FSC Information

NB: transferred from 'Actions & Strategy' Forum by moderator

Background info for Isle of Man FSC

FSC Annual report (to big to upload)

http://www.gov.im/lib/docs/fsc//fscannualreport20072008.pdf

Lot of stuff in there, relevant stuff is the regulation of banks.

Really just puts on paper the stated aim of the FSC to reassign liquidity from central treasury functions to a more local level. Also mentions the possibility of ringfencing.

Some other stuuf might also be useful background

Banking

Banks on the Isle of Man generally fall into one of three categories. Those which are part of very large
international groups where their operations locally are
part of significant offshore presences; more medium sized
banks where they are offering specialist services
including private banking, wealth management and
fiduciary opportunities to the group’s international client
base;

and a few other banks whose focus is mainly on
the taking of deposits from international residents for
lending to their parent groups.
In the case of the latter category it can mean that
such banks may incur material exposures to group
treasuries where the market risks - relating to interest
rate, maturity and foreign exchange positions - are
managed centrally. This is the principal reason why the
Commission operates a policy of only licensing banks
which are financially very sound and able to provide full
support to their local operations at all times.
However, in the light of the turbulence in financial
markets during the period the Commission has been
considering carefully its policy towards the cross-border
dependencies which banks may have on their parent
groups. Branches inevitably form part of the whole
entity, but local subsidiaries have a separate legal
standing and should be entitled to an element of ringfencing.
This is to give them some independence in
being able to draw on local liquidity reserves, and
ultimately additional protection for creditors in the event
of an insolvency.
The Commission is now discussing these issues with
relevant banks. To the extent
that it results in some
reassignment of liquidity
currently held centrally, it should
not affect the business rationale
of local banks.

The Commissionis reinforcing this approach with assurances from parent regulators that they are supervising liquidity on a
consolidated basis.

There is, however, an important challenge which supervisors face internationally.
Liquidity is generally managed by banks on a cash-flow basis supplemented by holdings of money market assets, and
supervisors are usually prepared to acknowledge
behavioural adjustments in assessing maturity mismatch
positions. However, if any bank finds itself moving from
a normal, going-concern environment into something
approaching a crisis, extended liability positions can
suddenly crystallise as immediate obligations. How
adequately to plan for such a transformation is
provoking much thought in wider circles.

During the year a tri-party group comprising
Guernsey, Jersey and the Isle of Man issued additional
papers detailing further co-operation during
implementation of Basel II. All papers are available from
the Commission’s website.
The Commission expected, and encouraged, a high
proportion of deposit taking incorporated banks to be in
a position to implement Basel II with effect from 1
January 2008, for reporting to the Commission for the
quarter ended 31 March 2008. This has been achieved.
The Commission continues to adopt a flexible approach
to implementation and will facilitate later adoption
during 2008. Only under exceptional circumstances will
the Commission accept a deposit taking bank to remain
under Basel I in 2009.
The Commission held meetings with all incorporated
banks that accept deposits (with one exception, where
the institution is not implementing until 1 January 2009)
in the final quarter of 2007, and provided feedback and
timetables to address any issues that arose. It was
ascertained from these meetings that banks would be
able to adopt from 1 January 2008, report as at 31
March 2008 and submit their ICAAPs in the first quarter
or half of 2008 for supervisory review and evaluation.