Module 6 Balance Sheet Guidance (Guidance to completing the Balance Sheet module of BSL/2)

Summary

This is detailed technical guidance from the Guernsey Financial Services Commission explaining how banks must complete the Balance Sheet module (Module 6) of the BSL/2 prudential return. It sets out, line by line, how to classify balance sheet and off balance sheet items, and how to calculate regulatory capital under the Basel III capital adequacy standard.

• Scope of Module 6: Covers assessment of a bank's balance sheet and off balance sheet activities; subsidiaries must also report capital resources, while branches only complete the Assets and Liabilities sheets plus a totals only Off Balance Sheet worksheet.
• Capital categories: Requires capital to be split into Core Equity Tier 1 (CET1), Additional Tier 1 (AT1) and Tier 2 (T2), each defined further in Annexes A to C.
• Transitional adjustments: Certain regulatory capital adjustments phase in over time: 60% during 2016, 80% from 1 January 2017, reaching 100% from 1 January 2018; banks must report the Value, Transitional and Transitional cap columns for affected items, with worked examples in Annex D.
• Item level guidance: Provides detailed instructions for numerous specific line items (e.g. retained earnings, goodwill, deferred tax assets, investments in own shares, pension fund assets/liabilities, AT1 and Tier 2 instruments) explaining what must be included, deducted, or left blank.
• Data entry rules: Every white input box in the sheets must be completed, entering zero where appropriate, and no data should be entered outside designated boxes.

The guidance is a companion document to the BSL/2 return form itself and does not independently create new supervisory requirements beyond correct and complete completion of the return in line with Basel III capital rules.

Key obligations

• Banks (subsidiaries) must complete the capital resources section of Module 6 in addition to the Assets and Liabilities sheets; branches complete only the Assets and Liabilities sheets and the totals only Off Balance Sheet worksheet.
• Every white input box in the Module 6 sheets must be completed, entering zero where appropriate, with no data entered elsewhere.
• Banks must report regulatory capital items using three columns as applicable: Value (full amount allowed including transitional adjustments), Transitional (full unadjusted amount), and Transitional cap (initial amount and applicable percentage).
• Banks must apply the specified transitional adjustment percentages to relevant capital items: 60% during 2016, 80% from 1 January 2017, 100% from 1 January 2018.
• Banks must classify and report capital instruments and deductions according to the detailed item-by-item guidance (e.g. CET1, AT1, Tier 2 items) consistent with the Basel III capital adequacy standard.

Applies to

banks, branches of banks, subsidiaries of banks

Deadlines

• during 2016: Transitional capital adjustments apply at 60%
• 1 January 2017: Transitional capital adjustments increase to 80%
• 1 January 2018: Transitional capital adjustments reach 100% (full application of Basel III capital standard, no further transitional relief)