Since 2009, the Commission has followed the revised guidelines set down by the Basel Committee of Banking Supervisors for the purposes of setting regulatory capital (e.g. ‘Basel II’).
Details of pillar one capital requirements have been jointly agreed with the regulatory authorities in Jersey and the Isle of Man and are set out here:-
For pillar two, the Commission applies a mechanistic credit conversion factor of 10% for uncommitted undrawn facilities. Details of other pillar two charges are set out here.
Interest rate risk on the banking book is one of the risks which are to be included in Pillar 2. The Commission has suggested a methodology for measuring this risk which is available here.
The Commission sets a minimum Internal Capital Requirement (ICG) of 100% in pillar one; plus a pillar two add-on (the minimum ICG for 2010 is 125%).
Guidance and feedback on Basel II implementation is set out here.
The Commission has a formal process (the Supervisory Review and Evaluation Process or SREP) whereby Basel II regulatory capital is set and each firm’s Internal Capital Adequacy Assessment Process (or ICAAP) is reviewed. Details of the SREP are set out here.
On emerging Basel III proposals the Commission has written to the Basel Committee on liquidity as set out here.