FRSGlobal : Risk Analysis and Regulatory Reporting

Regulators in the Cayman Islands

The Cayman Islands Monetary Authority (CIMA)

FRSGlobal in the Cayman Islands

The Cayman Islands have no direct taxation making them a thriving offshore financial centre complete with its own stock exchange which opened in 1997.

Because the Cayman Islands have more than 93,000 registered companies as of 2008, including almost 300 banks, 800 insurers, and 10,000 mutual funds - there is clearly a need for regulation.

In January 1997 the Cayman Islands Monetary Authority (CIMA) was established as the primary financial services regulator. The CIMA’s mission is to enhance the economic wealth and reputation of the Cayman Islands by fostering a thriving, growing, competitive, and internationally recognised financial services industry. They aim to do this through appropriate, responsive, cost-effective and efficient supervision and a stable currency.

The regulatory requirements for Capital Adequacy Reporting (CAR) in the Cayman Islands are regulated by CIMA. The CIMA Capital Adequacy rules follow the Basel II framework. They are summarised in the “Rules, Conditions and Guidelines on Minimum Capital Requirements (Pillar 1)” document issued by CIMA in February 2010.

To ease the burden of complying with the CIMA rules specified above firms should automate the entire Basel & QPR reporting requirements, including validation and daily monitoring reports.

Regulatory Environment — Cayman Islands

Statutory

Non Compliant Accounts Reporting
The Cayman Islands Monetary Authority (CIMA) is the financial regulator and advisor in the Cayman Islands. The CIMA requires Non compliant Account (NCA) reports to be submitted by financial institutions as an important measure to counter money laundering and terrorist financing activities.

Prudential

Regulatory reporting requirements are undergoing major changes with the implementation of Basel II in the Cayman Islands. This new suite of reports has been introduced from 1 January, 2011.

Capital Adequacy reporting
Capital adequacy reporting in Cayman Islands is based on the Basel II framework centred around risk reporting. Cayman Islands have implemented the first phase of pillar 1 by adopting the standardised approach for credit risk and market risk and basic indicator approach for operational risk. These reports can be submitted in excel or XBRL formats. Reports on minimum capital requirements, capital ratios and risk weighted assets are also included.

Quarterly Prudential Reporting (QPR)
QPR covers reports such as statement on financial position, large exposures, debt and equity securities, funds, interest rate repricing, summary of off -balance sheet exposures etc. to be submitted on quarterly basis. These returns are submitted along with Basel II reports by local incorporated banks (Category A and B) and branches of foreign banks.

Money Services Business (MSB) reporting
MSB reports are quarterly returns designed to capture financial information and data on money transfer businesses to and from the Cayman Islands. These reports provide detailed information on assets and liabilities, income statement, shareholders equity, etc. required for regulatory and statistical purposes.

Statistical

Local Banking Statistics (LBS)
Locational Banking Statistics (LBS) is a quarterly survey of international banking business conducted by the Bank for International Settlements (BIS), with the Cayman Islands participating since December 2000. Data is collected and aggregated by CIMA from category A and B banks. The LBS survey provides information on international assets and liabilities of banks, on balance sheet assets and liabilities between non residents in any currency and residents in foreign currency.

Domestic Banking Activity (DBA)
The Domestic Banking Activity (DBA) is a quarterly survey on the activities of domestic banks with regard to loans made, deposits received, interest rates, cheque clearing and a consolidated Statement of Assets and Liabilities of the bank’s domestic operations. The CIMA collects information from Category 'A' banks for inclusion in this survey. These reports provide an overview of the domestic banking industry to CIMA and also provide aggregated information to the Economics and Statistics Office.

Coordinated Portfolio Investment Survey (CPIS)
The CPIS collects information on cross-border holdings of securities, broken down by country of residence of issuer, as well as supplementary information on the currency of denomination and the institutional sector of the holder. The CIMA collects information, from all financial institutions, on investment holdings, in equity, short-term and long-term debt securities issued by unrelated non-residents as on 31 December annually.

Transactional

Counterfeit Reporting
Counterfeit reporting concern reports related to forged currency transactions. These reports are required to be submitted on ad hoc basis to the Financial Crime Unit of the CIMA in case forgery or suspicious transactions are observed by financial institutions.

FRSGlobal Basel II and Quarterly Prudential Reports
(QPR) - Cayman Islands

Cayman Islands Monetary Authority Basel II Implementation

The Cayman Islands Monetary Authority (CIMA) started implementing the Basel II Framework in two phases since 2008. The key objective was to promote a more forward looking approach to capital supervision, encouraging banks to identify risks and adopt stronger risk management practices.

The Basel II Framework applies to all Category A and B banks that are locally incorporated in the Cayman Islands, all home and host regulated banks with or without physical presence.

The first phase of the implementation has been completed on December 31, 2010 with following Pillar 1 approaches:

• Credit Risk – Standardized Approach
• Market Risk – Standardized Approach
• Operational Risk – Basic Indicator Approach and the Standardized Approach

The second phase will consider the more advanced approaches that commences after December 2012.

There will be a staged implementation of Pillar 2 and 3 between 2010 and 2012.

With the Pillar 1 changes, the CIMA decided to incorporate the revised Quarterly Prudential Reports (QPR) into the new templates. The QPR templates apply to all licensed banks on the Cayman Islands, including not only locally incorporated entities, but also branches of foreign banks operating on the Island.

Our regulatory reporting solution for Cayman Islands fully complies with the reporting requirement of the Basel II framework. In addition it also covers the Quarterly Prudential Returns to be submitted to the CIMA for prudential supervision.