CAYMAN MONITORS GLOBAL BANKING INDUSTRY WOES

By Staff Writer

Banking and finance sector regulators and operators in the Cayman Islands are no doubt closely monitoring recent developments in the international banking and finance industry.

The collapse or near-collapse of several banks and other finance companies of various sizes has sent shockwaves in what has been described as “a crisis of confidence that threatened to spread across global financial markets.”

The multi-billion dollar bailout of banking powerhouse Credit Suisse by the Swiss government has so far failed to quell the uncertainties about its future after the company ran into serious problems over its solvency and its future.

The Swiss government had initially pumped $US54 billion to bail out the ailing company.

A takeover deal by another industry giant, UBS, was being contemplated.

The woes affecting the already-troubled Credit Suisse, come on the heels of the near-collapse of Silicon Valley Bank, bankers to the US and UK tech sectors among others.

Its UK arm was only rescued at the last minute by the intervention of banking superpower HSBC which took it over at the last minute for a nominal £1.

However, it has since been reported that the bank had splurged excessive bonuses on senior management just days before it folded.

In the US, the collapse of SVB’s main arm has become the second-largest bank failure in US history after a run on deposits. Most of its customers had rushed to close their accounts over fears of the bank’s solvency.

Meanwhile, another troubled bank is in the news as the shares of First Republic, a mid-sized company, took a nosedive after customers rushed to remove their deposits. Several of its larger Wall Street industry partners have stepped in with an emergency US$35 million injection.

These developments which have sent shivers down the spine of the global banking and finance industry follow on the heels of another finance industry earthquake last November with the scandal and consequent liquidation of the Bahamas-based cryptocurrency firm FTX and the arrest of its founder Sam Bankman-Fried. He is awaiting trial in October this year and could be sentenced to over 100 years if found guilty.

Prior to its collapse, FTX was the third-largest cryptocurrency exchange by volume and had over one million users.

Here in Cayman, a hub of global financial activity, there has not been official comment from the government, the banking and finance sector, or local industry regulators about these developments.

However, earlier this month in an unrelated development, the Cayman Islands Monetary Authority(CIMA) announced the launch of its first-ever annual Financial Stability Report, which it said “provides an assessment of our local financial system, including salient trends and vulnerabilities over the reporting period.”

In a statement on its website, CIMA stated that as part of its mandate to ensure stability within the domestic financial system, and following months of preparation, the report also provides a macroprudential review, which not only examines sectoral performances but also assesses future endogenous and exogenous risks, which in turn, can hamper economic growth.

Commenting on this milestone, CIMA Managing Director Mrs Cindy Scotland, OBE says, “The annual publication of the Financial Stability Report, together with the present work of the Authority, is a testament of our commitment to reinforce the integrity of the financial services industry, maintain development of an appropriate macroprudential framework for sustainable financial stability while upholding the robust and credible reputation of the Cayman Islands.”