The Commission's mandate is: 'to reduce, and support the reduction of, prudential risk in the financial services sector and the maintenance of financial stability in the Bailiwick and take such steps as the Commission considers appropriate to support this elsewhere'.
To achieve this mandate, the Director of Risk and Financial Stability is tasked to:
- provide oversight and assessment of risks to Guernsey’s financial stability;
- further the development of Commission policy and strategy to maintain financial stability in the Bailiwick;
- provide oversight of macro prudential analysis and risk, staff analysis of stress testing;
- further the development of the Commission's macro prudential framework.
The Commission implements a risk based approach to supervision of individual firms. Risk categories include: Credit Risk; Market Risk; Operational Risk; Insurance Risk; Capital Risk; Liquidity Risk; Governance Risk; Business Model Risk; Environment Risk; Conduct Risk and Financial Crime Risk.
Although firms are risk assessed individually, the information gathered allows the Commission to conduct analyses of risk on a sector by sector basis. This enables the Commission to identify vulnerability and focus resources on areas deemed to present the highest risk to the stability of financial services in the Bailiwick as a whole.
The institutional arrangements for monitoring of risks also include the Financial Stability Committee; a non-statutory body, whose members include representatives of the Commission, recently constituted by the States of Guernsey primarily to provide advice to the States on co-ordination of strategies and policies to enhance Guernsey’s capability to identify, understand, monitor and address systemic risks.