Prudential reporting of capital ratios for JIBs

Guide on the calculation of the risk-based capital ratios in connection with the Code of Practice for Deposit-taking Business (Banking Code), as applicable to persons incorporated in Jersey that are registered under the Banking Business (Jersey) Law 1991 (JIBs). In addition, this document establishes detailed requirements relating to the prudential reporting of the Leverage Ratio.

Overview

Introduction

1.1 This document specifies the calculation of the three risk-based Capital Ratios – the three capital ratios for which minima are established in Section 5 of the Banking Code, being the:

1.1.1 CET1 capital ratio: the ratio of CET1 capital, as defined in Section 2, to total risk weighted assets, as defined in Section 5 (total RWAs);

1.1.2 Tier 1 capital ratio: the ratio of Tier 1 capital, as defined in Section 3, to total
RWAs; and

1.1.3 total capital ratio: the ratio of total capital, as defined in Section 4, to total RWAs.

1.2 The Banking Code requires JIBs to internally monitor Capital Ratios daily and notify the JFSC if limits are not complied with or Capital Buffers not maintained. This reporting must be consistent with the definitions set out herein.

1.3 In a small number of identified cases, items are defined purely for the purpose of the prudential return submission. These items are identified where additional information is considered useful to the JFSC, such as a breakdown of the composition of an item.

1.4 The requirements regarding the calculation and reporting of Capital Ratios are based on the international standards promulgated by the Basel Committee on Banking Supervision (Basel Committee).

1.5 In particular, item numbers have been aligned to the numbering used in the standards, where applicable. In some cases, items in the standard have been omitted as they relate to transitional provisions that are not applicable. Where additional items have been identified as being necessary, the item numbering has been extended beyond that used in the international standard through the use of higher numbers and the addition of letters to enumerate items that are key components.

1.6 The specification sets out both the definitions of the component items and the calculations that must be used to derive the Capital Ratios. Where component items are not relevant to a JIB, the JIB’s internal monitoring need not reflect the term.

1.7 The Banking Code also requires JIBs to submit prudential returns to the JFSC, consistently with this document, for each prudential period end date. The specific mechanics of this are set out in the “Prudential Reporting Guide for JIBs”, issued by the JFSC and available at:

1.7.1 http://www.jerseyfsc.org/banking-business/prudential-reporting/

1.8 For prudential reporting purposes only, this Guide also specifies the reporting of the Leverage Ratio.

Layout of this Guide

1.9 Sections 2 to 8 relate to the computation of the Capital Ratios.

1.10 Section 9 relates to the calculation of the Leverage Ratio.

1.11 Appendix A and Appendix B list all items defined herein for, respectively, the prudential reporting of Capital Ratios and the Leverage Ratio.

Read our full prudential reporting of capital ratios guidance note.