Feedback on Bank Financial Reporting and Audit Consultation (No. 13 2020)

Summary

This is a feedback paper published by the JFSC following Consultation No. 13 2020 on proposed new legislation, the Banking Business (Accounts, Auditors and Reports) (Jersey) Order (the New Order), which will overhaul financial reporting, auditor appointment, prudential returns, declarations of compliance and publication requirements for Jersey banks. It summarises industry and accountancy sector responses and sets out the JFSC's decisions and revised implementation timetable.

• Auditor appointment: JFSC must be notified before appointment of an auditor for Jersey Incorporated Banks (JIBs); JFSC retains a power to object to appointments.
• Financial statements: Banks must prepare financial statements under UK GAAP or IFRS (variations possible via Article 17); Overseas Incorporated Banks (OIBs) must produce audited accounts for the entity as a whole, not just the Jersey branch.
• Prudential returns: Quarterly prudential reporting continues, with a corrected Q1 reporting date (31 March, not 30 March); a new requirement for an auditor's report on the year end prudential return will apply from 30 September 2022, with flexibility on the nature of auditor engagement to be set out in the PR Code.
• Declaration of compliance: Registered persons must produce a Declaration of Compliance regarding compliance with laws and regulations, under the new DoC Code.
• Publication of financial statements: A physical copy of the most recent audited financial statements must be kept at each Jersey office and made available for inspection; a link to a group website is an acceptable means of publication; OIBs must publish both their own and their ultimate parent's financial statements.
• Transitional relief: Banks wishing to continue existing variances (e.g. on consolidated accounts, GAAP standards, parent accounts) must notify JFSC of required variances by the end of April 2022.

The New Order and associated Banking Code parts (Appointment of Auditors, Financial Statements, Prudential Reporting, Declaration of Compliance) are intended to come into force on 30 September 2022, following Privy Council approval of a related primary law amendment (Banking Business (Amendment No. 9) (Jersey) Law). Final drafts of forms and Code documents were to be issued for comment by end of March 2022, with final versions published by end of May 2022.

Key obligations

• JIBs must notify the JFSC before appointing an auditor, and the JFSC may object to the appointment.
• Banks must prepare financial statements in accordance with UK GAAP or IFRS unless a variation is granted under Article 17 of the New Order.
• OIBs must produce and submit audited financial statements for the entity as a whole (the legal person), not just the Jersey branch.
• Banks must keep a physical copy of their most recent audited financial statements at each Jersey office, available for inspection, or provide equivalent access via a website link.
• OIBs must publish both their own financial statements and those of their ultimate parent.
• From 30 September 2022, banks must obtain an auditor's report on the year end prudential return, with the engagement terms specified in the auditor's engagement letter.
• Banks wanting to preserve existing reporting variances must contact the JFSC with details of required variances by the end of April 2022.
• Registered persons must produce a Declaration of Compliance regarding compliance with applicable laws and regulations under the New Order.

Applies to

Jersey Incorporated Banks (JIBs), Overseas Incorporated Banks (OIBs), Registered Persons under the Banking Law, Auditors of banks (JIB Auditor, OIB Auditor, Branch Auditor)

Deadlines

• end of March 2022: JFSC to provide banks with forms and updated Code documents as final drafts for comment
• end of April 2022: Banks must respond with details of all required variances (e.g. on accounts standards) ahead of the New Order coming into force; JFSC to consider feedback on final drafts
• end of May 2022: JFSC intends to publish final versions of the New Order and Code documents
• 30 September 2022: New Order and associated Banking Code parts, including the auditor's report requirement on year end prudential returns, come into effect
• 31 March 2021: Consultation No. 13 2020 closed