Annual Report 2012 - the Jersey Financial Services Commission

Regulatory Developments2012 saw a period of reflection inrelation to the changes made to theIsland’s regulatory framework duringprevious years. Against a backdrop of theinternational regulatory response to therecent financial crises, the Commissionmonitored and, where possible,participated in these discussions.BankingThe key themes for Banking during 2012 have been theneed to monitor and respond to external regulatorydevelopments coupled with more in depth supervision oflocal banking operations.The structure and form of banking regulation is being recastinternationally. Banking has closely monitored keydevelopments and has worked with relevant stakeholders toproperly understand the potential impacts on the bankingsector in Jersey. The key external developments at this timeremain the Basel III package of reforms and the proposalsadvanced by the UK’s Independent Commission onBanking (“ICB”). In both cases, the Commission hasworked with its counterparts in the other CrownDependencies to identify a consistent approach.Structural reform has also involved the reallocation ofresponsibilities between overseas regulators. In the UK, theformer FSA’s responsibilities have now been sharedbetween the newly formed Prudential Regulatory Authorityand Financial Conduct Authority. Banking will need tomaintain its supervisory relationships with both authoritiesand will also need to closely monitor the plannedreallocation of responsibilities between Eurozone nationalsupervisory authorities and the European Central Bank.The level of information sharing and coordination betweensupervisory authorities has increased substantially since thefinancial crisis began and Banking fully participates in thisas a member of the supervisory colleges and crisismanagement groups that have been formed for individualbanks. This has provided a valuable insight into challengesfaced by banking groups represented in the Island and hashelped to identify potential risks at an earlier stage.At a local level, Banking’s supervision of Jersey bankingoperations has become considerably more intensive inrecent years, with the most noteworthy development in2012 being the introduction of Concession Limits, underwhich subsidiary banks must seek approval from theCommission for Large Exposures to sovereigns or otherbanks, including their parent group, all of which hadpreviously been exempted from the need for such approval.This has caused local banks to better assess and monitorthe concentration and credit risk they face in relation toupstreaming their deposits to parent banks.FundsA Funds Consultation Seminar on the Alternative InvestmentFund Managers Directive (“AIFMD”) was held with Industryin September 2012 to consider some key legislativedevelopments in relation to Jersey’s response to the AIFMD.Subsequently, the States of Jersey approved the legislationon 4 December 2012. Internationally the Commission’sdiscussions continue with the European Securities andMarkets Authority (“ESMA”), the European Commissionand fellow International Regulators. There remains a largeamount of work to be undertaken in relation to the AIFMD,a key requirement of which is signing a co-operationagreement with EU supervisory bodies being co-ordinatedby ESMA. The aforementioned consultation and legislativedrafting should ensure the Island is very well placed to do so.In addition, a number of other policy initiatives wereprogressed during 2012. A new Private Placement Fund(“PPF”) product was launched in January, Codes ofPractice for Certified Funds were introduced in April,and a new Collective Investment Funds (Certified FundsProspectus) (Jersey) Order 2012 became effective inNovember 2012. Funds also conducted an IOSCOself-assessment on Principles 6 (systemic risk) and 7(regulating the perimeter).18 | ANNUAL REPORT 2012