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GFSC Risk Based Supervision in Guernsey


For all those in Guernsey, it is always worth reminding yourself about the GFSCs approach to Risk Based Supervision in Guernsey

In particular, look at:-

  • 2017 guidance document on how the Guernsey Financial Services Commission regulates the finance sector within the Bailiwick

The GFSC states Introduction

  1. Under risk-based supervision, the most significant firms - those with the ability to have the greatest impact on financial stability and the consumer - will receive a higher level of attention under structured engagement plans, leading to early interventions to mitigate potential risks.
  2. Conversely, those firms which have the lowest potential adverse impact will be supervised reactively or through thematic assessments.
  3. The methodology explicitly recognises that the GFSC can only have a finite number of supervisors and must deploy them where they can make the greatest difference.

The GFSC further state

  1. PRISM and online services are the vehicles the GFSC uses to put the theory of risk-based supervision into practice.
  2. PRISM is both a supervisory framework and a software application.  It is designed to be scalable and suitable for effective supervision of the Bailiwick’s regulated firms.
  3. The online services are designed to ensure the systems are populated with good quality data, ensuring the supervisors have accurate and timely information to assist in the risk assessment process.
  4. By adopting a risk-based approach, the GFSC does not pretend that it can or should prevent all firms from failing.
  5. A properly functioning market economy requires a degree of risk-taking to secure an economic reward.
  6. Some firms will and must be allowed to fail to maintain market disciplines.
  7. Attempting to eliminate this risk is not a valid public policy; it would incur prohibitive costs and prove ultimately futile.
  8. PRISM provides a toolkit to aid the supervisors in focusing attention on the firms with the highest impact, making it materially less likely that they will fail in a disorderly fashion.
  9. A regulatory framework encourages supervisors to concentrate on the issues that really count and address them effectively.
  10. Such issues are much broader than compliance with rules and encompass prudential and conduct risks.
  11. As such, it underpins the commitment to maintain financial stability, protect consumers and combat financial crime

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