The Government's Response

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The Cayman Islands'financial sector is well regulated, with continual improvementsto its regulatory framework, and government is confident thatthe results of proper assessments, which have been and are beingdone, will bear this out.

This is the word from the Financial Secretary the Hon. GeorgeMcCarthy in response to the recent press release of the G7's FinancialStability Forum (FSF) groupings of Offshore Financial Centresinto different categories. He noted that the categorisations werenot meant to be taken as an assessment itself, but as a guideto setting priorities for assessment.

Pictured Hon. George McCarthy

The FSF release grouped offshore financial centres (OFCs) intothree categories based on their perceived quality of supervisionand cooperation, with category one having the highest qualityrelative to the size of its OFCs' activity. It listed Cayman incategory three -- among those centres generally perceived as havinga lower quality in terms of their legal infrastructure, supervisorypractices, and/or resources devoted to supervision and co-operationthan those in categories one and two.

Mr. McCarthy disagreed with the categorisation of the Cayman Islandsand pointed out that the FSF itself had acknowledged that itscategories were based on the perceptions rather than empiricaldata. It had also stated that the report should not be viewedas an assessment:
"The Financial Stability Forum, in its own words, stressedthat the 'categorisation of OFCs into these three groupings isbased on responses of OFC supervisors and the impressions of awide range of onshore supervisors at a particular point in time.The categorisation does not constitute judgement about any jurisdiction'sadherence to international standards.' Unfortunately, the categorisationputs Cayman is a bad light without proper evidence."

Mr. McCarthy continued: "The Financial Stability Forum'sReport of the Working Group on Offshore Centres which was releasedin April 2000 recommended that the International Monetary Fundundertake an assessment of OFCs' adherence to these standards.That assessment has not yet started."

"The Cayman Islands has been undergoing several other externalassessments," the Financial Secretary added. "For example,we have been working with the OECD, which is expected to releaseits report on tax havens in late June. In addition, we are nowinvolved in an assessment by KPMG.

"This was commissioned jointly by the Caribbean OverseasTerritories and Britain to assess the ongoing enhancement of ourfinancial regulation. The results of that study are expected inJuly. Anguilla, Bermuda, the BVI, Montserrat and the Turks andCaicos Islands are also part of that exercise."

"I am confident that the high standards of regulation andour commitment to maintaining and enhancing that regulation willbe recognised, as it has been in the past by bodies such as theCaribbean Financial Action Task Force," Mr. McCarthy concluded.

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