Module 7 - Guidance to completing the Individual Capital Guidance module of BSL/2 (Basel III)

Summary

This is technical guidance explaining how banks should complete Module 7 (Individual Capital Guidance) of the BSL/2 Basel III prudential return. It walks through each line item of the ICG worksheet, explaining how risk-weighted assets from credit, operational, market and settlement risk modules feed into the Pillar 1 capital requirement calculation, and how the Pillar 2 add-on and jurisdictional minima are applied and compared against actual capital ratios.

• Credit risk (Section A): RWA equivalents are drawn automatically from Modules 1 and 2 for SSA/SAC approaches, or entered manually if the bank uses FIRB or AIRB approaches.
• Operational risk (Section B): RWA equivalents are drawn automatically from Module 3 for BIA, TSA or ASA approaches, or entered manually if using AMA.
• Market risk in the banking book (Section C): RWA equivalents for FX/gold and commodities are drawn automatically from Module 4.
• Settlement risk (Section D): RWA equivalent is drawn automatically from Module 5.
• Total Pillar 1 RWA and capital ratios (Sections E-G): The sheet totals Pillar 1 RWA and calculates actual CET1, Tier 1 and Total Capital ratios against institution-specific minimum ratios, which incorporate jurisdictional minima, capital conservation buffer and the Pillar 2 add-on agreed through the bank's ICAAP.
• Jurisdictional and institution-specific minima (Section H): Pillar 1 jurisdictional minimum ratios and Commission-set institution-specific minimum ratios and absolute Pillar 2 floors are pre-populated by the Commission, with automatic adjustment where RWA has fallen below the level at the last setting of regulatory capital guidance.

The document is purely explanatory guidance for completing a specific return module; it does not itself impose new capital requirements but clarifies how existing ICAAP-derived Individual Capital Guidance and Basel III Pillar 1/Pillar 2 figures should be entered and calculated in BSL/2.

Applies to

banks licensed in Guernsey