Guidance Note: Prudential Reporting of Capital Ratios (Last revised 1 January 2025)

Summary

This guidance note sets out how Jersey incorporated banks (JIBs) must calculate the risk based capital ratios required under the Code of Practice for Deposit taking Business (the Banking Code), plus a separate specification for reporting the Leverage Ratio. It defines, item by item, the components of CET1 capital, Tier 1 capital, Tier 2 capital, total capital and total risk weighted assets (RWAs), aligning item numbering to Basel Committee standards where applicable.

• CET1 capital: Defines qualifying common share capital, retained earnings, other comprehensive income, and the regulatory deductions (goodwill, intangibles, DTAs, valuation adjustments, cross holdings, etc.) used to arrive at CET1 capital.
• Tier 1 and Tier 2 capital: Sets out AT1 instruments and deductions for Tier 1 capital, and Tier 2 items and deductions to derive total capital.
• Total RWAs and ratios: Specifies aggregation of RWAs and the calculation of the CET1, Tier 1 and total capital ratios, plus minima and capital buffers under the Banking Code.
• Memoranda items and capital requirements: Covers additional memoranda items and capital requirement calculations, including risk weightings for credit, operational and market risk.
• Leverage Ratio: Establishes detailed, separate requirements for calculating and reporting the Leverage Ratio, including on and off balance sheet exposures, derivatives and securities financing transaction exposures.

The guidance confirms that JIBs must monitor their Capital Ratios internally on a daily basis and must notify the JFSC if regulatory limits are breached or capital buffers are not maintained. JIBs must also submit prudential returns to the JFSC for each prudential period end date, calculated consistently with the definitions in this document; the detailed submission mechanics are set out in the separate Prudential Reporting Guide for JIBs.

Key obligations

• JIBs must internally monitor their Capital Ratios (CET1, Tier 1 and total capital ratios) on a daily basis.
• JIBs must notify the JFSC if capital ratio limits are not complied with or capital buffers are not maintained.
• JIBs must submit prudential returns to the JFSC for each prudential period end date, calculated and reported consistently with the definitions and item numbering set out in this Guidance Note.
• JIBs must calculate and report the Leverage Ratio for prudential reporting purposes using the detailed item definitions set out in Section 9 and Appendix B.

Applies to

Jersey incorporated banks (JIBs) registered under the Banking Business (Jersey) Law 1991

Deadlines

• daily: JIBs must internally monitor their Capital Ratios on a daily basis under the Banking Code.
• each prudential period end date: JIBs must submit prudential returns to the JFSC consistent with this Guidance Note for each prudential period end date.