Contrary to an increasingly loud chorus of international disapproval laying most of the blame for the global economic crisis onto offshore banking centres, a recent study indicates that Cayman’s financial sector is above the fray.
The Cayman Islands now own the 21st spot on the 2008 Global Financial Centre Index, which is a bi-annual study that rates the most competitive capital centres in the world. New York, London and Singapore round out the top spots.
Mark Yeandle, Senior Consultant of the Z/Yen Group Limited, whose remit includes financial services research, told government and financial sector representatives that the jurisdiction is improving its appeal and reputation amongst its peers at a Monday, 20 October, luncheon hosted by the Cayman Islands Financial Services Association.
With over US$1.4 trillion on deposit and more than 80,000 active companies registered in the Cayman Islands, the territory moved up four spots over last year and showed rising strength, moving up the list faster than almost any other jurisdiction.
It placed eight spots above the British Virgin Islands, 14 above the Bahamas and four above Gibraltar. Resting comfortably in the top-25 jurisdictions, Cayman is in the company of places like Dublin and Toronto and is poised to overtake Paris.
The index comprises 60 jurisdictions and includes analysis and market research that is heavily based on submitted testimony by professionals within the industry. The main factors include people, business environment, market access, infrastructure and general competitiveness. Among those key areas, Cayman managed to score high marks on in its business environment, mostly because of the territory’s tax laws.
Mr Yeandle’s study revealed that among industry players the integrity of its regulatory system was of paramount concern to those who responded; however, Cayman received less-than-impressive marks for its Government and regulatory sectors.
Other sectors such as asset management, banking and professional services all were assessed as functioning positively.
Responses gathered regarding Cayman included:
“Being in the asset management industry, the Caymans and Zurich are extremely competitive for me”;
“The Cayman Islands - very user friendly - open for business attitude”;
“The Caymans - genuinely keen to encourage business. Good tax environment”; and
“All the main players in financial services and supporting professional services are now well represented in the Caymans.”
The Association of Certified Fraud Examiners (ACFE) that is currently working towards incorporating a local chapter in the Cayman Islands and co-hosted a fund directors’ accountab ility symposium held here 21 October, said that despite the territory’s strides, more regulation is needed.
“Needless to say, the Cayman Islands remains a recognised world financial centre. Great strides have been made to develop the legal and regulatory infrastructure to ensure that it meets and often exceeds the standards of the global financial community. Nevertheless, the prevalence of director indemnities and exculpations raise a potential concern for the many investors in mutual funds incorporated in the Cayman Islands.”
ACFE said there needs to be a move towards greater accountability amongst directors and companies based in the Cayman Islands. Because of a single omission in the law, companies may exempt directors from liability for negligence, which could harm shareholders’ investments or even bring down the entire company.
ACFE said: “In the Cayman Islands, there is no such statutory provision and, accordingly, no statutory bar to articles of association providing for director exemptions. Consequently the articles of association of a Cayman Islands company typically contain indemnities and exculpations to relieve directors from liability for negligence, gross negligence and wilful default.”