Isle of Man Consults On Banking Code Changes

by Jason Gorringe, Tax-News.com, London

20 May 2005

A project is underway to update the Banking (General Practice) Regulatory Code 1999 an important phase of which has now been completed, the Isle of Man's Financial Supervision Commission has announced.

Following the sending out of the Guidance Note on Liquidity Risk Management for consultation in January 2005, the IoM FSC has recently sent further documents to all banking licenceholders, certain professional bodies and other interested parties for consultation which include: Draft Banking (General Practice) Regulatory Code 2005; Amended Banking Returns with completion notes; and Draft Guidance Notes for Interest Rate Risk, Foreign Exchange Risk, Structured Products and OTC Derivatives and Large Exposures.

The Commission requests that any comments or issues are provided by the 15th July. This will enable any necessary amendments to be made before presentation of the new legislation to the October sitting of Tynwald.

It is intended that the legislation will be implemented on or after the 1st January 2006 subject to the agreement of the industry. The Commission is working closely with the Association of Licensed Bankers (ALB) to prioritise the review and agree a detailed timetable that will enable the target date to be met.

The key drivers for this project are to update the Banking Code in line with current requirements whilst taking into account the recommendations made by the International Monetary Fund (“IMF”) inspection team following its visit in 2002.

Basel II has also been taken into consideration, particularly the requirements under Pillar 2 and this has necessitated a strengthening of risk management practices, some of which may be new though most are a formalisation of existing industry practice. While making these changes, the opportunity has been taken to update the legislation and to present it in a user-friendly format through the addition of detailed guidance notes and completion notes for the reporting forms.

Although many of the amendments merely reflect current practice, there are changes in the areas of quarterly banking returns and risk management. There is one new form for interest rate risk (SR-3B) and an expanded form for foreign exchange and OTC derivatives (SR-4). The main changes to the other returns are housekeeping issues. There are also new proposals for liquidity, credit and market risk management with a number of common requirements across all areas such as the requirement for a policy statement for each risk type. All changes to the Code and the first stage of the Commission’s impact analysis are outlined in a separate document entitled “Changes Proposed from Existing Banking Code to New Banking Code”.

It is understood that the ALB is planning to set up a number of working parties to feedback industry views and comments during the consultation period. The Commission will work with the ALB to ensure that clarification is provided where necessary and that any comments or issues raised by licenceholders are addressed promptly. Notwithstanding this, comments from individual banks are welcomed.

Recommended