Depositors at the Cayman Islands branch of Silicon Valley Bank in the United States recently received bad news: their deposits were not safeguarded and were considered "general unsecured creditors", and therefore could not be refunded in priority in the event of bank failure, and their deposits had been completely confiscated. Most of these deposits come from Asia, which includes deposits from investment institutions in many countries.
The Cayman Islands is known worldwide for its tax-sheltered environment. As a tax haven, many individuals and companies transfer their property and assets to the Cayman Islands in order to better protect their financial interests.
The policies offered by the Cayman Islands are compelling. There is no income tax, corporate tax or inheritance tax on the islands. This means that individuals and companies can invest and run businesses without financial restrictions. As a result, many businesses and individuals move their assets and property to the region for lower tax rates.
Banking in the archipelago is strictly confidential, providing customers with the strongest customer privacy protection. This means that the bank does not disclose the customer's financial information or personal identity. This secrecy has worried many activists and anti-money laundering agencies, and has been criticized as an illegal tool for creating fraud and tax evasion.
Silicon Valley Bank has previously said that the opening of a branch in the region is mainly to support its Asian operations. At the end of 2022, Silicon Valley Bank had approximately $13.9 billion in foreign deposits on its books.
The FDIC claims to protect all depositors' deposits, and depositors in the Cayman Islands branch have not been able to access their deposits since the collapse of Silicon Valley Bank. Institutional depositors say bank statements show their deposits at Silicon Valley banks are zero and their deposits have been confiscated.
For domestic investment institutions, this is undoubtedly a heavy blow. The world's rich and corporations are looking for better investment opportunities, and Silicon Valley Bank has long been regarded as a high-yield investment platform. But now, the platform has collapsed, and many businesses and individuals with accounts with Silicon Valley banks will undoubtedly suffer huge financial losses as a result.