government and among financial services providers, a sound regulatory regime based on international standards, and an internationally recognized legal system based on English common law.

Although retail banks (Category ‘A’ banks) are registered and licensed by Cmrai, the Authority does not have the power to regulate banking fees, as these charges are commercially driven. For more information or to obtain the latest list of retail banking fees, please refer to the appropriate sources.

No, the Cayman Islands Prime interest rate is set collectively by the retail banks. Any changes to the Prime interest rate are advertised by the Cayman Islands Bankers Association through local media outlets.

No, there are no usury laws in the Cayman Islands. The Authority does not have the power under the Monetary Authority Law (2013 Revision) or the Banks and Trust Companies Law (2013 Revision) to set maximum or minimum interest rates that may be charged or paid by retail banks and other deposit-taking institutions.

For up-to-date information, please refer to the Banking Services Statistics page.

The Authority reviews banking-related complaints against licensees from a regulatory perspective. Investigations typically assess whether any regulatory laws or guidelines have been breached and whether there are weaknesses in the institution’s systems and processes. The Authority acts primarily as an intermediary between the complainant and the licensee, rather than as an arbitrator.

Therefore, the Authority cannot interfere with a licensee’s commercial decisions and does not have the legal authority to resolve disputes, adjudicate, or mandate compensation payments. The Authority will not intervene in matters related to commercial decisions, interest rates charged, fees levied on products and services, or where both parties to a complaint have legal representation.

When should I file a complaint with the Authority?

Many complaints arise from misunderstandings or mismatched expectations, which can often be resolved through direct communication with the licensee. Complaints should be filed with the Authority only after the licensee has been notified, and if the complainant:

• Has not received a response from the licensee within 30 business days of filing; or
• Received an unsatisfactory response.

Can I make a complaint by telephone?

All complaints must be submitted to the Authority in writing, providing a chronological and concise account of the facts.

What should be included in the complaint?

The complaint, dated and addressed to the Head of the Banking Supervision Division, must include the following:

• Complete mailing address;
• Contact number(s) and email address(s);
• Signature of the complainant;
• Account number(s), where applicable;
• Type of accounts held with the licensee;
• Summary of the licensee’s response to the complaint, attaching copies where possible;
• Name of the individual(s) who responded to the complaint.

All documents can be submitted via:

• By hand to the receptionist at Eden House, Elizabethan Square, 80E Shedden Road, George Town, Grand Cayman;
• By post:
  P.O. Box 10052
  Grand Cayman, KY1-1001
  Cayman Islands
• By email to [email protected].

What happens once Cmrai receives a complaint?

Upon receiving a complaint, the Authority follows this process:

• Contact the complainant, acknowledging receipt of the complaint and clarifying the contents if necessary;
• Send a letter to the licensee requesting a response;
• Evaluate the licensee’s response; and
• Reply to the complainant.

If the Authority identifies any supervisory concerns (e.g., breaches in laws, rules, or guidance) or disciplinary concerns (e.g., misconduct by the bank or its staff), the Authority will take the appropriate action against the licensee. Such actions may include conducting an on-site inspection to verify the deficiencies identified. However, the Authority will not disclose internal assessment information to the complainant, in accordance with Section 50 of the 2016 RevMonetary Authority Act.

To facilitate the investigation, the Authority may need to share some details of the complaint with the licensee. If the complaint falls outside the Authority’s jurisdiction, the complainant will be advised to seek independent legal advice.

According to the Banks and Trust Companies Law (2013 Revision), locally incorporated banks and trust companies must maintain a minimum net worth of CI$400,000, or the equivalent in other currencies. Exceptions exist for Restricted 'B' Banking or Restricted Trust Licences, which require a minimum net worth of CI$20,000, or the equivalent in other currencies.

The Cayman Monetary Regulatory Authority International follows the Basel Committee's guidelines for calculating the capital adequacy ratio. While the Basel Committee recommends a minimum capital adequacy ratio of 8%, the Cayman Monetary Regulatory Authority International requires subsidiaries to maintain a minimum ratio of 12%, and privately-owned or affiliated banks to maintain a minimum of 15%.

For further details, refer to the Rules, Conditions, and Guidelines on Minimum Capital Requirements (Pillar I) and the Supervisory Review Process (Pillar II).

Each licensee has several reporting requirements and specific filing deadlines. For a complete list, please refer to the following link:

Current Reporting Schedule
 

The Authority must be formally notified of all appointments, resignations, or removals of directors and senior officers.

Unless exempted from Section 16(2) of the Banks and Trust Companies Law, licensees must obtain prior approval from the Authority before appointing directors or senior officers. The Authority requires the following minimum documentation for its assessment of fitness and propriety:

1. A completed Personal Questionnaire;
2. At least three references acceptable to the Authority, including two character references and one verifying the financial standing of the individual, all dated within six months of submission to the Authority;
3. A police or other satisfactory certificate, such as an original affidavit, from the last country of residence where the person lived for at least 12 months, confirming that the individual has not been convicted of a serious crime or any offence involving dishonesty.

If an exemption from Section 16(2) has been granted, licensees must ensure that an updated Personal Questionnaire and a police clearance certificate or sworn affidavit are submitted to the Authority.

Annual licence fees vary depending on the type of licence, as specified in the Banks and Trust Companies (Licence Applications and Fees) Regulations (2013 Revision).

All licensees must pay an annual fee by January 15th each year, as prescribed by Section 6(8) of the Banks and Trust Companies Law (2013 Revision). This fee should not be confused with the payment required under the Companies Law, which is payable to the Registrar of Companies by March 30th each year without penalties. Annual licence fees received after January 15th are subject to a surcharge of up to one-twelfth of the fee for every month or part of a month that the fee is overdue. Payments can be made in Cayman Islands or United States dollars (exchange rate CI/US 0.82). Cheques should be made payable to the Cayman Islands Government.

For additional information, see: Banking Services Fees.

The requirements for the appointment of directors and senior officers also apply to changes in shareholders or beneficial interests. Shareholders must submit a complete due diligence package, along with the necessary documentation outlined in the Regulatory Policy - Criteria for Approving Changes in Ownership and Control.

For more information, refer to the Regulatory Procedure on Assessing Fitness & Propriety and the Regulatory Policy - Criteria for Approving Changes in Ownership and Control.
 

The Basel II Framework aims to encourage banks to proactively identify and manage risks, fostering improved risk management practices. The Framework is designed to be flexible and capable of evolving alongside market developments and advancements in risk management techniques. Its primary objective is to promote the adoption of stronger risk management practices across the banking industry.

The Basel II Framework applies to banks incorporated in the Cayman Islands (both Category A and B banks), all home-regulated banks, and host-regulated banks (subsidiaries of foreign banks), regardless of physical presence.

Branches of foreign banks operating in the Cayman Islands are not required to maintain separate capital requirements and are thus excluded from local Basel II requirements. However, these foreign banks, including their Cayman Islands branches, must adhere to the minimum capital adequacy requirements of their home jurisdictions.

Banks incorporated locally should comply with Basel II’s Pillar 1 Standardised Approaches by December 31, 2010. A parallel run period from July 1, 2010, to December 31, 2010, will involve banks submitting test returns alongside the current Form BS return.

Starting January 1, 2011, banks are required to report under the following Pillar 1 approaches:

1. Credit Risk – Standardised
2. Market Risk – Standardised
3. Operational Risk – Basic Indicator Approach, Standardised Approach, or Alternative Standardised Approach

Pillar 2 – Supervisory Review Process and Pillar 3 – Market Discipline will also be implemented after December 31, 2010, considering their scope and potential impact on banks.

Yes, since most banks affected by Basel II are members of the Cayman Island Bankers Association (Cmrai), a joint Cmrai Basel II Working Committee has been established. This committee provides a forum for banks and Cmrai to consult, discuss, and agree on Basel II-related matters.

Yes, Forms BS have been renamed Quarterly Prudential Returns (QPRs). The Basel II forms and QPRs now consist of 29 worksheets. While all banks will submit the QPR worksheets, the Basel II forms required depend on the bank’s status and the types of investments it manages.

The Basel II forms are initially hidden when the Excel workbook is opened. Banks must select their “Status” (e.g., Affiliate, Private, or Subsidiary) to access the Basel II templates. Selecting “Branch” will not open the Basel II forms, as they do not apply to branches. Note: Excel 2003 or higher, with macros enabled, is required to open, view, and input data into these forms.

The Cover Sheet requires banks to fill out information such as:

a) Institution Name
b) Licence Number
c) Status
d) Quarter End
e) Fiscal Year End
f) Type
g) Name of Person Authorising Returns
h) Position

Banks must also select the methodologies used for Credit Risk, Market Risk, and Operational Risk under Basel II. However, not all banks need to select all methodologies.

Basel II Capital Forms:

a) Capital Ratios
b) Capital Constituents
c) RWA

Basel II Credit Risk Forms:

a) On-Balance Sheet exposures
b) Off-Balance Sheet exposures
c) Counterparty Credit Risk exposures
d) Settlement Risk
e) Securitisation Exposures

Basel II Operational Risk Form
Basel II Market Risk Forms:

a) Data - Interest Rate Risk positions
b) Data - Equity Risk positions
c) Data - Commodities
d) Interest Rate Risk Maturity Results
e) Interest Rate Risk Duration Results
f) Equity Results
g) Commodity Results
h) Foreign Exchange Result
i) Correlation Trade Portfolio

QPR Forms (Quarterly Prudential Returns):

a) Statement of Financial Position
b) Statement of Financial Performance
c) Ten Largest Depositors
d) Large Exposures
e) Asset Quality
f) Debt Securities
g) Equities
h) Funds
i) OTC & ETC
j) Off-balance sheet
k) Interest Rate

Methodology selected for Credit Risk Mitigation

a) Collateral Simplified Approach
b) Collateral Comprehensive Approach

Methodology selected for Counterparty Credit Risk

a) Current Exposure Method
b) Standardised Method

Methodology selected for Operational Risk

a) Basic Indicator Approach
b) Standardised Approach
c) Alternative Standardised Approach (i)
d) Alternative Standardised Approach (ii)
e) Alternative Standardised Approach (iii)
f) Alternative Standardised Approach (iv)

Market Risk

a) Methodology selected for Interest Rate Risk

i. Maturity
ii. Duration

b) Methodology selected for Commodities

iii. Simplified
iv. Maturity Ladder

c) Methodology selected for Options

v. Simplified
vi. Delta-Plus
vii. Scenario

The preferred method for submitting Basel II and QPR forms depends on the bank's familiarity with XBRL and the volume of information that needs to be submitted. For most banks, the Excel form will be the quickest and easiest way to create a submission.

The validation rules are criteria that Cmrai applies to all submissions to ensure data integrity and compliance with reporting requirements. Depending on the discrepancies found by each validation rule, either an error or a warning will be generated. A summary of these warnings and errors will be provided to the filer along with the validation rules.

If validation rules detect errors in a submission, the system will reject the filing. If only warnings are generated, the submission will be accepted, but the filer will be notified of the warnings.

To enable the hyperlinks, the file should be saved in the same directory as the “Facts List and Validation Rules” Excel file.

Credit risk is the uncertainty regarding a counterparty’s ability to meet its obligations.

Risk weightings applied to claims secured by residential property are determined on an individual exposure basis. Exposures with LTV information may apply 35% or 75% risk weightings accordingly. Claims secured by residential property without LTV information should be risk-weighted at 50%.

Credit Risk Mitigation involves techniques used by banks to reduce their exposure to credit risk. These techniques include:

a) Collateralisation - exposures may be partially or fully collateralised with first-priority claims, cash, or securities.
b) Use of guarantees and/or credit derivatives - a loan exposure may be guaranteed by a third party, or banks may purchase a credit derivative to offset various forms of credit risk.
c) Netting - banks may agree to net loans owed to them against deposits from the same counterparty.

An unrated bank in an unrated country would be assigned the appropriate risk weighting for an unrated bank under Option 2, which is 50% for exposures over 3 months or 20% for exposures of 3 months or less.

Loans secured by hedge funds must apply the highest haircut applicable to any security in which the fund can invest.

Machinery and equipment are not considered eligible capital for credit risk mitigation.

The recognition of an undrawn commitment should be determined by the bank’s accounting and legal treatment. Commitments are usually reported off-balance sheet, and Cmrai uses the classification of commitments according to generally accepted accounting practices (GAAP).

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, systems, or external events. This includes legal risk but excludes strategic and reputational risk. The causes of operational risks are internal processes, people, systems, and external events.

Other Fixed Assets include furniture & fixtures, computer equipment, and other real estate owned, which covers property held in satisfaction of debt. These assets are risk-weighted at 100%.

Each bank is best positioned to determine this. Banks that do not map gross income by business lines may use the Basic Indicator Approach.

Banks must demonstrate to Cmrai that they meet the “Qualifying Criteria” set out in paragraph 11 of the Rules, Conditions, and Guidance on the Calculation of Operational Risk Capital Requirements.

Gross Income is defined as net interest income plus net non-interest income. It is intended that this measure should:

a) be gross of any provisions (e.g., for unpaid interest);
b) be gross of operating expenses, including fees paid to outsourcing service providers;
     i. excluding realised profits/losses from the sale of securities in the banking book and;
     ii. excluding extraordinary or irregular items, as well as income derived from insurance.

Fees received by banks providing outsourcing services should be included in the definition of gross income. Realised profits/losses from securities classified as “held to maturity” and “available for sale,” typically items of the banking book (e.g., under certain accounting standards), are also excluded from the definition of gross income.

Market risk is the risk of losses in on- and off-balance-sheet positions due to movements in market prices. The risks subject to this requirement include:

a) the risks related to interest rate instruments and equities in the trading book;
b) foreign exchange risk and commodities risk throughout banks (i.e., in both the trading and non-trading books).

A bank’s trading book consists of all positions in financial instruments and commodities held either with trading intent or to hedge other elements of the trading book.

When mark-to-market valuation is not possible, banks should use mark-to-model, ensuring the method is prudent and reflects the economic substance of transactions. This should be done using market-determined inputs or parameters wherever possible. Banks should refer to paragraph 477 of the Rules, Conditions, and Guidance of the Minimum Capital Requirements – Pillar 1 for guidance on implementing the mark-to-model valuation framework.

Yes. Banks have the ability to add additional rows to accommodate more currencies as needed.

Positions of a structural, i.e., non-dealing, nature, as outlined below, may be excluded from the calculation of the net open currency positions:

a) positions taken deliberately to hedge, partially or totally, against the adverse effects of exchange rate movements on banks' capital adequacy ratio;
b) positions related to items that are deducted from banks' capital when calculating its capital base, such as investments in non-consolidated subsidiaries and retained profits held for payout to parent.

The Authority may approve the exclusion of structural positions from the capital requirement calculation if the following conditions are met:

a) banks provide adequate documentary evidence proving that the positions proposed for exclusion are genuinely of a structural, non-dealing nature and are intended to protect banks' capital adequacy ratio. The Authority may require written representations from banks' management or directors; and
b) any exclusion of a position is applied consistently, with the treatment of the hedge remaining the same throughout the life of the associated assets or other items.

For example, if a bank’s capital is denominated in USD and it holds a matched portfolio of foreign currency assets and liabilities in CHF, its capital/asset ratio will decline if the domestic currency depreciates. The bank may want to protect its capital adequacy ratio by running a short position in the domestic currency, despite the risk of loss if the currency appreciates. Therefore, any position deliberately taken to hedge against the adverse effect of exchange rate fluctuations on its capital ratio may be excluded from the foreign exchange capital calculation.

The process for obtaining a bank or trust licence in the Cayman Islands is regulated under the Banks and Trust Companies Act (2013 Revision). According to Section 6 (1), the Authority has the discretion to grant a licence if it is convinced that doing so is not contrary to the public interest. This may include specific terms and conditions deemed necessary by the Authority.

For more details, visit the Banking Services Licensing Requirements page.

BANKS (as outlined in Licensing Requirements on the website)

To prevent the next year’s fee from accruing, applications and necessary documentation for surrendering a banking licence should be submitted to the Authority at least two months before the end of the year.

The licensee or authorized representative must submit a formal letter including the following items, either by mail or through the REEFS portal (New Requests > Surrender of a Licence -- TRM-105-99):

1. The business justification for surrendering the licence. It is insufficient to state that the licensee is “no longer conducting banking business.”
2. A resolution by the shareholders and/or board of directors approving the surrender, which must be duly signed and dated.
3. The original licence certificate, or in the case of a lost certificate, an affidavit signed by at least two directors confirming the loss and committing to return it to the Authority if found.
4. A statement from the external auditor confirming that (1) all deposits have been repaid or transferred; (2) there are no outstanding liabilities; (3) there is no ongoing litigation or details of any existing or potential legal actions; and (4) there are no trust assets under administration (if applicable).
5. Details of any deposits transferred, including the name of the institution, the date of transfer, and the closing balance at that date.
6. Filing of a final quarterly prudential report (“QPR”) once all deposits have been repaid or transferred.
7. If the licensee is a branch, confirmation from two current directors may be provided in place of the external auditor's confirmation.
8. The applicable application fee (refer to the current fee schedule).

Additionally, all statutory fees and filing obligations must be current before the licence cancellation can proceed.

Under Section 3 of the Banks and Trust Companies Law, the Authority assesses whether an individual is "fit and proper" by considering:

(a) Their honesty, integrity, and reputation;

(b) Their competence and capability; and

(c) Their financial stability.

For more information, please refer to the Regulatory Policy and Procedures documents on Fitness and Propriety.

(1) The Personal Questionnaire form must be completed for each director, senior officer, and any shareholder or beneficial owner who is a natural person holding more than 10% of the applicant's issued share capital or total voting rights.

(2) The annual financial statements for the two years preceding the application year must be provided for each major shareholder (as defined above) that is a corporate entity, along with similar financials for the parent company, if applicable.

(3) A minimum of three character references must be provided, including one character reference and one financial reference, acceptable to the Authority.

(4) A police clearance certificate, sworn affidavit, or other certification satisfactory to the Authority must be provided to confirm that the director, senior officer, or shareholder has not been convicted of a serious crime or any offense involving dishonesty.

If the applicant is a company incorporated in the Cayman Islands, refer to Section 9 of the Schedule of the Bank and Trust Companies (Licence Applications and Fees) Regulation. If the applicant is a company incorporated outside of the Cayman Islands, refer to Section 10. See also the Regulatory Policy on Licensing Banks.