Banking & Fintech Newsletter – Issue no.5 (July 2019)

In this issue:

  • New CBM Directive on Borrower-based Measures
  • Circular on the Market Abuse Regulation 596/2014
  • MFSA Issues Guidance Relating to “Fitness and Properness” Assessments
  • EBA Guidelines implemented in Malta through two new banking rules and two new annexes to BR/12
  • Fintech Strategy Consultation Document – Pillar 1
  • EBA Thematic Report – Fintech on Payment and e-Money Institutions
  • Joint Committee Report – Cross Border Supervision of Retail Financial Services
  • Transposition of PSD II into the Banking Act and Financial Institutions Act
  • FIAU Publish Version of Implementing Procedures Part 1

New CBM Directive on Borrower-based Measures

Directive no. 16 in terms of the Central Bank of Malta Act (Chapter 204 of the laws of Malta), which relates to regulation on Borrower-based measures, came into force on the 1st of July 2019. The chief objective of this directive is, inter alia, to mitigate the potential systemic risks and minimize any impending build-up of vulnerabilities which might give rise to financial losses for both lenders and borrowers of real estate loans.

Directive

Circular on the Market Abuse Regulation 596/2014

On the 28th of June 2019, the MFSA published a circular addressing issuers of financial instruments, which have been already admitted to trading on a trading venue, or for which a request for admission to trading has been made, persons discharging managerial responsibilities for such issuers, and persons closely associated to them. The circular provides a clear blueprint on the obligations relating to the notification imposed by article 19 of the Market Abuse Regulation (Regulation (EU) No 596/2014).

Circular

MFSA Issues Guidance Relating to “Fitness and Properness” Assessments

The Malta Financial Services Authority has recently published a guidance note providing further detail relating to the fitness and properness assessments carried out by the MFSA on licence applicants. The MFSA clarifies and reaffirms the basis upon which it assesses applicants, namely the five main pillars which embody a fit and proper entity: competence, reputation, solvency, impartiality, and time commitment.

Guidance note

EBA Guidelines implemented in Malta through two new banking rules and two new annexes to BR/12

Last month, the MFSA issued:

  1. BR/19 on “Recovery Plans for Credit Institutions Authorised under the Banking Act (Chapter 371 of the Laws of Malta)” which provides guidance to credit institutions in view of their obligation under the Recovery and Resolution Regulations;
  2. BR/20 on “Remuneration Policies and Practices” which replaces and incorporates Annex 2E of BR/12 and which governs sound remuneration policies for all credit institutions’ staff and for staff whose professional activities have a material impact on a credit institution’s risk profile.
  3. Annex 2J and Annex 2K to BR/12 reflecting the requirements outlined in the EBA Guidelines on corrections to modified duration for debt instruments and implicit support for securitised transactions are being implemented.

BR/19

BR/20

Annex 2J

Annex 2K

Fintech Strategy Consultation Document – Pillar 1

Following the publication of its FinTech Strategy around mid-May this year, the MFSA published the consultation document on the first Pillar, Regulations, wherein the MFSA envisages to “adopt regulatory and supervisory initiatives to support innovation and improve regulatory efficiency.” The MFSA is inter alia proposing (i) a Regulatory Sandbox (ii) numerous proposals in relation to Regulatory Technologies and Supervisory Technologies while providing a status update of the other strategic objectives presented under Pillar 1 of the FinTech Strategy.

Consultation document

EBA Thematic Report – Fintech on Payment and e-Money Institutions

The European Banking Authority (EBA) has just published a thematic report on the impact of FinTech on payment institutions’ and electronic money institutions’ business models. The Report reflects the supranational entity’s considerations in relation to the current trends and drivers in context of these business models being adopted by these institutions, their interaction with BigTech firms, and the level of implementation of new technologies.

Consultation document

Joint Committee Report – Cross Border Supervision of Retail Financial Services

The European Banking Authority, the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA), collectively known as the three European Supervisory Authorities (ESAs) published a report highlighting the main issues with which competent authorities are coming across in relation to cross-border provision of financial services to consumers. After providing an overview of the consumer protection provisions and conduct of business rules which are available to consumers, the ESAs analyse the approach which is being taken by current legislations in order to solve such issues.

Report

Transposition of PSD II into the Banking Act and Financial Institutions Act

On the 10th July, the Maltese Parliament has tabled for the third reading of a new bill amending the Banking Act (Chapter 371 of the laws of Malta) and the Financial Institutions Act (Chapter 376 of the laws of Malta), transposing into Maltese law:

  1. The Payment Services Directive II or Directive 2015/2366/EU;
  2. The Payment Accounts Directive or Directive 2014/92/EU, specifically Articles 10 and 25; and
  3. The Bank Recovery and Resolution Directive or Directive 2014/59/EU, specifically Article 124.

The full transposition of the Payment Services Directive II shall introduce and regulate inter alia third party payment service providers, namely; Payment Initiation Service Providers and Account Information Service Providers.

FIAU Publish Version of Implementing Procedures Part 1

The Financial Intelligence Analysis Unit (FIAU) has just published a revised version of the Implementing Procedures part I, in the hopes of further clarifying the guidelines which are to assist subject persons in fulfilling their AML/CFT obligations. The main amendments which were implemented via this revision were:

  1. Adopting a more risk-based approach
  2. Revamping the Customer Due Diligence regulations
  3. Clarifying the implications tied to Outsourcing
  4. Defining Non-reputable Jurisdictions and High-risk Jurisdictions
  5. The introduction of a sanctions screening obligations section

It is interesting to note that the FIAU outlined that given that most aspects dealt with in the Implementing Procedures Part II addressed to banks are now being considered and catered for in the revised Implementing Procedures Part I, the FIAU is repealed the sector specific Implementing Procedures addressed to banks. To this effect, the FIAU has in fact initiated discussions with the Malta Bankers Association on the drafting of a new version of the Implementing Procedures Part II addressed to banks.