Approval or exemption from approval of (mixed) financial holding companies

The Banking Act (Chapter 371 of the laws of Malta) (the “Banking Act”) has recently been amended to bring into force certain provisions of Directive (EU) 2019/878 of the European Parliament and of the Council of 20 May 2019 amending Directive 2013/36/EU (the “CRDV”). One of the novelties concerns the new regime of approval or exemption from approval of certain financial holding companies (“FHCs”) and mixed financial holding companies (“MFHCs”) having as a subsidiary a credit institution (the “New Regime”).

Accordingly, Article 11B of the Banking Act introduces the new requirement for FHCs and MFHCs to seek approval or exemption from approval, as the case may be, from the Malta Financial Services Authority (the “MFSA”) in accordance with the conditions laid out in the said article (the “New Requirement”).

In accordance with the MFSA’s bi-annual update to credit institutions regarding the transposition of the CRDV, FHCs and MFHCs of credit institutions shall:

  1. evaluate whether they fall within scope of the New Requirement;
  2. assess whether they are required to apply for the MFSA’s approval or exemption from approval; and
  3. apply to the MFSA without delay once such a determination is made.  

In the mentioned bi-annual update, the MFSA provides that those “holding companies which are approved are to be held directly responsible for ensuring compliance of the banking group with the applicable provisions on a consolidated basis.”

In cases where FHCs and MFHCs do not meet or no longer meet the conditions for approval (Article 11B(4) of the Banking Act refers), the Banking Act provides the MFSA with the power to impose supervisory measures pursuant to Article 29AA to ensure or restore continuity and integrity of consolidated supervision and ensure compliance with the prudential requirements set out by the applicable legislation.

The article was authored by Caroline Gauci.