Cayman Islands has a Stake in US Bank Regulation
The CaymanNetNews picked up an interesting story by Reuters, supporting Pres. Obama’s push to reregulate banks. “The Cayman Islands and other offshore financial centres could become scapegoats unless regulation is stepped up on Wall Street’s biggest banks to avert another potential financial crisis, a former IMF chief economist warned.
“‘If they can’t deal with the underlying real problems, because those banks are too powerful politically, they will look for other people to blame,’ Simon Johnson, a former chief economist at the International Monetary Fund, said at a weekend business conference in Grand Cayman.
“‘Blaming offshore money centres for problems that are really centered on Wall Street’s largest banks doesn’t make any sense, but it could still happen,’ he said.”
Johnson, now a professor at MIT, cautioned that unless regulation is placed on the world’s largest banks, nothing will prevent them from putting together the same high-risk transactions and engaging in the same business practices that led to the worldwide financial crisis. US President Barack Obama’s recent proposal to limit the size and scope of the largest US banks is the right move toward effective regulation, he said.
How can this affect the Cayman Islands? Johnson explained, “Faced with escalating budget deficits, a declining taxpayer base and bank bailouts, more governments will increase taxes. OECD and G20 countries will then keep up the pressure on offshore centres to make sure their citizens are not evading taxes.”
Additionally, the Cayman Islands was in the spotlight in April last year when the G20 urged the OECD to crack down on tax havens. Cayman has put in place 12 tax information exchange agreements with other countries, and is now on the white list with internationally recognized tax standards.
Johnson’s remarks certainly reinforce the need to understand that we now have a global economy and how to deal with its challenges.