Feedback on Consultation Paper No. 7 2019: Basel III (2020-09)

Summary

This is a JFSC feedback paper summarising industry responses to Consultation Paper No. 7 2019, which proposed how Jersey will implement the remaining elements of the Basel III Framework for banks. It does not itself impose new binding rules; instead it records feedback received, the JFSC's responses, and the planned next steps toward final implementation.

• General approach: No respondent opposed adopting the Basel III Framework; JFSC will consider recognising other regulators' regimes (eg UK) for lower impact, high complexity areas.
• Advanced Approaches: JFSC will address impacted banks bilaterally and later publish an Interim Policy for banks seeking permission to use Advanced Approaches.
• Standardised Approach to Credit Risk: Feedback covered currency mismatch risk weights, clearing house exposures, credit ratings, sovereign exposures and HQLA, real estate and corporate exposure treatment, and off-balance sheet items; detailed proposals deferred to the 2021 consultation.
• Standardised Approach to Operational Risk: Capital charge impact expected to be neutral or modestly higher (5-10%); use of Group scalars and operational loss record-keeping to be revisited in 2021.
• Large Exposures: Concerns raised about contractual triggers on counterparty downgrade and absence of an aggregate limit; options to be considered in the 2021 consultation.
• Systemic banks: JFSC will finalise identification of D-SIBs and strategically important parts of G-SIBs and clarify supervisory approach and capital buffer interaction in future consultation.

The JFSC confirms it will run a further consultation in 2020 on the leverage ratio, NSFR and lower impact/high complexity areas, followed by a 2021 consultation on detailed implementation including reporting requirements, with full implementation of the relevant Basel III requirements targeted by the end of 2022.

Applies to

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

Deadlines

• 2020: JFSC to consult further on the leverage ratio, NSFR and detailed approach for lower impact/high complexity areas
• 2021: JFSC to consult on detailed implementation of Basel III proposals, including reporting requirements
• end of 2022: JFSC intends full implementation of the relevant Basel III requirements