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Cayman crisis 'exaggerated', insists bank boss
THERE'S trouble in paradise but press reports that Cayman Islands could be facing near-bankruptcy have been exaggerated, says the boss of the Isle of Man-based Cayman National Bank.
The global crisis and crackdown on offshore finance centres has created a financial crisis for the government of Cayman, the world's biggest hedge-fund venue and fifth-biggest bank centre.
It has warned it will have a CI$132 million budget (about 100m) deficit by next June if no cuts are made in government current spending plans and revenues continued to fall.
Struggling to pay its own staff and facing the prospect of introducing taxes, the Cayman government had negotiated bank loans of up to CI$372 million (about 294m).
But the UK's Foreign and Commonwealth Office has refused to permit the territory to borrow unless it develops a plan to curb expenditure and widen its tax base.
Ian Bancroft, managing director of Cayman National Bank and Trust Company (Isle of Man) Limited, said: 'The Cayman Islands, like most countries around the globe, are facing the most significant economic downturn seen in our lifetimes.
'With little in the way of natural resources, the twin industries of tourism and financial services together represent around 95 per cent of the Island's GNP, and both have been affected by the current economic malaise.
'Although we think of Cayman as a financial services competitor to the Isle of Man, it is worthwhile noting that tourism actually delivers the greater contribution to Cayman government revenues, and with their key market of the United States still in recession, any downturn in tourism will have an immediate knock-on impact on government finances.
'The Cayman government's current cash-flow problem is clearly a challenge for the Islands, although I am confident that it will speedily be resolved.
'Press reports that the Cayman Islands have turned to the UK Government for a bail-out are incorrect.
'Their government has already put in place arrangements with local banks for short term borrowing to meet the current funding gap.
'However, the requisite UK FCO approval for such borrowing has not yet been given.'
The Cayman Government is working on the sale and leaseback of some government assets in order to free up working capital.
Mr Bancroft pointed out that the Isle of Man had a much more diversified economy, plus a broader mix of government revenues, principally direct taxation, sales tax, customs duties, plus fees for various services.
'In the Cayman Islands, government revenues are derived almost entirely from customs duties, stamp duty, and various fees.
'The Cayman Islands have made it clear they have no intention to introduce income or property taxes, so they will need to address the current deficit through more of the same.'
He said that so far in this economic crisis, the Isle of Man had 'played its hand well', and should emerge stronger than many of its competitors.
'The Treasury minister and his team have done a great job to position the Island to benefit from the future. Markets seek certainty, and we can play this card to our advantage,' said Mr Bancroft.
'We have certainty in our finances, certainty in our international relationships and certainty in how we wish to position ourselves in terms of the emerging new economic order.'
He stressed that Cayman National Group continued to perform well in the Cayman Islands and the Isle of Man, adding: 'Our conservative approach has helped us to avoid the sub-prime and other problems which have beset the market.
'The group is well positioned to take advantage of the opportunities that will emerge on both sides of the Atlantic in the next few months and years and we are confident that the Isle of Man, and the Cayman Islands, will continue to thrive.'
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Weather for Isle of Man
Tuesday 07 February 2012
Today
Sunny spells
Temperature: 1 C to 7 C
Wind Speed: 16 mph
Wind direction: South east
Tomorrow
Sunny
Temperature: 3 C to 4 C
Wind Speed: 23 mph
Wind direction: South
