Guidance on Completion of the Prudential Information Return for Banks (Issued December 2008)

Summary

This is BMA guidance (issued December 2008) explaining how banks and deposit companies licensed in Bermuda should complete the Prudential Information Return (PIR), also referred to as the Basel II Capital Adequacy Return. It should be read alongside the Authority's 'Revised Framework for Regulatory Capital Assessment' and provides detailed definitions and line-by-line instructions for each section of the Return.

• Scope of the Return: Covers a Summary Schedule, the Standardized Approach to Credit Risk (on and off balance sheet, including collateral and credit risk mitigation), Operational Risk, the Standardized Approach to Market Risk, the Balance Sheet, and the Profit and Loss statement.
• General guidance: Sets out rules on valuation (book value, mark-to-market for trading book), treatment of specific provisions, accrual accounting, maturity classification of on and off balance sheet commitments, definitions of group companies and related parties, and permitted netting/set-off of on-balance sheet debit and credit balances.
• Reporting basis: The Return must be completed on both an unconsolidated and a consolidated basis, using the consolidation perimeter agreed between the institution and the Authority under its Consolidated Supervision paper.
• Form completion mechanics: Every designated white box on the Return must be completed (entering zero where appropriate); data should not be entered elsewhere on the form.

The document is purely explanatory guidance on how to fill in an existing prudential return; it does not itself create new capital or risk rules but clarifies definitions, categorisation and calculation methods used in the Return.

Key obligations

• Banks and deposit companies licensed under the Banks and Deposit Companies Act 1999 must complete the Prudential Information Return as at the end of March, June, September and December each year.
• The Return must be completed on both an unconsolidated and a consolidated basis, using the consolidation scope agreed with the Authority.
• Loans, advances, bills, securities and off-balance sheet items must be reported net of specific or earmarked general provisions.
• The Return must generally be completed on an accrual basis rather than a cash basis, with accruals shown against the relevant counterparty category where possible.
• On and off-balance sheet items must be classified by residual/original maturity (one year or less, or more than one year) following the specific rules set out for renegotiated, tranche, fluctuating and forward commitments.
• Debit and credit balances may only be netted where a formal agreement or legal right of set-off exists, both balances are in the same currency, and they relate to the same customer or company group.
• Every white (input) box on the Return must be completed, entering zero where no data applies.

Applies to

banks, deposit companies licensed under the Banks and Deposit Companies Act 1999

Deadlines

• end of March, June, September and December each year: The Prudential Information Return must be completed and presumably submitted as at each of these quarter-end dates, on both unconsolidated and consolidated bases.