Euro Exim Bank

Captive Audience – How Cayman is leading the way

Image“The outlook is very positive – I firmly believe that the worst of the downturn is behind us,” says McKeeva Bush, Cayman Islands Prime Minister.  “Investment opportunities in our real estate market are already quite lucrative.


The bottom line is that we have a secure business environment that has always been open and ready for business and we take special care to facilitate investment that is a good fit for us.”


In an age where caution is king, Bush’s bullishness is oddly refreshing.  He points out the clean bill of health from the ratings agencies – the economic king makers of 2010 – who weald the power to make-or-break with an untimely downgrading or endorsement.  “Our recent Moody’s rating is “Aa3 with a stable outlook” and other economic indicators are also positive.  It is definitely a good time to invest in Cayman.”


Cayman-based hedge funds looked after $2.3tn (£1.4tn) last year, and its GDP places it as the world's 12th richest jurisdiction, despite a population of only 51,900.  Tens of thousands of companies, hundreds of banks and at least 10,000 investment funds are based in Grand Cayman.


In fact, for the second year running, Cayman has been awarded first place for specialised financial centres by The Banker, a banking and finance magazine.  Cayman,  is the world’s largest domicile for hedge funds, healthcare insurance captives and catastrophe bond transactions, was chosen over other jurisdictions such as Bermuda, Jersey, Guernsey, Malta, Gibraltar, Monaco and Cyprus.


“This is yet another objective finding that reinforces the fact that Cayman is regarded by institutions, if not by stubborn popular press, as a successful and transparent tax neutral jurisdiction from which to base international operations.” Anthony Travers, OBE, Chairman of Cayman Finance said.


“This result comes at a time when Cayman has just signed its twentieth tax information exchange agreement and statistics from the Islands' regulating body CIMA show a continuingly robust performance by the financial services industry over the past year. Most importantly the financial crisis has been negotiated without the need to introduce corporate, income, capital gains, payroll or property taxes, the absence of which is likely to enhance Cayman's attraction in the immediate future.”


The three islands that make up the Cayman archipelago are situated 150 miles south of Cuba and 180 miles west of Jamaica in the central Caribbean. The largest of the three is Grand Cayman; Cayman Brac and Little Cayman, are just a short flight northeast. Together all three islands are situated on the edge of the Cayman Trench, the deepest part of the Caribbean Sea at a depth of more than four miles

The tiny Cayman Islands are the world's fifth biggest financial centre, where hundreds of billions of dollars flow through the economy. 


Statistics from the Cayman Islands Monetary Authority (CIMA) note that Cayman still maintains US$1.795 trillion in deposits and interbank bookings.


“The presumption that Cayman has prospered as a "secretive tax haven" as a result of a lack of transparency is incorrect,” confirms Charles Jennings, joint managing partner of Maples and Calder, an international law firm advising on the laws of the Cayman Islands.


“International reports over the last 20 years confirms that the Cayman Islands has established itself as a leading financial centre for institutional and sophisticated international investors by encouraging the creation of a well-run and appropriately regulated financial services industry.”


The majority of banks based in the Caymans are branches of banks regulated in onshore jurisdictions under Basel II principles, Jennings points out.  In addition, many Cayman hedge and private equity fund managers are regulated by the UK Financial Services Authority and many funds are listed on recognised stock exchanges.  And this is the rub, says Jennings:

“Multinational companies routinely disclose their overseas subsidiaries in their public annual reports. The Cayman Islands Monetary Authority, which regulates financial services businesses, often co-operates with overseas regulators.


However, none of the G20 or OECD countries (including Britain and the US) currently automatically exchange information in this way with all countries. Furthermore, since the adoption of the EU savings directive in 2005, banks have been required by Cayman law to automatically exchange information on EU residents' accounts with the tax authorities of all 27 EU states.”


The current vogue for Offshore-bashing amounts to nothing more than a kangaroo court, Jennings says, scathingly referring to The Guardian and the widespread obfuscation of facts.


“The Cayman Islands has had a tax information exchange agreement with the US since 2001, is now on the OECD "white list". [Cayman] is negotiating further tax information exchange agreements with other member states, and has introduced a unilateral mechanism for sharing tax-related information with other nations.


“Since the beginning of the global financial crisis, Cayman has not needed to bail out any banks nor to ask for financial assistance from Britain.  All the Cayman government recently asked for was a consent to borrow funds already committed by commercial banks, to tide it over while it reassesses and adjusts its budgetary needs as a result of the unprecedented global crisis.”


Looks like McKeeva Bush’s optimism is well founded…