Banking Supervision Act (Bailiwick of Guernsey) 2020 – Commentary

What changed?
Summary of the main changes made to the 2020 banking law
New rules to accompany the 2020 banking law

The Banking Supervision (Bailliage of Guernsey) Act 2020 (the Banking Act 2020) was implemented with effect from November 1, 2021, repealing and replacing the Banking Supervision (Bailiwick of Guernsey) Act 1994 (the Banking Act 1994), as part of the Guernsey Financial Services Commission (the Commission) long-term plan to revise its main regulatory laws.

What changed?

The 2020 Banking Law does not fundamentally affect the fundamental approach to regulating deposit-taking activities in the Bailiwick, and the activities covered by the definition of “deposit-taking activity” remain unchanged.

However, many details relating to the operation of depository license holders and the powers of the Commission to supervise such license holders have been changed. In addition, as with all major regulatory laws, the Commission’s enforcement powers have been transferred from the 1994 Banking Law to a new law, the Financial Services Companies (Enforcement Powers) Law 2020 (Bailliage of Guernsey), essentially aligning enforcement powers in all regulatory laws.

It is possible to generally characterize the main changes made to the 1994 banking law by the 2020 banking law as follows:

  • affect the obligations of holders to notify and / or report to the Commission on a periodic basis or as a function of events;
  • further define the role of the Commission with regard to the supervision of deposit collection activities carried out within or from the Bailiwick and broaden the supervisory powers of the Commission; and
  • clarify or codify current practices.

Summary of the main changes made to the 2020 banking law

Main changes to the ongoing obligations of licensees
Supervised persons approved and controlled

The categories of key personnel of license holders who need the Commission’s prior “no objection” to their appointment have been broadened to now cover:

  • controllers;
  • major shareholders;
  • directors;
  • responsible for money laundering reports;
  • responsible for money laundering compliance;
  • compliance officers;
  • risk manager;
  • a person who, under the immediate authority of a director or general manager, is responsible for keeping the accounts or other records of the organization; and
  • the holder of any other function enabling the body to fulfill the requirement that the company be managed by at least two natural persons from the Bailiwick, of appropriate quality and experience and sufficiently independent from one another.

The definition of “controllerin this context has been extended to now cover shareholder controllers,(1) indirect controllers(2) and any person who has the power, alone or with another, to appoint or dismiss a director or a member of a similar governing body or its parent company.

Supervised persons notified
The categories of key personnel whose appointment and resignation require notification to the Commission have been broadened to cover:

  • a managing director or managing director of the licensee (or its parent company) (other than a person in a supervised role approved above);
  • a designated officer;
  • a listener ;
  • any “other supervised manager” – namely, a person appointed other than as a managing director, to exercise, under the immediate authority of a director or a partner (or, in the case of a company in sponsorship, the general partner, or, in the case of a limited liability company, the member), the day-to-day management functions relating to the deposit-taking activities for which the organization is or will be authorized. However, this does not include a person who falls under another category of supervised role; and
  • a business secretary.

Notification of acquisition or reduction of voting rights
Persons who, alone or with partners, have the right to exercise or control the exercise of 15% or more of the voting rights of a holder (or of its parent company) are required to notify the Board and obtain its written approval when it increases its voting rights to more than 50% (whether in a single transaction or in a series of transactions).

Conversely, persons who, alone or with partners, have the right to exercise or control the exercise of 50% or more of the voting rights of a holder (or of its parent company) must notify the Commission when it reduces its voting rights to less than 50%.

Supervisory role
Broad regulatory powers
Various provisions of the Banking Law of 2020 allow the Commission to establish rules and regulations, in particular with regard to:

  • deposit collection activities and the exercise and conduct of such activities by licensees;
  • the issuance, form and content of filing announcements;
  • unsolicited calls to people from the Bailliage (or from people from the Bailliage to people from elsewhere) with a view to obtaining deposits;
  • the preparation, keeping, keeping, submission to the Commission and publication of accounting documents, as well as the form, information and elements to be included in the accounting documents and the auditor’s report; and
  • an annual review of the activity carried out by the licensee.

The revision also gives the Commission the power to issue codes of practice and guidance on a legal basis.

The legal obligation to keep the Commission informed is codified
The Banking Law of 2020 requires, as an express legal obligation, that licensees deal with the Commission in an open and cooperative manner, and that they keep the Commission promptly informed of any matter that should reasonably be disclosed. This was previously in the Code of Good Practice for Banks.

Extension of powers
The Banking Law of 2020 contains a number of provisions which also expand the supervisory powers of the Commission, including:

  • the power to give instructions to all persons who are or were (or who are exempt from the provisions of the Banking Law of 2020) persons exercising supervised functions in such enterprises, and to any person suspected of having violated any provision of the Banking Law of 2020;
  • enlargement of the categories of persons from whom the Commission may require the production of information or documents; and
  • the expansion of the persons to whom an auditor should raise the alert so that it now includes the associated entities of any audited party.

New rules to accompany the 2020 banking law

In addition, in order to effectively implement the 2020 Banking Law, the Commission drafted and consulted with the banking sector on revised rules and guidance to accompany the 2020 Banking Law, producing:

  • banking supervision rules and directives (accounts, disclosure and declaration) 2021; and
  • 2021 banking supervision rules and guidelines (major exposures) (together, the rules).

These rules will replace the 1994 banking rules (accounts) and the current large exposures policy, and they will come into force at the same time as the 2020 banking law.

These rules largely concern the permanent obligations of licensees incorporated in the Bailliage and oblige these licensees to:

  • prepare audited annual accounts in accordance with an approved accounting standard authorized by the Commission (i.e. International Financial Reporting Standards, generally accepted accounting practices in the United Kingdom or generally accepted accounting practices in the United States );
  • make available on request and publish online a certain number of key indicators at the latest one month after the annual accounts of the holder have been submitted to the Commission. These key indicators include:
    • Common Equity Tier One ratio, calculated as the ratio of Common Equity Tier One capital to total risk-weighted assets;
    • the liquidity coverage ratio or, where applicable, the liquidity asymmetry ratio;
    • the leverage ratio; and
    • the stable net funding ratio;(3) and
  • ensure that the operator’s exposure limits comply with the new rules and, if necessary, make a quarterly major risk declaration.

Branches of licensees incorporated outside the Bailiwick are also subject to quarterly notifications and must report on their ten largest loans in the market and their ten largest credit exposures on a quarterly basis.

For more information on this topic, please contact Michaela jesson, Paul Chanter, Christophe jones Where Tim clipstone in Ogier by phone (+44 1481 721672) or email ([email protected], [email protected], [email protected] Where [email protected]). The Ogier website is accessible at the address www.ogier.com.

End Notes

(1) The definition of “shareholder controller” has itself been broadened to cover not only the shareholders holding at least 15% of the control of the votes of the body directly or indirectly, but also the beneficial owners of at least 15% shares issued in a cell of a protected cell company which is or will be made redundant.

(2) In the broad sense, “indirect controllers” are the persons on whose instructions the directors or controllers are used to acting, it includes a person who allows to exercise a significant influence on the management of an organization. .

(3) These ratios are defined in more detail in the relevant regulatory statements and guidelines published by the Commission.


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