By now, most everyone in the Cayman Islands should have realised what all of the people in our financial services industry realised quite a while ago: the party is over.
Decades of relatively uninhibited growth and revelry in the financial services sector have come to a screeching halt, no fault, at least initially, of our own.
The sub-prime mortgage meltdown that precipitated the onset of the global financial crisis had virtually nothing to do with the Cayman Islands. Yes, some of the enormous amounts of profits earned by the ill-advised investment scheme were channelled through the Cayman Islands, but the blame for the fiasco really reverts to good, old-fashioned American greed.
While the American government and American public rightly take out their frustrations on frivolously corpulent companies like AIG and scoundrels like Bernie Madoff, they are also looking for some others to blame. Offshore financial centres, all painted with the same brush as cheating tax-havens, are the new focus of ire.
The Americans aren’t alone in their scorn, either. Because the economic crisis has spread globally, European countries like Germany, France and even Mother Britain are complaining about offshore financial centres and vowing to do something drastic about them.
It’s gone so far that there are writers calling for Cuba-like trade sanctions against the Cayman Islands, or even an invasion of our shores, in order to uncover tax cheats. Just the fact that someone is actually writing such things in major publications should give everyone here an idea of how serious the situation really is.
The bottom line is things will have to change. Going forward, it can not be business as usual for Cayman’s financial services industry, and the government framework that supports it.
However, it doesn’t mean an end to our financial sector. As former CIMA Chairman Tim Ridley told a large gathering at a Cayman Islands Bankers’ Association function last week, Cayman can still be in a select group of survivors and thrivers… if it starts doing things right.
No longer can a key piston in Cayman’s economic engine be ignored like a car that never has its oil changed. The financial services industry will not only need constant maintenance to make sure it’s running at peak efficiency going into the future, it needs some major overhauling as well.
First and foremost, Cayman’s financial services industry needs real communication and cooperation between the public sector and the private sector. Government lip service will no longer suffice; what is needed is the kind of real two-way cooperation that existed back in the early days of the country’s ascent to an offshore giant.
The party might be over, but it doesn’t mean Cayman has to turn out the lights. It means the government and private sector must roll up their collective sleeves and get to work together- and fast.