Guidance Note: Prudential Reporting of Liquidity Ratios

Summary

This is a detailed technical guidance note setting out how Jersey incorporated banks (JIBs) must calculate and prudentially report their liquidity ratios. It supplements the Code of Practice for Deposit-taking Business (Banking Code) and covers the Liquidity Coverage Ratio (LCR) or Liquidity Mismatch Ratio (LMR), High Quality Liquid Assets (HQLA), and the Net Stable Funding Ratio (NSFR), closely modelled on Basel Committee standards.

• HQLA classification: Defines Level 1, Level 2A and Level 2B High Quality Liquid Assets, applicable haircuts, general and operational eligibility requirements, and diversification expectations, with Level 2 assets capped at 40 percent of total HQLA and Level 2B capped at 15 percent.
• LCR or LMR calculation: Sets out the components, adjustment factors and formulas used to calculate the LCR or LMR, including retail outflows, other liabilities, commitments, derivatives, other outflows and inflows.
• NSFR reporting: Establishes detailed requirements for prudential reporting of the Net Stable Funding Ratio, including Available Stable Funding and Required Stable Funding factors.
• Reporting mechanics: Requires reporting in sterling equivalent amounts, in round thousands, using the Unencumbered Holdings, Rehypothecated Holdings, Realisable Value, Adjusted Amount and Haircut Amount fields for each HQLA item, submitted via specified sheets in the Prudential Return.
• Internal monitoring: Notes that the Banking Code requires JIBs to internally monitor the LCR/LMR daily and notify the JFSC if limits are not complied with or buffers not maintained, consistent with the definitions in this guidance.

The document is guidance rather than a standalone binding rule, but it operationalises and gives the definitions and calculation methodology that JIBs must apply to satisfy the liquidity monitoring and prudential reporting obligations already imposed by the Banking Code. It does not itself set new filing deadlines, deferring the mechanics of submission timing to the separate Prudential Reporting Guide for JIBs.

Key obligations

• JIBs must calculate and report HQLA, the LCR or LMR (as applicable), and the NSFR in accordance with the definitions and methodology set out in this guidance note.
• JIBs must internally monitor the LCR/LMR daily and notify the JFSC if limits are not complied with or liquidity buffers are not maintained.
• JIBs must report HQLA and related amounts in sterling equivalent, in round thousands, disclosing Unencumbered Holdings, Rehypothecated Holdings, Realisable Value, Adjusted Amount and Haircut Amount for each item.
• JIBs must develop and document diversification policies and concentration limits for HQLA, reflected in their Liquidity Management Policy and ICAAP liquidity risk section.
• JIBs must submit prudential returns to the JFSC for each prudential period end date, consistent with this guidance, using the mechanics set out in the separate Prudential Reporting Guide for JIBs.

Applies to

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

Deadlines

• daily: JIBs must internally monitor the LCR/LMR on a daily basis as required by the Banking Code.
• each prudential period end date: JIBs must submit prudential returns (HQLA, LCR/LMR, NSFR sheets) to the JFSC for each prudential period end date, per the Prudential Reporting Guide for JIBs.