REPORT
Jersey Financial Services Commission Cash Holding Guidelines
Background
Article 18 of the Financial Services Commission (Jersey) Law 1998 provides that, “The Commission may invest any of its funds which are not immediately required in accordance with guidelines set by the Minister.”
The Minister, recognising that the Jersey Financial Services Commission (JFSC):
› has statutory powers to levy fees and charges under various laws it administers in order to carry out its duties;
› is able to borrow money;
› is able to receive grants from the government;
› can levy penalties on regulated firms (prior to returning them to the industry more generally or the government); and
› collects certain fees on behalf of the government (i.e. company annual return fees),
notes that the JFSC is likely to maintain positive balances in its banking relationships (the size of such balances varying throughout the year).
The Minister therefore wishes to set the following Guidelines, replacing any existing Guidelines as at the date of this Report.
Guidelines
These Guidelines reflect the following principles:
› that the JFSC operates independently of the Government of Jersey under relevant laws (subject to the ability of the Minister to give the JFSC guidance or general directions in certain circumstances, as explained in the Memorandum of Understanding between the Minister and the JFSC);
› that the Minister can be assured that the JFSC carries out effective supervision of deposit-takers, at an entity and a sectoral level, and has the expertise to develop an effective treasury policy;
› that, ultimately, there may be circumstances where the Government has to ‘stand behind’ the JFSC financially (such circumstances are expected to be extremely unusual).
1. The Minister authorises and requires the JFSC to develop a policy (Policy) for the investment of surplus funds.
2. The Policy, and any amendments to it, must be approved by the JFSC’s Board of Commissioners.
3. The Board of Commissioners must review the operation of the Policy on an annual basis.
4. The Policy must adhere to the following principles:
› security of prevailing cash deposits and access to liquidity should be the over-riding concern;
› individual counterparty strength must be considered and robustly monitored;
› deposits will not be places with counterparties holding a Standard & Poors long-term issue credit rating of less than BBB (or equivalent from another credit rating agency);
› the JFSC shall also consider prevailing systemic and regulatory risks that might impair liquidity (including new powers that may be applied in bank recovery and resolution scenarios).
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