The Cayman Islands’ National Building Society has had an eventful eight years. The home mortgage provider’s assets have increased sevenfold, and the amount of its net loans has increased more than 17 times over.
The group, which is a subsidiary of Jamaica National Building Society, also dramatically restructured its money transfer operations.
But until a few weeks ago, the general public would not have been aware of this, even though the law governing the Cayman society stipulates the regular publishing of its annual financial statements.
On 29 July, the society’s financial statements for the years 2005-2012 appeared in the Cayman Islands Gazette. In this instance, the neglect for the law is not attributable to the society, but to its regulator, the Cayman Islands Monetary Authority.
While CIMA admitted responsibility for its failure to follow the Building Societies Law, the monetary authority said it should not be in the position of having to gazette the society’s financial statements in the first place, and that this arrangement is inconsistent with CIMA’s procedures for other licensees.
An emailed statement from a CIMA spokeswoman “acknowledges that there was an inordinate delay in having the audited Statement of Accounts of the National Building Society of Cayman listed in the Official Gazette. This has now has been done.”
The statement continues, “However, the Authority regards this requirement as an anomaly in the Building Society Law, as it is not appropriate for the regulator to have the role of publishing the financials of its licensees. We will be seeking to have this legislation amended.
“While the Authority supports the view that there should be an obligation on the licensees to make this information available to the public, we do not regard it as appropriate for CIMA to be held responsible for having the information published in the Official Gazette.”
Established in 1992, the National Building Society is the only entity currently falling under the Building Societies Law, which was originally enacted in 1964 and revised as recently as 2010. CIMA has been regulating the building society since 2000. The monetary authority also regulates two cooperative societies, the Cayman Islands Civil Service Association Cooperative Credit Union and Caymanian Land and Sea Cooperative Society. Unlike the building society, the cooperatives’ financial statements are not gazetted by CIMA.
According to CIMA’s spokeswoman, “I have been informed by the Legal Division that the Cooperative Societies Law which governs the credit union does not contain a similar provision. To that extent, there is no need to amend any other regulatory laws.”
The Building Societies Law also stipulates that a copy of the annual financial statement be sent to each “member, depositor and creditor for loans”, and also that a copy “shall be suspended in a conspicuous place in ever office of the society”.
According to the gazetted reports, auditors were able to issue unqualified opinions as to the accuracy of the building society’s financial statements for all years. One blemish is that the 2005 statement had to be restated and adjusted due to an error related to withholding tax. The error first occurred in 2002 and was corrected in the 2006 report.
From 31 March, 2005, to 31 March, 2012, the building society’s total assets grew from $7.2 million to $51.0 million, an increase of 607 per cent. The society’s net loans grew from $2.1 million to $36.6 million, an increase of 1,663 per cent. The number of loans grew from 36 to 265, an increase of 636 per cent.
On average, the society issued $10.9 million in loans per year, with the amounts ranging from $700,000 in 2005 to $27.0 million in 2008 (and $5.7 million in 2012).
The building society provided money transfer services up until October 2011, when it surrendered its licence and passed along the money transfer service operations to a separate entity, called JNMS(C), of which Cayman’s building society has a 20 per cent ownership stake and associate JN Money Services (also a subsidiary of Jamaica National Building Society) has an 80 per cent stake.
From 2005 to 2011, the building society’s annual income from money transfer fees grew from $290,000 to $1.6 million (and $1.1 million for part of the budget year 2012).