Feedback on Basel III Prudential Roadmap: advanced approaches, systemic importance, the NSFR and the leverage ratio (No. 5 2025)

Summary

This is a JFSC feedback paper summarising industry responses to Consultation Paper No. 5 2025 on the Basel III prudential roadmap, covering advanced approaches to credit risk and the output floor, systemic importance and the systemic buffer, the Net Stable Funding Ratio (NSFR), and the leverage ratio. It confirms the JFSC's intended approach following consultation, largely proceeding as originally proposed with some clarifications.

• Advanced approaches and output floor: The JFSC will follow the UK PRA's near-final rulebook (PRA PS9/24), applying the output floor except where a bank's foreign group already applies it on consolidation.
• Systemic importance: Banks providing transactional banking services (one or more transactional accounts) to more than 9,000 Jersey individuals or SMEs will be designated highly systemic and subject to a 1.5% systemic buffer from H2 2027.
• Leverage ratio: Applies only to highly systemic banks and those with material overseas operations, requiring a 3.25% Tier 1 capital ratio, with no additional systemic buffer or CET1 sub-limit.
• NSFR: Applies only to highly systemic banks and those with material overseas operations, following the PRA's Liquidity (CRR) Title IV rules including its liquid asset treatment.
• Disclosure approach: The JFSC will only publish the total number of highly systemic banks; individual banks may voluntarily disclose their own status.

The proposals directly affect Jersey incorporated banks (JIBs) only, though branches could be designated highly systemic; effects on bank customers are indirect. The JFSC will provide near-final draft documentation to JIBs by end Q1 2026, with further consultations and Code changes phased through 2026 ahead of full implementation in H2 2027.

Key obligations

• Banks designated as highly systemic will be required to notify the JFSC following each year end
• Highly systemic banks and banks with material overseas operations will need to comply with the leverage ratio requirement of 3.25% of Tier 1 capital once implemented
• Highly systemic banks and banks with material overseas operations will need to comply with NSFR requirements based on the PRA's Liquidity (CRR) Title IV rules once implemented
• Highly systemic JIBs will be subject to a 1.5% systemic buffer from H2 2027

Applies to

Jersey incorporated banks (JIBs), banks with material overseas banking operations, highly systemic banks

Deadlines

• end of Q1 2026: JFSC will provide JIBs with near-final draft documentation
• January 2026: JFSC will consult on remaining Codes changes required to implement Basel III rules, including large exposures, trading book, securitisations and own funds
• H1 2026: JFSC will publish final prudential Codes, effective 1 July 2027, with optional early transition from 1 January 2027
• H1 2026: JFSC will consult on changes to Pillar 2 (including Interest Rate Risk in the Banking Book) and prudential reporting
• H2 2026: JFSC will implement changes to Pillar 2 and prudential reporting so JIBs can transition in H1 2027
• 1 January 2027: Transition window begins, with optional early transition for JIBs
• H2 2027: All aspects of the Basel III framework will be fully live for JIBs, including the 1.5% systemic buffer