Thursday April 27 2017

News Source: Global Exchanges

Focus: Other

Type: General




The Jersey Financial Services Commission (JFSC) has published a consultation paper proposing revised regulatory requirements for liquidity management and reporting in Jersey. It uses as its basis papers issued by the Basel Committee as part of the group of new and revised standards referred to as Basel III. In so doing, it addresses the similar EU proposals incorporated in CRR.

Sections 4, 5, and 6 establish proposals for the implementation of the liquidity element of Basel III in respect to Jersey Incorporated Banks, where under international standards the JFSC has primary responsibility for oversight.

Section 5 (on reporting) also addresses changes to the prudential reporting of the liquidity position of Overseas Incorporated Banks, his being the only section that is directly relevant to OIBs.

The central proposal, set out in Section 4, is for the implementation in Jersey of the LCR component of Basel III as set out in the LCR Standard, with certain amendments being proposed to reflect local banking sector characteristics.

Section 5 further addresses revisions to reporting requirements. For a JIB, these are more extensive than current requirements, reflecting a desire to more fully understand its liquidity position including, but not limited to, its LCR. In particular, reporting of its NSFR, a longer term standard specified in Basel III, is required in order to provide information on the stability of a JIB’s funding base beyond the narrow timeframe (one month) of the LCR.

Section 6 contains proposals for how JIBs should document their internal liquidity assessment processes within their ICAAP documentation. Specific stress testing will be required:

  • In connection with all modifications to predicted flows, an assessment of anticipated stressed behaviour (including an assessment of evidenced historical behaviour; during recent periods and any relevant stress periods); and
  • In connection with HQLA, an assessment of stressed availability (through sale or repo, based on operational use tests).

Sections 8 and 9 set out respectively a cost benefit analysis of the proposals and a summary of specific questions raised.

Draft proposed prudential reporting guides and revisions to the Banking Codes are set out in Appendices B to I, whilst Appendix J contains draft revisions to the Banking Codes.

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