In spite of challenges facing the local hedge fund sector, Chairman of the Board of Directors of the Cayman Islands Monetary Authority (CIMA) Tim Ridley points to positive signs in the financial industry.
Asked to review the performance of the sector in 2007 by Cayman Net News, Mr Ridley said there have been significant achievements.
He said there has been continued growth in the hedge fund industry, notwithstanding the credit market problems.
It is a testament to the maturity and resilience of the industry that only a few of Cayman’s funds encountered difficulties. It is the very nature of the industry that some will fail and many were and are extraordinarily successful, the CIMA chairman said last week.
Mr Ridley pointed to the excellent assessment the Cayman Islands received from the Caribbean Financial Action Task Force.
“Our anti-money laundering regime is something of which we can be justly proud. As always, there is still work to be done and we must continue to be proactive as we move forward,” he said.
Among the challenges facing the industry, according to Mr Ridley, is the continuing ill-informed and outdated political and media commentary about Cayman and other offshore financial services centres, particularly from the USA.
Another challenge is the need to keep Cayman’s legislative platform up to date. There is a continuing backlog of important legislation to enhance the local financial services product, he said.
Sourcing and retaining high quality staff are other areas worth visiting, he noted. He added that financial services are booming worldwide and there is a shortage of those with the necessary skill sets and experience, saying that Cayman must compete in the world markets for these people.
“Cayman needs to improve its education system at all levels to produce a qualified and motivated workforce that can better meet the needs of the industry,” he said.
“The lack of understanding and appreciation of many parts of the local community, of the vital importance of the financial services industry to the well-being of the islands. The industry needs to develop better outreach programmes at all levels to rectify this.”
Looking ahead, Mr Ridley forecast good growth in the fund industry, modest growth in the captive insurance industry and stability in the banking and fiduciary services industries.
He noted that there is progress on introducing a regime to attract large open market reinsurers to base themselves in Cayman.
On the question of CIMA’s involvement, he said the Authority would continue to work with the banking industry to implement Basle II (the new capital adequacy regime for banks).
Mr Ridley welcomed the “resurgence and expansion” of the Cayman Islands Financial Services Association (CIFSA), saying, “It is now showing real signs of developing into a meaningful force to carry the private sector message of excellence to the world.”
In the coming months, he said he expects continued pressure from the private sector on Government to move ahead with much needed legislation for the financial services industry, and continued efforts by CIFSA and Government to debate and better inform overseas media and politicians in order to correct the misimpressions that still exist about Cayman’s financial services industry.
CIMA is celebrating its 10th anniversary as an independent statutory authority. As part of its development, CIMA has introduced an e-filing for the fund industry. This platform will be extended to other regulated areas over the next few years. The system greatly improves the ease and timeliness of filing financial and statistical information with CIMA, Mr Ridley said.
CIMA will shortly be releasing some of the non-confidential statistical information, he added.
The International Monetary Fund (IMF) will conduct its assessment of Cayman in 2008. This assessment will review the regulatory and legal regime here against international standards.
For the first time, the assessment will also include stress testing. For example, how would Cayman’s financial services industry deal with a flu pandemic?
This will require the Government and CIMA to devote significant time and resources in preparation for and during the assessment and subsequent report. Representatives from the private sector will be expected to meet and discuss issues with the IMF team, he said.