Basel III Prudential Roadmap: 2024 H2 (CP No. 6 2024)

Summary

This is a JFSC consultation paper seeking industry feedback on the next phase of Basel III implementation for Jersey incorporated banks (JIBs). It covers proposals in three areas: the Standardised Approach to Credit Risk, the Standardised Approach to Operational Risk, and Large Exposures regulations, largely following the UK PRA's near-final rulebook. It is part of a longer Basel III Prudential Roadmap with full implementation targeted for H2 2027.

• Scope: Directly affects only Jersey incorporated banks (JIBs); indirectly may affect bank customers in Jersey.
• Credit risk: Proposes adopting PRA near-final rules on Credit Conversion Factors, Credit Risk Mitigation, due diligence and treatment of exposures to sovereigns, PSEs, banks, corporates, retail, mortgages and other categories such as CIUs and equities.
• Operational risk: Proposes following PRA rules for calculating the operational risk capital requirement and related Pillar 2A approach.
• Large Exposures: Seeks high-level feedback now on PRA's current and proposed Large Exposures regime (including indirect exposures and cross-border group exposures), with final proposals to follow in H1 2025 once the PRA finalises its rules.
• General matters: Proposes separating prudential requirements from prudential reporting guidance, issuing new Banking Code documents on credit and operational risk, a single Glossary, a consolidation approach for subsidiaries, and reliance on HMT equivalence decisions for overseas prudential regulators.
• Not covered here: Pillar 2, prudential reporting, Own Funds, and securitisations are excluded from this consultation and will be addressed in separate H1/H2 2025 consultations.

The JFSC asks 20 specific consultation questions covering these areas and invites written comments, including estimates of the impact on risk weighted assets, by 28 March 2025. Following consultation, the JFSC plans to publish feedback and near-final draft Codes in Q2 2025, with further consultations on Codes, Large Exposures, securitisations, Pillar 2 and prudential reporting through 2025 and 2026, ahead of full implementation across all JIBs in H2 2027 (with an optional earlier transition from H2 2026).

Key obligations

• No binding obligations are imposed by this consultation itself; it invites JIBs and industry bodies to submit written feedback on the proposals by 28 March 2025.
• Industry bodies or associations responding are asked to also provide a summary of the type of individuals or institutions they represent.

Applies to

Jersey incorporated banks (JIBs)

Deadlines

• 28 March 2025: Deadline for submitting written comments on the consultation to the JFSC or, alternatively, to Jersey Finance Limited for inclusion in an industry response.
• Q2 2025: JFSC plans to publish feedback to this consultation along with near-final draft documentation on the SACR and SAOR.
• H1 2025: JFSC will consult on remaining Codes changes needed to implement Basel III, including securitisations and Large Exposures, and finalise Large Exposures proposals.
• H2 2025: JFSC will publish near-final Codes and consult on changes to Pillar 2 (including Interest Rate Risk in the Banking Book) and Prudential Reporting.
• H1 2026: JFSC will implement changes to Pillar 2 and Prudential Reporting so JIBs can transition in H2 2026.
• 1 July 2026 (optional early transition) to H2 2027 (full implementation): Near-final Codes come into effect from 1 July 2027, with transitional provisions enabling earlier transition from 1 July 2026; all aspects fully live for all JIBs by H2 2027.