Dividend Payments and Distributions (2022-07-28)

Summary

This is a Supervisory Information Circular issued by the Cayman Islands Monetary Authority (CIMA) reminding regulated entities of their obligation to notify or seek approval from CIMA before paying dividends, capital repayments, or distributions to shareholders, members, or parent companies. It applies to banks, money services businesses, building societies, cooperative societies, credit unions and development banks that are incorporated and/or regulated under the Banks and Trust Companies Act, Money Services Act, Building Societies Act, Cooperative Societies Act, and Development Bank Act.

The circular reiterates CIMA's supervisory role in ensuring these entities maintain adequate capital, reserves, net worth, liquidity, and loan loss provisions. It specifies that any notification to, or approval request submitted to, CIMA prior to a dividend or distribution payment must be accompanied by supporting documentation, including the following.

• Pre- and post-dividend capital adequacy and net worth calculations
• Pre- and post-dividend liquidity and leverage ratio calculations (where applicable)
• A Board of Directors resolution approving the payment
• Confirmation that minimum capital, liquidity, leverage and provisioning requirements will continue to be met after the payment

This is a reminder circular rather than a new rule, but it sets out concrete documentary requirements that affected entities must satisfy when seeking to pay dividends or make distributions.

Key obligations

• Notify and/or seek approval from CIMA prior to payment of dividends, capital repayments or distributions to shareholders, members or parent companies.
• Accompany any dividend/distribution notification or approval request with pre- and post-dividend capital adequacy ratio and net worth calculations (as defined in the applicable Acts, if applicable).
• Include pre- and post-dividend liquidity and leverage ratio calculations with the notification/approval request (if applicable).
• Provide a Board of Directors' resolution approving the dividend payment as part of the submission.
• Confirm that the entity will continue to maintain the minimum required capital adequacy ratio, adequate liquidity and leverage ratios, and adequate loan loss and other provisions following the dividend/distribution payment.

Applies to

banks, money services businesses, building societies, development banks, cooperative societies, credit unions