CIMA to supervise banking groups on a consolidated basis

The Legislative Assembly adopted the Banks and Trust Companies Bill 2018, which empowers the Cayman Islands Monetary Authority to supervise banking groups on a consolidated basis.

CIMA supervises and regulates banks incorporated and licensed in Cayman in accordance with the principles developed by the Basel Committee on Banking Supervision. In December 2010, Cayman’s regulator began the implementation of the Basel 2 framework issued by the global standard-setting body for the prudential regulation of banks.

Presenting the bill in the Legislative Assembly on Tuesday, Minister for Financial Services Tara Rivers said the rules included in the amendment bill will bring the first phase of the implementation, known as Pillar I, to a close. It includes the standardized approach for the calculation of a bank’s capital based on credit risk, market risk and operational risk.

According to those rules and the bill, the calculation of capital should be considered on a consolidated basis, where the holding company of a Cayman Islands-licensed bank is incorporated in the Cayman Islands and is the parent entity within the banking group.

In such an instance, Basel 2 rules would require that the holding company will ensure that the banking group, on a consolidated basis, complies with the set minimum capital requirements established by CIMA, Minister Rivers said.

Under the new rules, Cayman Islands banking groups must adhere to capital requirements and other prudential measures set by the authority and allow CIMA to fully implement Pillar I of the Basel 2 supervisory framework.

The bill also includes a sanctions regime for entities that are not complying with capital requirements and other prudential measures set by the authority.