Does Guernsey have a depositor compensation scheme?

The Banking Supervision (Bailiwick of Guernsey) Law, 2020 provides for the States (government) of Guernsey to introduce a depositor compensation scheme in Guernsey. On 26 November 2008 the States of Guernsey approved the immediate creation of a Depositor Compensation Scheme for Guernsey. The Banking Deposit Compensation Scheme (Bailiwick of Guernsey) Ordinance, 2008 is available in the Legislation and Guidance section of this website, though further details are available at www.dcs.gg​.

Does the Commission follow Basel II/III guidance?

Yes. Basel II requirements have been embedded for some time. Basel III-consistent regulatory capital requirements were introduced in Guernsey in early 2016. Basel III-consistent minimum regulatory liquidity requirements will be implemented during 2017. The Commission continues to monitor the work of the Basel Committee on Banking Supervision to ensure that the local regulatory framework is compliant with international standards.


What is the minimum regulatory capital requirement for Pillars 1 and 2?

Banks are required to maintain a Risk Asset Ratio of 10.5% for Pillar 1 (comprising an 8% requirement plus a 2.5% Capital Conservation Buffer) and at least 0.5% for Pillar 2; making an aggregate of 11%. Most banks have regulatory capital requirements between 12-16%.

What is the quality of capital requirement?

Banks are required to maintain a minimum Common Equity Tier 1 ("CET1") capital ratio of 8.5% (comprising a 6% requirement plus a 2.5% Capital Conservation Buffer) for Pillar 1. Pillar 2 capital should be comprised of at least 75% CET1.

How does the Commission apply the Pillar 2 requirement?

The Pillar 2 requirement is applied through the Supervisory Review and Evaluation Process ("SREP") which embraces two dimensions: banks' assessment of capital and other mitigants required to cover their risks (the Internal Capital Adequacy Assessment Process - "ICAAP") and the supervisory review and evaluation of that assessment. An outcome of the SREP is the agreement of the amount of additional capital required beyond the Pillar 1 regulatory minimum requirement.

How does the Commission regulate liquidity?

Currently a maturity mismatch / stock approach is used to set a minimum regulatory liquidity requirement. Details of this approach are set out in the Commission's Guidance on Liquidity Risk Management. However, in 2017 this approach will be replaced with a Basel III-consistent Liquidity Coverage Ratio minimum requirement. Details of this approach are explained in the Commission's recent consultation paper.

What are the corporate governance requirements for a) subsidiaries and b) branches?

Guernsey-incorporated subsidiary banks must meet the Finance Sector Code of Corporate Governance. The Code does not cover Guernsey branches of foreign-domiciled companies.

What is the Commission's approach to upstreaming?

The Commission sets limits on the up-streaming of assets to the parent bank or other group entities. This is set out in the Banking Supervision (Large Exposures) Rules and Guidance, 2021.

What is the Commission's approach to outsourcing?

The Commission's approach to outsourcing is explained in the Outsourcing Risk Guidance Note for Banks.

How do I apply for a banking licence?

The Commission is the licensing authority under the Banking Supervision (Bailiwick of Guernsey) Law, 2020. This Law sets minimum criteria for licensing which the Commission must be satisfied are met prior to the granting of a licence. Prospective banking licence applicants should contact the Commission at an early stage to discuss application requirements.

What sort of banks operate in Guernsey?

Most banks in Guernsey are either wealth management banks or banks serving the local finance sector. However, there are also banks serving the local retail market - current accounts, mortgages, etc. All banks in Guernsey are part of wider banking groups.

Where a certain position falls under different categories of “supervised role” within each of the Supervisory Laws, and when an entity is licensed under more than one of those Laws, which set of legal requirements will take precedence in respect of a proposed appointment to that position?

In such circumstances the Law with the higher level of requirements will take precedence. 

For example, the position of director is considered to be a “vetted supervised role“ under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (“the  POI Law”).  The same position is considered to be an “approved supervised role” under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2020 (“the Fiduciaries Law”).  The POI Law requires the Commission to have first issued its statement of “no objection” before an appointment can be made to a vetted supervised role, and such statement of “no objection” is deemed to have been given after 60 days where the Commission has not objected or issued further comment.   Under the Fiduciaries Law, an appointment to an approved supervised role requires the Commission to have first issued its statement of “no objection” in absolute terms, and this is not deemed to have been given if no response has been issued by the Commission within 60 days.

Therefore, in such circumstances, where a person is seeking to be appointed to the position of director of an entity which is licensed under both the POI Law and the Fiduciaries Law, the “higher” requirements of the Fiduciary Law will take precedence, and the Commission’s statement of “no objection” in absolute terms is required before the appointment can be made.

In any event, for a proposed appointment to a vetted supervised role, the Commission would typically seek to issue its statement of no objection (or otherwise) before the expiry of the 60-day period following which such statement of no objection is deemed to have been given.

For information purposes, the differences between the requirements of the different Laws in respect of appointments to such supervised roles are due to differing international standards for the respective industry sectors.