‘THE BANKING SERVICES ACT "The Banking Services (Deposit Taking Tastitution) (Caital Adequacy) Regulations, 015 Tn exercie ofthe power conferred upon the Supervisory Commitee by section 131(1) ©) ofthe Banking Series Ac, the following Regulations ae hereby made, with he approval ofthe Miniter PARTI. Preliminary 1. These Regulations may be cited as the Banking Services (Deposit, Taking Insittons) (Capital Adequacy) Regulations, 2015, 2. ~ (1) Inchese Regulations — “capital Base” has the meaning assigned to tin the Ranking Services Ae, “pital sare" has the mesning esigned to iin the Banking Services det, “deferred share” asthe meaning assigned toitin the Banting Series Ae, “deposit tiking institution” has the meaning assigned tot inthe Banking Services fet, “enty” isles a trust, partnership, pension o othe find o incorporated esscition o organization; “general provisions for loss” means all the secumulated provisions for loss which are prudential ia natare and cannot be determined on «an em-by item bass andar established in accordance with _egutions or the Supervisory Riles, made under the Acting ‘to ert lassifction, provisioning and non-eecral equiements “ordinary shares” means tat clas of shares in the capital ofa deposittaking institution which are non-redeemable and are unsere in which the rights ofthe holders thereof ae equal in ll espects, Including the right o- (©) vote atall metings of sharholdes except where only sharcoldes ofa specified clas of shes are entitled to vote, (©) receive dividends declared om those shares; td (6) receive the remaining property of the deposit king ‘natintion on Liquidation; “preference shares" means shares inthe capital of «deposit aking ‘nstiution ecer than ordinary or capil shares which - (2) are prefered in mates relating 0 - @ he disrivaon of profs; and payment of dividends and (©) rank wih respect to capita, in winding up proceedings nd in such other mates snd respects ashe by-laws -reting ech sch lass of shares may provide; “prvrbed deductions” means the aggregate of- (@) te deposit taking iastinion’s equity investments in unconsolidated subsiiaris, (©) the deposit aking nsinton’s substantial investment, wheter held directly or indirect, ineny other mconsoldated esis or companies (©) the deposit aking institution's proporionat share of ‘the amount of accumulated losses of sy unconsolidated subsidiary or any other unconsolidated catty or company in which has substan (© other fetes provided bythe depos akinginstimtion that re westd as capital by unconsolidated subsidiaries and by any other unconsolidated entities or companies in which thas 2 substantial investment, (© new and existing capital sues between the deposit ‘king instnton and one or more other depsit taking Institutions that represent, ther diel o indrety, back-to-back placements (anyother deduction designated by the Supervisor under the Act, “regulatory cept” has the meaning assigned to tin the Banking Serves det “specific provisions for loss” means all the atcumulate provision for Jos on particular assets which are ruiodto reduce the book ‘values to realizable values in accordance with regulations, othe Supervisory Rules, made under the Act eating othe lassifcaton and provisioning for losses on eet flies; “subordinated deb” has the mening assigned to it inthe Banking Serves det "substantial investment” means = (deposit aking insttion’s investment in anther company, which on is own or together with that of ay ceonected person, smount to twenty pe cnt or more ofthe voting rights or of total shareholders equi (©) inthe case ofa deposit taking instintion’s investment ‘in ancl otherthan a company the aggregate ofthe deposit aking institution's owner interests inthe ‘iy, however designated, whether bald by the depot. ‘aking instton solely together with ny connected perso ar ay entity controlled by the deposit takingInston whic represents wen percent or more of tf he ower tren io which he enti is vided “Tier 1 eapta”bas the meaning assigned to it in the Banting Services Aes “Tier 2 apt” ba he moaning signed tit nthe Boning Services act (2) References in these Regulations to fans manage by 2 deposit taking inttion ae reference to monies eeived bythe epost aking lastion fom cles for investor with writen inetuctions athe manner of investnet, whether on ditreonary or an-isrtonary tess and which finds are subject the Standards of Sound Prior ites bythe Supervisory Commitee o, regulations made under the Act PART IL Primary Ratio Regiromets 2A depo taking nstision shall maintin on iy bas, he rao ‘coven its capt base andthe tol of atu, 0 lee han sx per coat or sch other percentage the Supervisory Commitee may specify ty notice published in the Gazete PARTI Ragulstory Cope Regutremens 2.) A deposit king inion seplatery expt shal bo nesued by reference fo th greg ofits Te and Tier? capt, ss rescibed dons. (@) Inte eaclation of Ter 2 capital the value of em peernce ines with en igi tm mata of Sve years or mor shal be Aetemined in accordance withthe provisions of Schedule (©) Where ny new share ar ised by depos king instion afer coming in fore of hse Regains the deposit aking ‘estintion sell nay the Supervisrin wting of the iesoe—(@) within 21 dys of the date ofthe resolution euthorzng the share issue, or within suc oer period as may be agreed ty the ‘Superior nd () sxtng ot fil details ofthe itu, including the tems and ‘condions thereof en the clases of hares tobe aficted thereby (4) The Supervisor may, in lation ta deposit taking instiion, take he action outlined in paragraph 5 ofthe First Schade ofthe Banking Sovices Act. (9) Inespectve ofthe standard risk-weght applying to ny category of assets, the Supervisor may determine that higher or lower Fiskowsight shouldbe assigned toa parcular ase, where justified by the risk profile of that asset. 5. Every éepost taking insttaon shall maintain reglatycsptal ‘comprising les thn ily percent Ter 1 capital or such other percentage asthe Supervisory Committee may prescribe, by notice published inthe Gaze, PARTIV. Capital Adequacy Ratio Requirements 6.-(1)__Sobjctto paragraphs (2) and), a deposit akg instnton shall matin ona dily basis, the ratio between its regulatory capital (the ‘ueratr) nd the aparepate ofits rk weighted on blame shect sets, ‘offbalance sheet items and balances related to funds mancged by the ‘epost aking institution, and foreign exchange risk expose (he denominator at no less than ten pr cent o uch ther percentage a he ‘Supervisory Committe may prescribe, by notice publishe in the Gaze (2) Nowithtanding paragraph (1), each deposit taking institution shall- (@) maintain capital ratios well hove the regulatory ninimum levels ‘nd hold suces capital to cover its material rik exposures‘with a sufSsenly adequate buffer, commensurate withthe level sod nae of sks to which itis expose nd (©) havein plac an appropriate stezy for maintaining edequste levels of cata to mitigate risk of financial loss under varying conditions. (@) The Supervisor may, by notice in writing o& depositing Snstiuton, direst he deposit aking instintion to vary the ratio brween its regulatory capital and the denominator ta love whic is mere consistent with tht deposi aking instutin’s risk profile as asessed by the Supervisor. 7.=(0) very depsit aking nation shal ave in place adept systems and procedareseatiefctory to the Supervisor to compute the capital adequacy aso, (@) In detemining the adequacy of the systems and procedures the ‘Supervisor shall ave regard to intemational sandars of sound praice, andthe Supervisory Roles, ssed under the Act, nd the depost taking inttion’s rik pole and adequacy ofesoures, 8.-(1) Every deposit aking insittion sal provide the Supervisor ‘with computations of capital adequacy requirements inthe fost and ‘requncy preseibd by the Supervisor. (@) The deposit aking insnaton shall ealelate its capt adequacy ratio - (@) with egardo its oncbalance sheet asses, in accordance with he provisions of Schedule I; (©) ‘with epadto offtbalance sheet assets and fonds managed by the deposi taking ination in accordance withthe provisions of Schedule. (2) Subject regulation (5), the respective standard isk-weighs to be applied oa deposit taking iastiution'sombalance sheet assets shallbe those spect in Schedule 3. () Tae ret conversion factors tobe applied to deposit aking inctntion’sofbalanceshet ates shal be those specified in Schedule 4 (6) Inmaking the calculations specifi this regulation and regulation 6, each depsi taking instntion shall calculate, in accordance ‘with he provisions of Schedule 5, te foreign exchangers exposure _ataching tall og and off-balance sheet asets denominated in foreign ccurency, (©) Every deposit aking institution shal submit the ealulatons required under this Par in such form asthe Supervisor may specify, s at ‘he lest day ofeach calendar month or such other date a he Supervisor may specify, however, the calculations shal be submited to the ‘Supervisor within twelve working days therafer. PART V, Transitional and Rapeal 9.—(0) A deposit taking instintion which tthe dat ofthe coming into fect ofthese Regulations, doesnot meet a es the primary ratio and capital adequacy ratio requirements shall, within one month ofthat date, provide plan astepable tothe Supervisor forthe timely achievement of the capital adoquey aio. (@) The deposi taking instntion sal achieve compliance in any ‘ventnt later thn sx months after the coming into operation ofthese Regulations 10, “The Banking (Capital Adequacy Regulations, 2004 andthe Financial Instintions (Capital Adequacy) Regulations, 2004, re spate SCHEDULE (Regulation 8) Capital Adaquacy Ratio Catelations On Balance Sheet dette 1. The on-balance sheet asets ofa deposit king instintion shal belasted inane of four broad rsk- weighting estegores, namely, 220 ‘per ont (M0 venty percent (20%) ity per ent (50%) and ane ‘nde per nt (100%), 2, Classifestion shall be dependent on te Supervisors assessment of (a the nature of he counterparty or (8) where applicable, the guarantor onthe cola, 5, Amount clatsid in each category shall be multipin by the ‘Spplealerskeweighing, withthe resling weighted values edded together to arive at total isk-weighted esets, 4, The amoun ofthe deposit aking nsiaton's assets deducted in ‘computing capital base (such a goodil investments in ‘unconsolaed subsidiaries, or bac-tovbock secures) shall Be risk weighted st sero per cent (0%). 5. Asset beances sbjec to rsk- weighting must be reported net of| specie provisions fo Tss. 6, Recognition of collateral in reducing the eet isk of claims shall be {mit toca in which the deposi taking insition has a secured Snteret or sours issued by = (@) the Goverament of lamaica; (©) he Government ofthe United States, Canada o the United Kingéom: (©) Cental banks and other publi sector entities of the G10 and (CARICOM counties and specified mullateral development ‘banks or lending agencies, sd denosasted inte overs national cueney, oe approved bythe Supervisor. Tht peron ofa claim that is covered by euch epproved collateral wl be assigned te rsk-weight given tothe collateral (namely, 9420 20%) 7. Loans or other exposures unconditionally uaented by - {@) the Gevernment of Jamaica; (@) the Gevemment ofthe United States, Canada or the United Kingdom; (©) Cental bens nd other publi sector entities ofthe G10 and CARICOM: counties, (© approved multilateral development banks or lending agencies; and (6) a bank or supervised deposit aking neatonincorporsted int O= 10 or CARICOM country approved by the Supervisor, sll atactthe weigh atsgned to a drt claim onthe guerantoe SCHEDULE? (Regulation 82)) Capita Adequacy Ratio Calculations ~ Of Balance ‘Sect Asset 1, Wh be ecro of conn wich ae condo ancl pont tng ssn eles es Shleasned 00 rt meron tort decrine se ‘ehnce tne cet equiva atte Tae on le set geet ont caine malig epee fils het by the relevant credit conversion factor. ‘sees 2%, The cre equivalent amount wil hen be treated as an o-tlance sheet item and asin a risksweght appropiate othe unter arty o, $rslevan he weight assigned tthe guranior or the ate of becollateral 13. Atany de when fands are managed bythe deposittaking [nsteaon, capital adaqusey requirement shall epply to such nds, in recognition ofthe sks (eputational contagion and eds) which cerue to the deposit taking insittion as result of involvement inthis area of Dusiness 44. Where funds ae managed by the deposit aking inition ona ‘pecially nomaisredonary basis, no expt adeuacy requirements ‘val apply. 5. Where funds are managed by he deposit taking instuton on 2 Alsceeanary basis, such portfolios shall be assigned caversion factor 0f 25% to determine an on-blance sheet equivalent for he purposes of assigning rskeweighs 6 Tho.on balan host equivalents wil hen be atigned aa weight ‘appropriate tothe counterparty othe nature ofthe collteral a pected under Schedule 7. Those Regulations shall not be deemed to gran to epost aking instnaon aay power or rght regarding the management o investnent of ‘eustomery funds which is inconsistent withthe provisions of any ‘regulations under the Bank of Jataie Act or Standards of Sound Practices issued by the Supervisory Commitee on te investment of ceusomer’ funds SCHEDULES (Regulation 863)) (On Balance Sheet Assets ~ Risk Weight Categories 1. 0% Risk-Weight Cash (denominated in domestic and foreign cumerey) on haa. 2. Deposits with and othe claims on the Bank of Fanaa including ash reserves (domestic and foreign currency) andcurent account balances 3. Goverment of Jamaica debt secutes denominated in Jamaican cumreney. 4, Lotas granted to, or which ae guarantend by, the Government of | Jamaica and denominated in Jamaican cumency 5. Deke securities which are issued by statutory bode or companies ‘owned or controlled by the Goverment of Jamaica, or an agency ofthe Goverment of Jamaica nd are alo grated by the Govermeat of Famaics, and which debt securtiesare denominated in Jamaican curency. 6. Debt secures issued by the United States of America, Canada or the United Kingdom and other governments and central Banks of the G 10 countries approved bythe Supervisor fom time ote, snd denominated in the issue's national currency and funded in ‘hat curency 7. Debt secures issued by public sector entities ot agencies ofthe ‘governments ofthe United States of Americ, Camda or the United ‘Kingdom ad other goveraments of G10 and CARICOM counties as epproved by the Supervisor from tine to time, tat cary the full guarantee ofthe repecive governments,8. Debt securities issued by CARICOM county govemments and ital banks as approved by the Supervise fom tet time, and denominated inthe ismers national curency and funded in that cureney 9, Chins ily secured by cas. 1CClaims fully secured ty Govemmest of Jamie secure ‘denominated in Jamaican curency. 20% Riskewsight 1. Clsims on deposi taking instnions and on inition specified ‘under the Bank of Famaice Act. Such claims (other han capital insimens) sal inclode depos, Toan, cheques and otber ites in want and loans guaranteed by sch nsntons, 2 Clans (other than pital instruments) with residual matury of Jes than twelve months on deposit taking institutions inorporied inaad supervised by the appropriate baking supervisory or ‘monetary athorty ofthe Uaited States, Canad, United Kingdom Sr CARICOM county, as aproved by the Supervisor from Sie to tie; oF 2, Claims (other than capita instruments) wth residual matty of| lesen selve montis on deposit taking insitions incorporated inand supervised by the appropriate banking supervisory of ‘mncary authors f any oar country as approved by the Soperisoe fom time to time. 4. Da scutes ime by publi sector entities or agencies of the Governments ofthe United Stats of America, Canada ore United Kingdom and oer governments ofthe G~ 10nd (CARICOM countries as approved by te Supervisor fom time to tie, which ae denominatod inthe isuers national cuene, and that ae noe guarantee by their respective govemmeats. ‘5, Chins on, including claims guaranteed or collateralized by, ‘secures coud by, oer goverment, central banks and ‘lateral development bars or lending agencies ss approved ‘by de Supervisor om time to time and denominated inthe ‘ssuer’s atonal euency. 50% Risk- Weight Trg legal mortgages to owner-oocupiers ily secured on their ‘idences (exept for thoes where the arears cn the mortgages ‘xceed tte (3) months, n moths, ia which cas, the morgage is signed a 100% riskweghn) 100% Risk-Weight 1 Other lias, Sehedule aan morigngn nt otheree cared in his 2, Holling of ordinary and preference shares. 43. Other securities not otherwise clasifitin this Schedule. 4, Fixed ates, inching lan, buildings and equipment net ofepreiton, wed o eld, or bot by the deposit taking Inston inthe conduct of ts business, 5. Govemment of Famaica debt securities denominated in foreign cure. 6. Debt sures denominated in foreign cumeney that are issued by ststory bodies or companies owned or contlled by the Govemmest of Jamaica or an agency ofthe Government andre also garaneed by the Goverment. 17. Debt setes ised by foreign goverameats, and by earl ‘banks oc monetary authorities of other jurisdictions and nominated in a curency other than the issuers aati ccurerey. {8 Det securities denominated in foreign curency which are sie. by foreign public sector entties or agencies Hom time to tine, ‘tht ae not guaranteed ty their espective goverment. 9, allober assets SCHEDULE 4 (Regulation 81)) (Cred Conversion Factors for OfpBalance Sheet Asses (0% Conversion Factor ‘Commitments that are unconditionally cancellable by the deposit taking. Snstuton at ey ime without prior noice. 100% Conversion Factor 1 Guarantees. given on behalf of customers to stand behind the nancial obligations of the customer and to analy. thee obligations should the customer fll odo so. ‘Standby eters of credit or other equivalent revocable oblignins serving 25 financial guarantees, suchas laters of ereditsopporing ‘he issue of commercial pper. PPartcipton in bankers’ acceptances and partcipstion in nancial etiam of eet Poricipations consis guarantees bythe paring deposit taking instition such that ir there sa deft by te inderying obligor, they wl indemnity the sling entity for ‘he fl pineal nd interest atrial to thezn. Scores lending wansactons where the lending ety is abl o ‘i emtane for ary eo cove these ln + Contrcual obligations to purchase astets, including Sanding facilities with cenain drw-down, ‘Transecion related contingencies (such as bid bonds, performanceones, warranties, and standby Ieters of credit relat to & parts ransaction) 7, Commitments incloding undererting commiuments and ‘comnersal ered nes 1 Note Issuance or Revolving Undervting Failites whereby a boarymer may issue short-term notes, sypically three to six months in motu, up to a prescribed limit over an extended peiod of tine, commonly by moins of repeated offerings to a tender pane. Ifareany time the notes ae nt god bythe tender a an acopable ‘poe, an underwtiter (or group of underwriters) undertakes to buy ‘hea ata prescribed price. 9, Trae related contingencies (og, short-term, selfiqudatingtade ‘eloed items such a commercial and documentary ltrs cf credit fasund by the bank tht ae, or are to be, collateralized by the sdelying shipmend). 10. All other commitments other than those 19 which a 0% conversion factor as been designated under these Regulations. ‘SCHEDULES (Regulation 86)) Forcign Exchange Risk 1. Two cesses are needed to cleulate the capital requirement or ‘ecg exchangers a fellows (@ themeasurement ofthe deposit aking instition's exposueorits ‘nt open portion na single currency nd () themeasuement ofthe risks inerent inthe deposit aking {nstton’s mit of log and short postions in different canenies, 2, The deposi aking insinton's exposure ina sng currency crits net pen postion ina single curency shall be the agarezate of - (tenet spt poston (namely al ast tems les al isl items, induding scored interest, denominated i the euency in seston) (©) Senet forward poston (namely all mounts to be receive ess allsmouns tobe paid under forward foreign exchange ‘emsnction) (© vacances (and similar wancacions) that ar certain tobe alle and are likely tobe recoverable; (©) oy ober itm representing a profit los (such as aceued ‘meres expense) in foreign curences. 3. To maasurethe exposure ia the mix oflong and shor poston he nominal mount (or net presen vale) ofthe et postin in each reign ‘mene is converte at pot rates into Jamaican éollas. The oveall net‘open poston i measured by agarezating separately the individual nt ‘Eo postions end the indian nt lang pions The greater of ie ‘re sums represents the overall foreign exchange isk positon whichis to be nluded inte denominator ofthe capital adequacy ati. ‘SCHEDULE 6 (Regulation 4 2)) Tier 2 Capital Calaations-Determination of Capital Value of Trm Preference Shares with an Original Term 9 Maar of Five Years or More Remaining term % of value for inclusion ‘omaterity in Ter 2 capita 5 yeas or more 100% 4 years or are and 30% Tess han S years 3 yeas or more 60% snd loss than 4 years 2 yeas cf more 40% snd les than 3 years 1 year or more 20% sand ess than 2 years ‘Less thas 1 year o% Detar aly