Consultation Paper No. 7 2019: Implementation of remaining elements of Basel III

Summary

This is a JFSC consultation paper seeking industry feedback on proposals to implement the remaining elements of Basel III in Jersey, following earlier implementation of capital quality and liquidity ratio elements in Q1 2019. It sets out a proposed Interim Policy on use of Advanced Approaches plus initial proposals for four higher impact areas that will be subject to further consultation before finalisation.

• Interim Policy on Advanced Approaches: Proposed policy intended to come into force shortly after this consultation closes, given its high potential impact.
• Standardised Approach to Credit Risk: Initial proposals on external ratings use, credit risk mitigation, due diligence, sovereigns/PSEs, banks, corporates, subordinated debt/equity, retail, real estate, and off balance sheet items.
• Standardised Approach to Operational Risk: Proposed calculation methodology and requirements to record and report operational losses to the JFSC.
• Large Exposures: Proposed changes to the general approach, sovereigns and connected banks, definition of exposure, interbank exposures, and fund exposures, including the Concession Limit approach.
• Systemic Banks: Proposed approach to identifying D-SIBs, applying greater supervisory intensity, higher capital buffers, and resolution considerations.

The proposals will directly impact Jersey Incorporated Banks (JIBs), with only minimal direct impact expected on Overseas Incorporated Banks (OIBs), though some aspects (Sections 4 and 9) are relevant to them. Borrowers and depositors could be indirectly affected through changes to loan cost, availability, or safeguards. As a consultation, this document creates no binding obligations itself; it invites written comments and poses 40 specific questions to respondents ahead of finalised rules.

Applies to

Jersey Incorporated Banks (JIBs), Overseas Incorporated Banks (OIBs), Registered Persons under the Banking Law

Deadlines

• 29 February 2020: Deadline for interested parties to submit written comments on the consultation paper to the JFSC or, for industry responses, to Jersey Finance Limited (JFL).