Insights

In this issue:

• FIAU issues guidance document on the funding of terrorism
• MFSA releases guidance note focusing on the Money Laundering Report Officer
• EBA consults on draft Regulatory Technical Standards (RTS) and draft Implementing Technical Standards (ITS)
• MFSA launches FinTech Regulatory Sandbox
• EBA consults on estimation of Pillar 2 and combined buffer requirements for the purpose of setting MREL
• ECB advises Eurozone banks to not pay dividends until January 2021
• T2-T2S consolidation project schedule extended by one year
• EBA publishes quarterly risk dashboard following the first impact of COVID-19
• EBA calls upon financial institutions to prepare for post-Brexit reality
• Commission finds no conflict between provisions of the Payment Accounts Directive and the Fourth Anti-Money Laundering Directive
• EBA offers a clarification on the implementation of the reporting and disclosure framework in the context of COVID-19 measures

FIAU issues guidance document on the funding of terrorism

The FIAU has issued a guidance document (“the document”) aimed at supplementing and building upon the 2018 ‘Guidance Note on Funding of Terrorism – Red Flags and Suspicious Activities’.

The document serves to provide a comprehensive view of the current national situation as to the funding of terrorism. Amongst other information, the document highlights emerging trends as well as an overview of red flags associated with various products and services. It also provides a background of emerging red flags within Malta.

Link to full report

MFSA releases guidance note focusing on the Money Laundering Report Officer

The prevention of money laundering and funding of terrorism regulations (Subsidiary legislation 373.01) imposes the obligation on a subject person to appoint a money laundering report officer (“MLRO”).

The MFSA has released a guidance note designed at showcasing the main responsibilities and obligations of persons who are vested with such an important role, to play in maintaining the integrity of the financial system. The guidance note lays down all the main obligations of the MLRO while also pointing out the main principles that a person holding such a role should abide by.

Link to the guidance note

EBA consults on draft Regulatory Technical Standards (RTS) and draft Implementing Technical Standards (ITS)

The European Banking Authority has launched a public consultation draft Regulatory Technical Standards and draft Implementing Technical Standards on the impracticability of contractual recognition of write-down and conversion powers and related notifications as outlined in the Bank Recovery and Resolution Directive.

The consultation is aimed at ensuring that such standards are drafted in a manner which ensures that they are not impracticable, and that they do not hinder progress.

Interested parties may submit their views on such matter by the 24 October 2020.

Link to more information

MFSA launches FinTech Regulatory Sandbox

FinTech operators are being provided with the opportunity of testing their innovations within the MFSA’s FinTech Regulatory Sandbox. Its goal is to provide legal certainty to industry players as well as ensuring investor protection and market integrity.

Furthermore, Chief Officer – Strategy, Policy and Innovation, Michael Xuereb has held that the Sandbox serves to equip the MFSA with a better view of the ever-changing technological innovation, helping shape its policy-making.

Interested parties can visit the MFSA website for further information.

Link to news item

EBA consults on estimation of Pillar 2 and combined buffer requirements for the purpose of setting MREL

The European Banking Authority has launched a consultation session aimed at developing its Regulatory Technical Standards on the methodology, to be followed by resolution authorities when establishing the Pillar 2 (P2R) and combined buffer requirements (CBR) at resolution group level for the purpose of setting the minimum requirement for own funds and eligible liabilities requirement under the Bank Recovery and Resolution Directive.

The consultation process will run until the 24 October 2020.

Link to further information on EBA website

ECB advises Eurozone banks to not pay dividends until January 2021

The ECB has once again issued a recommendation to the banks within the Eurozone to avoid paying out dividends and not to buy back shares until January 2021. This is the second time in 2020 that the ECB has advised against issuing dividend distributions, after it sounded this warning back in March 2020.

Such measures are aimed at ensuring that banks have the necessary capital to be able to absorb losses and continue to support lending during the ongoing crisis.

Link to more information

T2-T2S consolidation project schedule extended for one year

The T2-T2S project aimed at consolidating TARGET2 and T2S has been delayed by a year following an extension granted by the ECB’s Governing Council. In light of the uncertainty and challenges that the COVID-19 pandemic has brought, market participants indicated that they would rather that the go-live date of the T2-T2S consolidation project be postponed by 12 months.

The new target date for the project to go live is now November 2022.

Link to news item on ECB

EBA publishes quarterly risk dashboard following the first impact of COVID-19

The EBA has published its quarterly risk dashboard which has helped illustrate the preliminary impact that COVID-19 has had on EU banks. The data provided is based on a sample of 147 banks, which together cover more than 80% of the EU/EFA banking sector (by total assets).

The data focuses on the extent of the effect that the pandemic has had on a wide spectrum of factors such as bank’s capital ratios and profitability, the cost of risk and whether non-performing loans (NPL) ratios remained stable.

Link to further information

EBA calls upon financial institutions to prepare for post-Brexit reality

The EBA has issued a reminder to all financial institutions regarding the end of the transition period between the EU and the UK which will take place on the 31 December 2020, reminding them of the importance that they are adequately prepared for this scenario.

The end of the transition period will put an end to the possibility for the UK-based financial institutions to enjoy their right of passporting, meaning they can no longer offer financial services to EU customers on a cross-border basis. UK financial institutions must obtain the necessary authorisation from the competent authorities to continue offering their services in different Member States.

The EBA also reminded electronic money institutions that they must be adequately authorised before they continue to provide payment or electronic money services in the EU after 31 December 2020.

Press release

Commission finds no conflict between provisions of the Payment Accounts Directive and the Fourth Anti-Money Laundering Directive

On 29 April 2020, the Latvian Ombudsman submitted a query to the European Ombudsman regarding a potential conflict with the Payment Accounts Directive (“PAD”) and the Anti-Money Laundering Directive (“AMLD”).

The Commission declared that there was no contradiction between Recital 47 and Article 1(7) of the PAD. The Commission held that both Recital 47 and Article 1(7) provide that no provisions in the PAD can infringe upon the AMLD. The Commission further explained that an obliged entity has to refrain from establishing a business relationship when it is unable to comply with the customer due diligence requirements and that Recital 47 of the PAD merely clarifies the limited scope under which a refusal can be made to open a bank account with basic features.

The Commission also replied that it is not aware of EU legal mechanisms allowing consumers who cannot open a bank account with basic features due to non-compliance with the AMLD, to undertake essential payment transactions.

Link to the Ombudsman’s decision

EBA offers a clarification on the implementation of the reporting and disclosure framework in the context of COVID-19 measures

The EBA has published instructions aimed at clarifying some frequently asked questions about the implementation of its Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis, which was originally published in July.

The EBA expects to update this report at a later stage.

The press release can be found here.

Link to guidelines