Cayman’s free market economy supports a competitive business environment, justifying the opening of a new bank.
That was the message Leader of Government Business Kurt Tibbetts had in response to a recent inquiry in Finance Committee by Opposition Leader McKeeva Bush about the decision by HSBC, which already conducts business in Cayman, to open a retail branch.
After the business of the Finance Committee had been completed, at the end of the session Mr. Bush had demanded to know whether the bank in question had, in order to be granted the license to conduct a retail business, provided a commitment to the Cayman Islands Government to give cheaper access to capital to the general populace and any commitment for any preferential business rates for Government and whether the banking institution was 50 per cent or more Caymanian owned.
The question led to a heated exchange between Mr. Bush, Finance Committee chair Financial Secretary Kenneth Jefferson and Mr. Tibbetts.
At the time, Mr. Jefferson said the bank had held a Class A license, which allows it to operate a retail banking business, since 1984.
‘The Cayman Islands Monetary Authority has the authority to issue a banking license and it has the authority to approve a change in the business plan of a bank,’ said Mr. Jefferson.
‘And it did so and there is no obligation on the part of CIMA to seek government’s approval. That is absolutely not necessary, and so the responsibility for the position, which HSBC now finds itself, was certainly one between the bank and CIMA,’ he said.
Speaking in the Cabinet press briefing the following week, Mr. Tibbetts further elaborated on the issue, saying that as far a the Government was concerned, once the proper due diligence has been done and all the proper requirements have been met, his thoughts would be that the more competition, the better.
‘CIMA makes those decisions with regard to granting licenses, and unlike what may have been alluded to by other individuals, the cabinet has nothing to do with the granting of banking licenses,’ said Mr. Tibbetts.
‘Cabinet, through the Legislative Assembly, simply sets the fees. This institution as I understand it already had a license but when they were granted the license several years ago they had indicated that they did not wish to operate retail over the counter banking at that time, although they had a Class A unrestricted license.’
Mr. Tibbetts defended the move to open the retail bank as fitting with Cayman’s competitive business environment.
‘I would say to you if another institution, or other institutions, think that the climate here in the Cayman Islands is one which is conducive to them operating as a Class A bank, and they satisfy CIMA’s due diligence and all of the regulatory requirements, why not?’ he said.
Mr. Tibbetts also questioned the need to oblige the new bank to provide preferential rates.
‘In everything else that we do in life here in the Cayman Islands, we find the more competition, the better,’ he said.
‘With regard to the special concession with rates to customers, why would a new institution be asked to do so, [especially since] those banks that have been here for a long time made a whole lot more money in the Cayman Islands than them, not be asked [to provide special concessions]?’ he said.
‘I don’t understand the logic in singling a new institution out while the existing institutions are operating as they normally operate,’ he said.
However, Mr. Tibbetts indicated that, as had been announced, Government had been in discussion with banks regarding mortgage financing for a guaranteed home mortgage scheme and the national housing development trust scheme for needy families.
‘I can say that a new institution coming into the market might offer incentives that other institutions aren’t offering, as part of the exercise in competition that benefits the customer,’ said Mr. Tibbetts.
‘But if there is a varying view as to why HSBC should not be granted a licence, I’d like to hear it,’ he said.