Consultation on changes to Pillar 2 and prudential reporting (No. 4 2026)

Summary

This is a JFSC consultation paper seeking industry feedback on proposed changes to Pillar 2 supervisory guidance and prudential reporting requirements for banks, as part of the ongoing Basel III implementation programme. It sets out proposed revisions to how capital minima, Pillar 2 buffers and liquidity guidance are determined, and proposes revised prudential reporting templates drawing on PRA reporting standards. No rules are yet finalised; this is a request for comment, not a binding requirement.

• Pillar 2 guidance: Proposes to restructure and update Pillar 2 guidance, consolidate liquidity related guidance into one section, and clarify how JIBs should assess capital minima and Pillar 2 buffers.
• Capital minima and buffers: Sets out a proposed methodology for JIBs to calculate Pillar 2 capital requirements, Pillar 2 RWAs, and resulting total capital, Tier 1 and CET1 minima, with primary responsibility placed on JIBs' own ICAAP assessments.
• Transition arrangements: Proposes guidance requiring JIBs to forecast the impact of Basel III changes on capital minima and buffers before and after transition, with automatic variation of conditions once transition completes.
• Prudential reporting: Proposes substantial revisions to prudential reporting templates (new Basel III Supplementary Returns workbook, revised sheets on IRB data, securitisation, fiduciary activity, parent accounts, counterparty credit risk) drawing on PRA templates, alongside indicative future changes to Jersey branch reporting.
• Longer term plans: Signals future work on making Pillar 2 more risk based, reviewing ICAAP submission frequency, simplifying reporting, and possibly introducing an additional buffer for systemically important but not highly systemic banks, subject to further consultation.

The proposals directly affect Jersey incorporated banks (JIBs), with some sections also relevant to Jersey branches of overseas incorporated banks (OIBs) regarding potential future reporting changes. The JFSC intends to finalise the underlying Basel III prudential requirements by end of July 2026, publish updated Pillar 2 guidance, revised return completion guides and a revised Banking Code Main Body in Q3 2026, and permit JIBs to transition to the new requirements by 1 July 2027.

Key obligations

• Respondents wishing to comment must submit responses using the published consultation response form by 5:00pm on Friday 31 July 2026
• Respondents from industry bodies or trade associations must also provide a brief description of the type of individuals or institutions they represent
• Once finalised, JIBs will be expected to explain how they manage events increasing exposure for concentration risk and state their targeted Tier 1 capital level relative to large exposure requirements
• Once finalised, JIBs will be expected to describe due diligence processes for rated exposures and methodologies for categorising unrated exposures for credit risk
• Once finalised, JIBs will be expected to consider historical loss experience, including losses previously reported to the JFSC, for operational risk assessments
• Once finalised, JIBs will be expected to document trading books and, where material, provide assessments using relevant group models for market risk
• Once finalised, JIBs subject to the NSFR requirement will be expected to take this into account alongside additional stress testing over shorter and longer horizons
• Once finalised, JIBs will be expected to assess and forecast the impact of Basel III changes on capital minima and buffers before and after transition, informing conditions of registration

Applies to

Jersey incorporated banks (JIBs), Jersey branches of overseas incorporated banks (OIBs)

Deadlines

• Friday 31 July 2026, 5:00pm: Deadline for submitting responses to the consultation
• end of July 2026: JFSC intends to finalise the revised Basel III prudential requirements
• Q3 2026: JFSC intends to publish updated Pillar 2 guidance, new/revised prudential return completion guides, and a revised Banking Code Main Body
• 1 July 2027: JFSC intends to permit JIBs to transition to the revised Basel III requirements