Protecting, Supporting and Prioritising the Financial Services Industry
As the primary pillar of the Cayman Islands’ economy, the financial services industry has been at the heart of this country’s success and its high standard of living for the past 40 years. As an industry, Financial Services is the single largest contributor to the GDP, the largest employer, and largest provider of revenue to the government. It has endured many trials over the years, and recently it has faced unprecedented challenges both domestically and internationally.
Under the Progressives’ led government, in February 2020 the Cayman Islands once again found itself on the European Union’s Tax Blacklist; a direct result of this administration’s lack of focus and mismanagement, failing to introduce necessary legislative amendments by required deadlines and to meet other commitments. After a scurry of activity, we are now on the FATF “grey” list and the target of new attacks.
This mismanagement has left us exposed - without the appropriate policy support and now facing several critical challenges:
• Lagging legislative and regulatory framework. For years, the financial services industry pleaded with policymakers for support via review and innovation in the form of new or revised laws. The 2017-2021 administration appeared not to understand the importance and urgency of, and the consequences of, not passing these needed amendments. The legislation industry requirements would help Cayman maintain its competitive edge against increasingly aggressive competitors, but those pleas have gone largely ignored by the PPM led coalition as they have been distracted or in denial and led to reputational issues for the jurisdiction.
• Inadequate resources for marketing, PR and promotion. Despite its importance to the economy – 60% of the GDP, almost half of all government revenues and a stable employer of a large number of Caymanians, the financial services industry receives approximately 1/10th the budget allocated for marketing, PR and promotion compared to the tourism industry. The reputation of the jurisdiction and the industry is continuously under attack from intergovernmental organisations like the FATF and from international bodies like the OECD and from agile, competitive jurisdictions. As an important driver of the local economy, it needs a proportionate investment of human and financial capital to protect it and promote it.
• Understaffed Policy Secretariat. For years, the financial industry has not had the benefit of a fully staffed and functional policy secretariat to provide research services, strategic support and policy advice in relation to the various international challenges as a result of initiatives by the OECD, IMF, FATF and other similar multilateral bodies. This results in reactionary firefighting rather than a strategic, multifaceted approach. The current Secretariat has not been fully supported, it operates with less than 50% of the required staff complement, and the existing staff have been operating continuously at maximum capacity for years.
• Loss of Local Jobs to Other Countries. As a result of poor domestic policies by the progressive led government, arising in part from the lack of comprehensive consultation with local stakeholders on key issues, the financial services industry is increasingly outsourcing many jobs to other countries such as Canada, Ireland and India. Paired with the increased cost of doing business, the jurisdiction is becoming more expensive for local service providers in the financial industry.
Solutions
It is time to address the years of neglect for the local financial services industry through stronger protection and more effective promotion of the Cayman Islands as a tax neutral hub that supports global economic growth and recovery. This industry is the single largest employer and generator of Government revenue. We are failing to access additional high value, direct and indirect economic benefits available to us from financial services. With 20 years of experience in financial services, I understand the issues facing the various sectors.
These issues must be addressed urgently and effectively in consultation with industry. If elected, I will support swift action to protect, maintain and encourage growth in this vital industry and improve the benefits to Caymanians by encouraging Cabinet and other MPs to do the following:
Properly Resourcing Financial Services Secretariat. Adding funding and increased staffing to facilitate a fully functioning Financial Services Secretariat and provide the necessary policy research, analysis and advice to Minister and effectively liaise with the private sector to seek advice from, and provide information to, the various industry representatives. This policy unit will be part of the new financial services department outlined below.
Single Ministry for Financial Services combined with Trade, Investment, Aviation and Maritime Affairs
I support combining the responsibility for all aspects of the financial services industry and MITIAMA to the same Cabinet Minister. This will ensure that there is proper political accountability and direct commitment to the industry when marketing the Cayman Islands as a leading jurisdiction with which to do business. I will also organise the current public sector resources applied to the industry into a single department that focuses on the financial services industry and inward investment. This level of support will be backed by my commitment to deal with the industry’s issues as they arise and on a continuing basis, rather than ignoring them until a few months before the election, as the PPM led coalition has done.
Improve Industry Wide Consultation and Engagement. We need to acknowledge that the private sector is the driver of this industry and the economic benefits it provides to the country. The public and private sector must work together with a shared vision for a strong and resilient financial services industry. The policymakers and public sector must provide the industry with adequate timelines for consultation, particularly when seeking policy and legislative input from service providers across various sectors. Improve communication and engagement with Cayman Finance and the industry’s on-island service providers to leverage their global networks. I will support initiatives and policies advanced by our first-class financial services industry providers by providing the legislative support to protect and grow the industry.
Dedicate adequate resources to marketing, PR and promotions. I will push to provide a properly funded marketing and promotional program for the financial services industry and business development for the Cayman Islands. This program will address the reputational crisis the industry is undergoing while promoting the quality and competitiveness of our services across the globe. This will also include effective lobbying efforts in countries of strategic interest and an awareness campaign at home, the latter of which will ensure our local population understands and appreciates the significant contributions the industry makes to the Cayman economy.
Establish a Financial Services Training Programme. We will establish a financial services training programme so that Caymanians with interest in participating in the industry are educated across the wide range of financial services areas. This training program will be devised so that Caymanians at all levels of employment can better prepare themselves for the industry, allowing all Caymanians an equal opportunity to participate in the industry’s success.
I will continue to support all local regulatory bodies to ensure they are able to meet the necessary international standards while maintaining the competitiveness of our industry. We can do this by ensuring that they are equipped with the resources to attract the right personnel. Through the Financial Services Secretariat, we will also put an effective working partnership between the Government, Cayman Finance, and local regulatory bodies towards our common goal of a well-regulated and commercially successful industry that benefits the people of the Cayman Islands.
We will actively encourage international businesses to establish physical offices and headquarters in the Cayman Islands to become a full-service international financial centre. This will ensure that we will benefit from license fees and their direct contribution to the local economy by hiring Caymanians, renting offices, and buying local goods and services.
Conclusion
It is an indisputable fact that the financial services industry is the lifeblood of the modern Cayman success story. It differentiates the Cayman Islands economy from others in the region and provides the level of employment at salaries that enable a higher standard of living. Its service providers are the stable, lucrative generators of employment for Caymanians, revenue for CI Government and steady business for local companies. It must be protected. When all other options have been exhausted, the Cayman Islands Government must be willing to assess its legal options for recourse against unfair initiatives, putting the Cayman Islands’ financial services industry at a competitive disadvantage. Our goal is to maintain international best practices and the highest standards applicable to all service providers and jurisdictions.