Amendments to the Banking Rules on Accounts, Disclosure & Large Exposures

Overview

The purpose of this Consultation Paper is to seek feedback from stakeholders and interested parties on the issues contained in the paper and the proposed revisions to the relevant rules and guidance issued under the Banking Supervision (Bailiwick of Guernsey) Law, 2020 (“The Law”), which is intended to replace the Banking Supervision (Bailiwick of Guernsey) Law 1994.  This includes the Banking (Accounts) Rules 1994 and the Large Exposure Policy.

The proposals in this Consultation Paper are relevant to all institutions in Guernsey that hold a banking licence (“Licensed Institutions”) under The Law.

The Commission is committed to meeting international standards to ensure the continuing credibility of Guernsey as an international financial services centre. We are also committed to introducing rules, on a proportionate basis, to implement standards which take proper account of the economic wellbeing of the Bailiwick and the firms which operate in it; as well as safeguarding depositors.

The Commission has been considering internally the updates to the Basel III standards finalised in December 2017 (sometimes colloquially referred to as Basel IV) and how best to implement them in a way that makes sense for the local banking sector. Given that the implementation date has been deferred by one year to 2023 we do not intend to consult on these issues now.

The above exercise highlighted a number of areas where the Commission’s supervisory framework needed to be updated to meet the Basel Framework for banking regulation. It is the policy of the Commission to adopt international standards that are proportionate to the scale and nature of the Bailiwick’s industry. The proposals in this consultation are intended to address those points. 

The areas addressed in this paper are:

• Accounting Information and Disclosure
  • The Commission proposes to clarify the accounting standards Licensed Institutions incorporated in the Bailiwick may use and update the existing disclosure requirements to include a limited amount of key regulatory information.
• Large Exposures and Upstreaming
  • The Commission proposes to update its large exposure and upstreaming regime to bring it more fully in line with international standards and reduce concentration risk, while making a number of allowances for the nature of the local industry. This will only effect Licensed Institutions incorporated in the Bailiwick.

The Commission is also planning to update the sign off and verification requirements for its banking regulatory returns. We are taking this opportunity to inform licensees of this change.

The key aims of the proposals in this Consultation Paper are to:

• enhance the effectiveness, clarity and transparency of the regulatory requirements;
• increase the information available for stakeholders;
• reduce concentration risk in order to increase the soundness of the banking sector and protect depositors; and
• meet international standards.

The content of this Consultation Paper is at the proposal stage and does not prejudge any final decision to be made by the Commission.

The Consultation Paper, along with both sets of draft new rules and guidance, can be found below.

What happens next

Responses to this Consultation Paper will be considered by the Commission prior to issuing new rules and guidance under The Law. A Feedback Paper will also be published, summarising the responses to the Consultation.