Fears over higher bank charges due to proposed licence fee hike

The Cayman Islands Chamber of Commerce is warning that bank customers could face higher bank charges, more expensive loans and costlier business banking services due to government plans to increase licensing fees.

Under the new proposals, which followed the government’s 2024-2025 Budget Policy Statement pledge to explore enhanced revenue streams, the current flat fee structure for bank licences could be replaced by a sliding scale based on the total assets of each bank.

A consultation was launched in August by the Ministry for Financial Services on the proposals, which include the controversial plan to implement an annual fee on credit unions for the first time.

A recent article by the chamber, which has more than 600 members with a workforce of around 20,000 people, said that some banks could face steep increases in fees and that the costs could be passed onto both business and retail customers.

“For Class A banks, which typically have significant asset bases, the increase in licence fees could represent a substantial financial burden,” the chamber said.

According to early projections, banks with assets of $1 billion will face a fee of $1 million, with costs rising significantly for banks with greater assets. For example, banks with a $3 billion asset base, which includes most Class A banks in the Cayman Islands, could see their fees rise to $1.5 million. Banks with even larger asset bases could face fees as high as $2 million, doubling the cost for some businesses.

As a result, several financial institutions told the Chamber of Commerce that customers might bear the brunt of the changes through higher banking fees.

One banking professional told the chamber, “It’s difficult to see how we can absorb such a significant fee increase in such a short time frame without adjusting our pricing structure. Ultimately, this may result in higher client costs, which none of us want to see.”

Another banking executive warned that the Cayman Islands must not price itself out of the market, saying, “The Cayman Islands has long been a favourable jurisdiction for international banks due to its regulatory environment and competitive costs. However, if license fees rise too sharply, we could see institutions reconsidering their operations here, especially if other jurisdictions remain more cost-competitive.”​

A spokesman for the chamber said in the article, “The Cayman Islands is known for its robust financial services industry, and the proposed fee increases raise important questions about the sector’s future competitiveness. While the government aims to enhance revenue through these increased fees, there is concern that this may diminish the industry’s attractiveness to international institutions.”

Richard Lewis, chief operating officer of the Cayman Islands Bankers Association, told the Cayman Compass that his organisation had submitted its views for the consultation and were now waiting for the government’s response.

Once the consultation period ends, André Ebanks, deputy premier and minister for financial services and commerce, will present the findings to caucus, which will then make recommendations to Cabinet to debate in Parliament.