Basel III Prudential Roadmap: H2 2024 feedback

Feedback on Consultation paper No. 6 2024, on the implementation of Basel III in Jersey.

In this feedback paper, we address industry responses to our proposals concerning:

• the standardised approach to credit risk (SACR)
• the standardised approach to operational risk (SAOR)
• Large Exposures

Executive summary

Introduction

In March 2024, we published our consultation on the Basel III prudential roadmap. This included a timeline for a series of detailed consultations on matters, including capital requirements, operational and credit risk, liquidity and leverage requirements and prudential reporting, ahead of implementation in H2 2027, with flexibility for banks to transition from H2 2026. It set out that our approach would:

• be based on the UK’s implementation
• be proportionate, flexible and simple
• address competitive disadvantages

In December 2024, in accordance with the Basel III consultations, we published a consultation paper on the standardised approaches to credit and operational risk, and Large Exposures regulations: Basel III Prudential Roadmap: 2024 H2 — Jersey Financial Services Commission

In mid-January 2025, the UK announced it would delay implementing Basel III until 1 January 2027.

This paper sets out our feedback in respect of our Basel III consultation published in December 2024.

UK implementation delay

In the UK, the PRA announced that it has delayed its Basel III implementation date until 1 January 2027. The delay was caused by uncertainty over how and to what extent the US would implement Basel III. The UK’s position was also informed by a desire for harmonised implementation of trading book rules to avoid market impacts.

The EU took a similar view and also delayed the market risk elements of implementation, having already implemented everything else. The US position remains unclear.  

We will address the consequential impact on our plans as part of our next planned consultation paper, which will be released in July 2025, slightly later than initially envisaged.

Consultation feedback

Sections 2, 3, 4, and 5 of this paper set out our response to the feedback received on our Basel III consultation published in December 2024:

• section 2 – General matters regarding how we will implement changes to prudential regulation (General Matters)
• section 3 - the Standardised Approach to Credit Risk (SACR)
• section 4 - the Standardised Approach to Operational Risk (SAOR)
• section 5 - Large Exposures regulations

What did we do?

We held a workshop open to all banks to explain and gather feedback on general matters, the SAOR, UK developments, and our high-level response to these. We later held further workshops with JIBs on the SACR, including CRM.

All JIBs were represented at the workshops, and all responded to the consultations. No other consultation feedback was received.

What was proposed, what feedback did we receive, and how will we proceed?

For the SACR and SAOR, we intend to closely follow the PRA’s near-final rulebook, see Appendix A-1 , published in September 2024 as part of the PRA’s policy statement PS9/24 Implementation of the Basel 3.1 standards near-final part 2 (PRA PS9/24).

Respondents noted some areas of concern, which are set out in the relevant Section, along with our response. As none of those matters were identified as significant, we intend to circulate a near-final draft of the Codes and invite further feedback on how these Codes could be modified to address the specific areas of concern that were raised.

We will circulate a list of relevant PRA material that provides further guidance on various matters. We will also request feedback on whether this sufficiently clarifies matters or if further guidance from us is required. In July, the PRA material will initially be provided to JIBs. By the end of October 2025, we aim to finalise and publish this on our Basel III — Jersey Financial Services Commission page. Ultimately, this will be incorporated in our Prudential Handbook, which will be published in H1 2026.  

For Large Exposures, the situation is complicated by the PRA’s unanticipated consultation on its Large Exposures rules, which has not yet been finalised.

Respondents:

• were broadly positive about the UK’s approach, particularly the use of a post-collateral measure of exposure, in contrast to our current pre-collateral measure of exposure
• welcomed the UK exemptions, particularly for sovereign exposures, in contrast to our sovereign concession limit approach
• expressed concerns regarding the PRA’s consultation proposals regarding the recognition of indirect exposures
• expressed a preference for our current group concession limit rules over the PRA’s consultation proposals (which are a relaxation of its current rules)

We will discuss detailed proposals in our H2 2025 consultation, drawing on the PRA’s final position and this feedback.

The consultation briefly mentioned Pillar 2 and prudential reporting, which will both be consulted on in H1 2026. We will therefore only provide a brief summary of those responses, which will be used when developing proposals.

Who would be affected?

The proposals in the consultation paper only directly impact JIBs. It was circulated to them and to the Jersey Bankers Association (JBA), including the relevant JBA sub-committee, the JBA Prudential and Banking Reform Technical Group (JBARTG).

We engaged with the Jersey Resolution Authority to deliver a joined-up approach to appropriate prudential regulation.

Implementing the Basel Framework will indirectly impact the customers of banks in Jersey, whether it be our own adoption or implementation by home countries in respect of branches.

Next steps

We will provide JIBs with near-final draft documentation on the SACR and SAOR in July 2025, covering both transposing PRA Rules into JFSC Codes and setting out PRA guidance.

Timeline:

• in July 2025, we will consult on advanced approaches to credit risk, systemic importance, and the linked proposals for the Net Stable Funding Ratio and the Leverage Ratio
• in H2 2025, we will consult on the remaining Codes changes required to implement the Basel III rules, including Large Exposures
• in H1 2026, we will publish near-final Codes, to come into effect from 1 July 2027, with transitional provisions that enable earlier transition from 1 January 2027
• in H1 2026, we will consult on changes to Pillar 2 (including Interest Rate Risk in the Banking Book) and Prudential Reporting
• in H2 2026, we will implement changes to Pillar 2 and Prudential Reporting so that JIBs can transition in H1 2027

All aspects for JIBS will be live in H2 2027.

Read our full Basel III Prudential Roadmap: H2 2024 feedback.