Regulatory Policy on Consolidated Supervision (November 2023)

Summary

This document is a Regulatory Policy issued by the Cayman Islands Monetary Authority (CIMA) in November 2023 explaining how CIMA approaches consolidated (group-wide) supervision of regulated entities that are part of a financial group or financial conglomerate. It sets out CIMA's statutory basis for the policy (drawing on sections 6(2) and 34(8) of the Monetary Authority Act), defines key terms such as 'group', 'financial group', 'financial conglomerate' and 'parent undertaking', and describes both quantitative (consolidated financial/capital returns) and qualitative (governance, risk management, ownership structure) approaches to supervising a regulated entity in the context of its wider group.

The policy applies to all CIMA-regulated entities that form part of a group, and is applied proportionately based on the risk the rest of the group poses to the regulated entity.

CIMA's supervisory roles

• Host supervisor: CIMA acts as host supervisor when the entity is a branch, subsidiary, or affiliate of a foreign-regulated parent.
• Home/group-wide supervisor: CIMA acts as home or group-wide supervisor when the group is based in the Cayman Islands.
• Factors considered: In each capacity, CIMA considers cooperation with overseas regulators, information-sharing, participation in supervisory colleges, and the prohibition on shell banks.

Rather than creating brand-new statutory duties, the policy largely describes CIMA's supervisory discretion and expectations, but it does impose some concrete requirements on regulated entities and applicants.

• Documentation requirements: Regulated entities and applicants must provide group organisational charts, parent-company financial statements, and other qualitative/quantitative information on request.
• Departures from standard rules: Any departure from standard consolidation rules requires CIMA's written agreement.

The policy should be read alongside CIMA's other regulatory policies (e.g., on changes in ownership/control and fitness and propriety) and applicable regulatory Acts.

Key obligations

• Regulated entities and applicants may be required to submit an organisational chart of their group showing the parent undertaking, subsidiaries, branches, affiliates, holding companies and their respective supervisors, upon CIMA's request.
• Regulated entities may be required to submit financial statements of their parent undertaking and additional qualitative information (e.g., on internal structures, risks, fitness and propriety of significant shareholders/directors/senior managers, corporate governance, internal controls) upon CIMA's request.
• Any exceptions to the standard rules for accounting consolidation in prudential returns must be agreed in writing with CIMA.
• Regulated entities may be subject to CIMA-set capital and other prudential requirements at both solo and consolidated levels.
• Regulated entities may be subject to more frequent or additional reporting as CIMA deems necessary for consolidated supervision, including any further guidelines CIMA may separately issue on group reporting and filing requirements.

Applies to

regulated entities that are part of a group (financial group or financial conglomerate), banks, insurance entities, branches, subsidiaries and affiliates of foreign-regulated entities