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Guernsey Revises Capital Adequacy Rules

by Amanda Banks, Tax-News.com, London

01 December 2009


Guernsey’s Financial Services Commission has prepared new Capital Adequacy Rules mandatory for all entities licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 1987.

According to the Commission, the Capital Adequacy Rules are the second part of a process to replace the Licensees (Financial Resources, Notification, Conduct of Business and Compliance) Rules, 1998 and the Collective Investment Schemes (Designated Persons) Rules, 1988.

The Licensees (Conduct of Business) Rules, 2009, which will encapsulate the new capital adequacy requirements, are coming into effect on January 1, 2010.

The Commission has further announced that as the Capital Adequacy Rules are to come into effect in 2010, licensees should note that they will not apply for fiscal years ending in 2009.

The highlights of the Capital Adequacy Rules include:

  • The introduction of pro formae calculations which take account of risks to which the business of the licensee might be subject;
  • The Board of a licensee will maintain the responsibility for assessing not only its capital adequacy but also the basis and assumptions upon which this has been calculated;
  • If the Board is of the view that the pro formae do not adequately capture the risks to which its business is subject, the Commission would expect the Board to formalize a more stringent level of capital requirement;
  • The introduction of a liquidity requirement; and
  • The recognition that a licensee should not rely on loan support from another group company for the purposes of meeting its capital adequacy.

The Commission is eager to receive views on whether, in particular, the above objectives have been achieved and what problems are foreseen.


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