Regulatory Policy on Domestic Systemically Important Deposit-Taking Institutions (D-SIDTIs) (Effective: 23 May 2025)

Summary

This document is CIMA's Regulatory Policy (effective 23 May 2025), which accompanies the Rule on Domestic Systemically Important Deposit-Taking Institutions (D-SIDTIs, Rule effective 27 May 2024). It sets out how CIMA identifies deposit-taking institutions whose failure could seriously disrupt the Cayman Islands' financial system and economy, and what additional prudential requirements apply once an institution is designated a D-SIDTI.

• Banks: All banks incorporated in the Cayman Islands, including their local and overseas branches and subsidiaries.
• Cooperative societies: Cooperative societies such as credit unions and building societies supervised by CIMA.
• Development Bank: The Cayman Islands Development Bank.
• Foreign bank branches: Foreign bank branches operating in the Cayman Islands are also within the scope of the systemic-importance assessment, although capital requirements for such branches are primarily addressed by the home supervisor.

CIMA uses an Indicator-Based Approach, assessing size, interconnectedness, substitutability, complexity and households' dependency, supplemented by a qualitative supervisory overlay, to score and identify D-SIDTIs on a periodic basis. Institutions proposed for designation are notified of CIMA's reasoning and may discuss the proposed designation before a final decision is made. CIMA does not currently publish a public list of designated D-SIDTIs.

• HLA capital surcharge: Once designated, an institution becomes subject to a Higher Loss Absorbency (HLA) capital surcharge above its normal minimum capital requirement, communicated bilaterally by CIMA.
• Intensive supervision: More intensive supervision applies to designated institutions.
• Recovery and resolvability: Expectations around early recovery planning and resolvability also apply once designated.

Key obligations

• Institutions designated as D-SIDTIs must maintain the additional Higher Loss Absorbency (HLA) capital requirement communicated to them bilaterally by CIMA, on top of their existing minimum capital requirement.
• Where an institution has a mandated Minimum Capital Requirement (MCR), the HLA add-on must be met using capital instruments eligible for the minimum Capital Adequacy Ratio (CAR) calculation.
• Where an institution does not have a stipulated MCR, the HLA Requirement must be met using Tier 1 capital instruments unless CIMA advises otherwise.
• A D-SIDTI whose capital falls to or below the required minimum (inclusive of the HLA Requirement) may become subject to restrictions on discretionary distributions such as dividends and share buybacks.
• CIMA may require the HLA Requirement to be applied on a solo or consolidated basis, and institutions must comply accordingly.
• Institutions proposed for D-SIDTI designation must engage with CIMA during the notification process and may discuss the basis for designation before it is finalised.

Applies to

banks incorporated in the Cayman Islands (including local and overseas branches and subsidiaries), cooperative societies (credit unions), building societies, development bank of the Cayman Islands, foreign bank branches operating in the Cayman Islands, deposit taking institutions generally

Deadlines

• 27 May 2024: Effective date of the Rule on Domestic Systemically Important Deposit Taking Institutions (D-SIDTIs).
• 23 May 2025: Effective date of the Regulatory Policy on Domestic Systemically Important Deposit Taking Institutions (D-SIDTIs).