Obtain an Offshore Banking Licence in the Cayman Islands: Class B Banking License

An offshore banking licence in the Cayman Islands can be obtained for international financial activity from the jurisdiction. It makes it possible to work with global settlements, corporate structures and cross-border operations under the supervision of CIMA — the Monetary Authority. 

The Class B Banking License is a category B licence for banking activity with territorial restrictions. The obtaining of an offshore banking permit in the Cayman Islands is suitable for working with foreign clients, international groups, investment structures, funds, corporate settlements and private banking services outside the islands. At the same time, the regime does not grant the right to freely accept deposits from residents of the jurisdiction or to operate as an internal retail bank.

Obtaining an Offshore Banking Licence in the Cayman Islands: What the Class B Admission Grants

The obtaining of a category B banking permit in the Cayman Islands makes it possible to conduct activity with clients outside the islands — to open accounts, to carry out international settlements, to work with deposits, corporate financing and investment operations.

At the same time, the law restricts the acceptance of funds from residents of the jurisdiction. Exceptions are provided for:

• another licensed bank;

• an exempted company;

• an ordinary non-resident company, if it does not conduct activity in the territory of the islands.

The law separately restricts investments in assets connected with residents of the islands. After obtaining an offshore licence in the Cayman Islands, a category B bank is not entitled to invest in assets connected with local persons, apart from special exceptions.

The following are permitted:

• operations with another licensed institution;

• the financing of exempted or non-resident companies;

• separate mortgage loans to employees or persons with Caymanian status;

• the acquisition of government securities;

• the purchase of certain securities of state-connected issuers.

When the Obtaining of a Class B Banking License in the Cayman Islands Is Suitable for a Banking Group

The arrangement in the Cayman Islands of a category B banking licence is more often carried out by international financial groups that need a regulated offshore centre for cross-border operations.

A Subsidiary Bank of a Foreign Banking Group

A foreign bank may obtain a Cayman offshore financial-services licence through the creation of a separate subsidiary structure on the islands. It is used for international settlements, private and corporate servicing or operations with investment structures.

CIMA usually checks the level of supervision in the country of origin. If necessary, confirmation of the consent of the home supervisory authority to the creation of a Cayman division is requested.

A Branch of a Foreign Bank

A branch banking licence allows a foreign bank to work through a division in the jurisdiction without creating a separate legal entity. For obtaining an offshore banking permit in the Cayman Islands, CIMA requires:

• the constituent documents of the foreign financial institution;

• information about the directors and managers;

• financial statements for two years;

• data about the auditor;

• a description of the future activity;

• guarantees for the obligations of the branch;

• recommendations from two international banks.

Additionally, the financial stability of the head structure and the quality of supervision in the country of registration are analysed.

A New Bank That Is Not a Branch or a Subsidiary Structure 

An independent applicant passes a deeper check. When arranging a category B banking licence in the Cayman Islands, CIMA assesses the actual presence of infrastructure for activity. The regulator checks:

• the management team;

• the presence of personnel;

• the premises;

• the systems for storing documentation;

• internal control;

• the distribution of powers;

• the technical resources.

The more complex the business model, the higher the requirements for presence in the Cayman Islands.

The Main Requirements for the Applicant

An offshore banking permit in the Cayman Islands is arranged only with the presence of an approved place of conducting activity. This address is considered the head office of the bank in the Cayman Islands. Authorised agents are also required — two private individuals who are residents or a corporate structure.

When arranging a category B bank licence in the Cayman Islands, CIMA checks the owners, directors, controllers and managers of the future institution. For a locally registered structure, the following are usually required:

• personal questionnaires;

• two recommendations on business reputation;

• a bank or trust recommendation;

• a certificate of the absence of a criminal record;

• confirmation of two actually acting directors;

• information about experience in the banking sphere.

At least one director must have banking managerial experience.

The Structure of the Group and the Possibility of Supervision

The regulator analyses the entire group of companies, and not only the applicant itself. CIMA is entitled to refuse or to establish additional conditions for obtaining a Cayman class B banking licence if:

• the structure hinders effective supervision;

• the chain of ownership is non-transparent;

• the activity of another company of the group is capable of worsening the financial position of the bank;

• there are risks for depositors or creditors.

Particular attention is paid to high-risk jurisdictions and complex multi-level holdings.

The Capital Investment Requirements

In order to obtain an offshore banking licence in the Cayman Islands, the fully paid-up capital must constitute from 400 thousand KYD (488 thousand USD). These amounts are considered the minimum threshold. CIMA may require a larger volume of funds taking into account the risks, the structure of the operations, the client base and the scale of the business. The minimum paid-up funds do not replace the capital adequacy ratio. These are different indicators. For a bank, the minimum capital adequacy ratio constitutes 10% of the risk-weighted assets, if CIMA does not establish a different ratio. Additionally, in CIMA's clarifications, higher benchmarks are indicated:

• 12% for subsidiary banks;

• 15% for private or affiliated banks.

The Road Map for Obtaining an Offshore Banking Licence in the Cayman Islands

The obtaining of a Cayman category B banking permit is built along the following route:

Conclusion

The obtaining of an offshore banking licence in the Cayman Islands requires an understanding of the logic of banking supervision, the structure of international financial groups and CIMA's requirements for the sources of capital, management and internal control. Our team builds the process comprehensively: from the choice of the bank model and the preparation of the corporate structure to the interaction with the regulator, the formation of the business plan, the coordination of the local presence and the support after the issuance of the permit.