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Banking & fintech newsletter – Issue no.18

In this issue:

  • Central Bank issues notice on COVID-19 influenced Directive No.16 relating to ‘Regulation on Borrower-Based Measures’
  • EBA to launch new regulatory framework for investment firms
  • EBA opines on hurdles to TPPs within the SCA space
  • MFSA announces changes to LH Portal
  • MFSA Circular on the changes to the FIR/01
  • Revisions to Banking Rule BR/14 to implement EBA Guidelines
  • MFSA Policy document on Risk-Based Supervision

Central Bank issues notice on COVID-19 influenced Directive No.16 relating to ‘Regulation on Borrower-Based

Measures’The Central Bank of Malta (CBM) has taken cognisance that the COVID-19 pandemic has adversely affected the real estate market and to that effect, it issued a number of amendments to Directive 16. The measures taken by CBM in this respect are the following:

  1. Extension of the phasing-in period for the LTV-O ratio to go down to 75% for Category II borrowers – The Directive specified that those intending to purchase their second property (Category II buyers) and who need to obtain financing from a bank, would have to make a minimum 15% down payment until the end of June 2020. Such an amount was to be increased to 25% from 1 July 2020. However, the CBM is now postponing this increase by a year to 1 July 2021.
  2. Guidance to the lender on the treatment of the Stressed DSTI-O for both Category I and Category II borrowers – CBM has also allowed for the 40% limit relating to the repayment burden to be exceeded for a period of six months, subject to a number of conditions being satisfied. This concession is totally at the discretion of the lender.

EBA to launch new regulatory framework for investment firms

The European Banking Authority (EBA) issued for public consultation until 31 August 2020 its blueprint for the implementation of a novel regulatory framework for investment firms and reflecting its IFR/IFD mandates. The consultation is based on four main pillars, namely prudential, reporting, disclosures and remuneration obligations. Technical Standards have been drafted by the EBA bearing in mind the proportionality principle and specific size and business model of the different classes of investment firms.

Public hearings will be organised by the EBA via conference calls on 30 June 2020, from 11:00 to 13:00 CET, for the consultation paper on the classification of investment firms as credit institutions and capital requirements and from 14:00 to 16:00 CET for the consultation papers on supervisory reporting and disclosure and variable remuneration requirements.

EBA opines on hurdles to TPPs within the SCA space

The European Banking Authority (EBA) has just issued an opinion on the hindrances being encountered within the circles of third-party provider (TPP) services under the regulatory technical standards (RTS) on strong customer authentication (SCA) and common and secure communication (CSC). Amongst other clarifications, such an opinion explains when mandatory redirection is an obstacle to the provision of TPPs’ services and how it expects that regulators need to make sure there is compliance of the interfaces offered by ASPSPs with the PSD2 and the RTS.

MFSA announces changes to LH Portal

The MFSA has issued a circular outlining that it has improved its Licence Holders Portal, particularly the Corporate Profile section. To this effect, it has also issued guidelines and procedures which are applicable from 8 June 2020. The Authority highlighted that Licence Holders need to submit the Entity’s assessment in standardised format through a questionnaire downloadable from the MFSA website. Furthermore, the Corporate Profile will also be the proper channel for resignation requests for all approved positions.

MFSA Circular on the changes to the FIR/01

Financial Institution Rule FIR/01 is being amended, to cater for the full transposition of Article 10 of Directive (EU) 2015/2366 (PSD2). These amendments shall come into force with immediate effect.

In addition to other amendments which are purely being made for explanation purposes, the Authority outlined that paragraph 63 of the FIR/01 is being amended to outline the criteria for institutions to invest in liquid low-risk assets in line with Regulation 7 of the Financial Institutions Act (Safeguarding of Funds) Regulations, which regulation provides the methods which institutions may use in order to safeguard funds.

Revisions to Banking Rule BR/14 to implement EBA Guidelines

Banking Rule BR/14 which applies to both credit and financial institutions is being amended to implement the EBA Guidelines on Outsourcing Arrangements (EBA/GL/2019/02). The new rule will include a set of guidelines and considerations which will allow institutions to pigeonhole arrangements that can be considered as outsourcing arrangements and whether these services are material otherwise. In the case of a material outsourcing arrangement, institutions are to notify the MFSA through a novel notification procedure established by the Authority in the revised Rule.

MFSA Policy document on Risk-Based Supervision

The Authority issued an explanatory document communicating the main elements and goals of adopting a risk-based supervisory approach. The MFSA explains how anti-money laundering culture and procedures have been amalgamated in its risk-based supervisory role. The document also delves on the three main principles pervading across its supervisory approach – namely that it’s judgement-based, forward-looking and focused on key risks.