ACT No. II of 2011 AN ACT to amend the Banking Act, Cap. 371.

I assent.

G EORGE A BELA

(L.S.)

President

8th March, 2011

ACT No. II of 2011

AN ACT to amend the Banking Act, Cap. 371.

BE IT ENACTED by the President, by and with the advice and

consent of the House of Representatives, in this present Parliament

assembled, and by the authority of the same, as follows:-

(1) The short title of this Act is the Banking Short title and

(Amendment) Act, 2011 and this Act shall be read and construed as commencement

one with the Banking Act, hereinafter referred to as "the principal Cap. 371.

Act".

(2) The provisions of this Act shall come into force on such

date as the Minister responsible for finance may, by notice in the

Gazette, establish and different dates may be so established for

different provisions and different purposes thereof.

Article 2 of the principal Act shall be amended as follows: Amendment of

article 2 of the

(a)

in subarticle (1) thereof

principal Act.

(i) for the definition " "bank" or "credit

institution" ", there shall be substituted the following new

definition

" "bank" or "credit institution" means an

undertaking, the business of which is to receive

deposits or other repayable funds from the public and

to grant credits for its own account;";

(ii) immediately after the definition "Capital

Adequacy Directive" there shall be inserted the following

new definition

" "Capital Requirements Directive" means

Council Directive 2006/48/EC of 14 June 2006,

relating to the taking up and pursuit of the business

of credit institutions (recast), as may be amended or

updated from time to time, and includes any

implementing measures that have been issued or may

be issued thereunder;";

(iii) immediately after the definition "connected

persons" there shall be inserted the following new

definition

" "consolidating supervisor" means the

competent authority or the overseas regulatory

authority, as the case may be, responsible for the

exercise of supervision on a consolidated basis of EU

parent credit institutions and credit institutions

controlled by EU parent financial holding

companies;";

(iv) the definitions "Directive", "electronic

money", "electronic money institution" and "Electronic

Money Rule" shall be deleted;

(v) immediately after the definition "EEA State"

there shall be inserted the following new definition

" "EU parent credit institution" means a parent

credit institution in a Member State which is not a

subsidiary of another credit institution authorised in

any Member State, or of a financial holding company

set up in any Member State

For the purpose of this definition, "parent credit

institution in a Member State" means a credit

institution which has a credit institution or a

financial institution as a subsidiary or which holds a

participation in such an institution, and which is not

itself a subsidiary of another credit institution

authorised in the same Member State, or of a

financial holding company set up in the same

Member State;";

(vi) immediately after the new definition "EU

parent credit institution" there shall be inserted the

following new definition

" "EU parent financial holding company" means

a parent financial holding company in a Member

State which is not a subsidiary of a credit institution

authorised in any Member State or of another

financial holding company set up in any Member

State

For the purpose of this definition, "parent

financial holding company in a Member State"

means a financial holding company which is not

itself a subsidiary of a credit institution authorised in

the same Member State, or of a financial holding

company set up in the same Member State;"; and

(vii) immediately after the definition "holding

company" there shall be inserted the following new

definitions

" "home Member State" means the Member State

in which a credit institution has been authorised in

accordance with article 6 to 9 and 11 to 14 of the

Capital Requirements Directive;

"host Member State" means the Member State in

which a credit institution has a branch or in which it

provides services;";

(b)

in subarticle (2) thereof

(i) in the first proviso, for the words "made

thereunder:", there shall be substituted the words "made

thereunder.”; and

(ii) the second proviso shall be deleted;

(c)

subarticle (3) thereof shall be deleted;

(d) subarticle (4) thereof shall be renumbered as

subarticle (3);

(e)

in subarticle (3) thereof, as renumbered, the words

"to the exclusion of an electronic money institution," shall be

(f)

subarticle (5) thereof shall be deleted;

(g) subarticles (6) and (7) thereof shall be renumbered

as subarticles (4) and (5) respectively; and

(h) in subarticle (4) thereof, as renumbered, for the

words "the Directive", there shall be substituted the words "the

Capital Requirements Directive".

In paragraph (a) of subarticle (2) of article 3 of the Amendment of

principal Act, for the words "the requirements of Directive 2006/48/ article

principal Act.

EC of the European Parliament and of the Council of 14 June 2006

relating to the taking up and pursuit of the business of credit

institutions and the requirements of Directive 2006/49/EC of the

European Parliament and of the Council of 14 June 2006 on the

capital adequacy of investment firms and credit institutions.", there

shall be substituted the words "the requirements of the Capital

Requirements Directive and the Capital Adequacy Directive.".

Article 4 of the principal Act shall be amended as follows

(a)

in subarticle (1) thereof, for the words "to carry out

the functions prescribed by this Act and any regulations,

Banking Rules, or Electronic Money Rules made thereunder and

to ensure that credit institutions carrying on business in Malta

comply with this Act, and any regulations, directives, Banking

Rules and Electronic Money Rules issued thereunder", there

shall be substituted the words "to carry out the functions

prescribed by this Act and any regulations or Banking Rules

made thereunder and to ensure that credit institutions carrying

on business in Malta comply with this Act, and any regulations,

directives and Banking Rules issued thereunder";

(b) in subarticle (2) thereof, wherever they occur, the

words "and Electronic Money Rules" shall be deleted;

(c)

for subarticle (3) thereof, there shall be substituted

the following

"(3) Banking Rules shall be binding on licence

holders and others as may be specified therein.";

(d) in subarticle (4) thereof, the words "and Electronic

Money Rules" shall be deleted; and

(e)

in subarticle (5) thereof, the words "and Electronic

Money Rules" shall be deleted.

Immediately after article 4 of the principal Act, there shall

be added the following new article

" Supervisory

4A. (1) The competent authority, in the

practices.

exercise of its duties, shall take into account the

convergence in respect of supervisory tools and

supervisory practices in the application of this

Act, and of the regulations and rules made

thereunder.

(2) For the purpose of subarticle (1)

(a)

the competent authority shall

participate in the activities of the

Committee

of

European

Banking

Supervisors;

(b)

the competent authority shall

follow the guidelines, recommendations,

standards and other measures agreed by

the Committee of European Banking

Supervisors and shall state the reasons if

they do not do so; and

(c)

national mandates conferred

on the competent authority shall not

inhibit the performance of its duties under

this Act or as a member of the Committee

of European Banking Supervisors.".

Article 5 of the principal Act shall be amended as follows

Amendment of

article 5 of the

(a)

in subarticle (1) thereof, the words "or of issuing

principal Act.

electronic money" shall be deleted;

(b) in subarticle (3) thereof, the words "or of issuing

electronic money" shall be deleted;

(c)

subarticles (5) and (6) thereof shall be deleted; and

(d) subarticle (7) thereof shall be renumbered as

subarticle (5).

Article 6 of the principal Act shall be amended as follows: Amendment of

article 6 of the

(a)

in subarticle (1) thereof, the words "or of issuing principal Act.

electronic money" shall be deleted; and

(b) in subarticle (2) thereof, for the words "as may be

prescribed from time to time by Banking Rule and, or,

Electronic Money Rule and", there shall be substituted the

words "as may be prescribed from time to time by a Banking

Rule and".

Article 7 of the principal Act shall be amended as follows: Amendment of

article 7 of the

(a)

in paragraph (a) of subarticle (1) thereof, for the principal Act.

words "(a) its initial capital amounts to not less than five million

euro (5,000,000.00) or in the case of an electronic money

institution, of one million euro (1,000,000.00):", there shall be

substituted the words "(a) its initial capital amounts to not less

than five million euro (5,000,000.00):"; and

(b) in subarticle (8) thereof, the words "and Electronic

Money Rules" shall be deleted.

Article 7A of the principal Act shall be deleted.

Deletion of

article 7A of the

principal Act.

Article 9 of the principal Act shall be amended as follows

Amendment of

article 9 of the

(a)

in paragraphs (a) and (c) of subarticle (2) thereof,

principal Act.

the words "or Electronic Money Rules" shall be deleted; and

(b) in subarticle (3) thereof, the words "and Electronic

Money Rules" shall be deleted.

Article 11 of the principal Act shall be amended as

(a)

subarticle (3) thereof shall be renumbered as

subarticle (4); and

(b) immediately after subarticle (2) thereof, there shall

be inserted the following new subarticle

"(3) A credit institution licensed in Malta shall be

prohibited from opening a branch, subsidiary or

representative office in a third country where the secrecy

laws or other regulations of that country prohibit the

information flows deemed necessary for adequate

consolidated supervision.".

Immediately after article 11 of the principal Act, there

shall be inserted the following new article

" Opening of

11A. (1) The competent authority may

branches

not apply provisions which result in more

having their

favourable treatment to a branch of a credit

head office

outside the

institution having its head office outside the

European

Union.

European Community than that accorded to

branches of credit institutions having their

head office within the European Community.

(2) The competent authority shall

notify the European Commission and the

European Banking Committee of all

authorisations for branches granted to credit

institutions having their head office outside

the European Community.".

Article 12 of the principal Act shall be amended as

(a)

in subarticle (1) thereof, for the words "a credit

institution, to the exclusion of electronic money institution, with

a current licence", there shall be substituted the words "a credit

institution with a current licence"; and

(b) in subarticle (3) thereof, for the words "Every credit

institution, other than an electronic money institution, shall",

there shall be substituted the words "Every credit institution

shall".

In sub-paragraph (i) of paragraph (b) of subarticle (6) of Amendment of

article 13A of the principal Act, for the words "the Directive;", there article

the principal

shall be substituted the words "the Capital Requirements Directive;". Act.

Article 15 of the principal Act shall be amended as Amendment of

article 15 of the

follows

principal Act.

(a)

in subarticle (1) thereof, for the words "A credit

institution, to the exclusion of an electronic money institution

shall not -", there shall be substituted the words "A credit

institution shall not -"; and

(b) subarticle (3) thereof shall be deleted.

In subarticle (1) of article 17 of the principal Act, for the Amendment of

words "A credit institution, to the exclusion of an electronic money article

principal Act.

institution, shall -", there shall be substituted the words "A credit

institution shall -".

In subarticle (1) of article 17A of the principal Act, for the Amendment of

words "Every credit institution, to the exclusion of an electronic article

the principal

money institution, shall", there shall be substituted the words "Every Act.

credit institution shall".

Article 17B of the principal Act shall be amended as Amendment of

article 17B of

follows

the principal

Act.

(a)

in subarticle (1) thereof, for the words "and adequate

internal control mechanisms including sound administrative and

accounting procedures.", there shall be substituted the words

"and adequate internal control mechanisms including sound

administrative and accounting procedures, and remuneration

policies and practices that are consistent with and promote

sound and effective risk management."; and

(b) in subarticle (2) thereof, the words "or Electronic

Money Rule" shall be deleted.

In article 17C of the principal Act, for the words "All Amendment of

credit institutions, to the exclusion of an electronic money article

the principal

institutions, shall" there shall be substituted the words "All credit Act.

institutions shall".

Subarticle (1) of article 17D of the principal Act shall be Amendment of

article 17D of

amended as follows

the principal

Act.

(a)

in subarticle (1) thereof, for the words "or Banking

Rules and Electronic Money Rules made thereunder and the

technical criteria set out in Annex XI of the Directive,", there

shall be substituted the words "or Banking Rules made

thereunder and the technical criteria set out in Annex XI of the

Capital Requirements Directive,"; and

(b) in subarticle (2) thereof, the words "and Electronic

Money Rules" shall be deleted.

In paragraph (c) of subarticle (1) of article 19 of the

principal Act, the words "and Electronic Money Rules" shall be

In subarticle (2) of article 19A of the principal Act, for the

words "a Banking and, or Electronic Money Rule as the case may

be,", there shall be substituted the words "a Banking Rule".

In paragraph (c) of subarticle (3) of article 20 of the

principal Act, the words "and Electronic Money Rules" shall be

In subarticle (5) of article 22 of the principal Act, wherever

they appear, the words "and Electronic Money Rules" shall be

In subarticle (1) of article 23 of the principal Act, the

words "and Electronic Money Rules" shall be deleted.

Article 25 of the principal Act shall be amended as

(a)

in subarticle (3) thereof, for the words "as defined in

Articles 47 and 48(1) of the Directive,", there shall be

substituted the words “as defined in Articles 47 and 48(1) of the

Capital Requirements Directive,"; and

(b) for subarticle (6) thereof, there shall be substituted

the following

"(6) The competent authority shall further, upon a

request in writing, disclose to the Central Bank, central

banks of the European system of the central banks, other

overseas central banks, other bodies with a similar function

in their capacity as monetary authorities when this

information is relevant for the exercise of their respective

statutory tasks, including the conduct of monetary policy

and related liquidity provision, oversight of payments,

clearing and settlement systems and the safeguarding of

the stability of the financial system. The competent

authority shall also, upon a request in writing and where

appropriate, disclose to other authorities responsible for

overseeing payment systems, any information in the

possession of or accessible to the competent authority,

which is required for the discharge of the duties of the

Central Bank and the other authorities mentioned above,

under the law

Provided that in an emergency situation as referred

to in article 25B(5), the competent authority shall

communicate information to the central banks of the

European system of central banks and the Central Bank

when this information is relevant for the exercise of their

statutory tasks, including the conduct of monetary policy

and related liquidity provision, the oversight of payments,

clearing and settlement systems, and safeguarding the

stability of the financial system

Provided further that where the information is

subject to professional secrecy, the competent authority

may authorise the disclosure of certain information to

other government departments of other Member States’

central government administrations responsible for

legislation on the supervision of credit institutions solely

where necessary for reasons of prudential control.".

Article 25A of the principal Act shall be amended as Amendment of

article 25A of

the principal

Act.

(a)

in subarticle (1) thereof, for the words "functions

under the Directive.", there shall be substituted the words

"functions under the Capital Requirements Directive.";

(b) in paragraph (v) of subarticle (2) thereof, for the

words "in terms of Article 136(1) of the Directive", there shall

be substituted the words "in terms of article 16A";

(c)

in paragraph (b) of subarticle (4) thereof, for the

words "in terms of Article 136(1) of the Directive", there shall

be substituted the words "in terms of article 16A";

(d) in subarticle (6) thereof, for the words "in

accordance with the Directive.", there shall be substituted the

words "in accordance with the Capital Requirements

Directive.";

(e)

subarticle (7) thereof shall be deleted;

(f)

subarticle (8) thereof shall be renumbered as

subarticle (7);

(g) in subarticle (7) thereof, as renumbered, for the

words "pursuant to Articles 125 and 126 of the Directive,",

there shall be substituted the words "pursuant to Articles 125

and 126 of the Capital Requirements Directive,";

(h)

subarticle (9) thereof shall be deleted;

(i)

subarticle (10) thereof shall be renumbered as

subarticle (8); and

(j)

immediately after subarticle (8) thereof, as

renumbered, there shall be inserted the following new

subarticles

"(9) Where the competent authority is the home

supervisor of a parent credit institution it shall

communicate to the overseas regulatory authorities of the

host Member State, where a significant branch is

established, the information referred to in subarticle (2)(iv)

and (v) and carry out the tasks referred to in article

25B(1)(c) in cooperation with the overseas regulatory

authorities of the host Member State.

(10) (a) The competent authority, in its role as

consolidating supervisor, shall establish colleges of

supervisors, as prescribed in a Banking Rule, to facilitate

the exercise of the tasks referred to in Articles 129 and

130(1) of the Capital Requirements Directive and subject

to the confidentiality requirements of this Act, and

compatibility with European Community law, and shall

ensure appropriate coordination and cooperation with

relevant third country overseas regulatory authorities

where appropriate.

(b) The competent authority, in its role as

consolidating supervisor, shall ensure that there is close

co-operation between all the overseas regulatory

authorities participating in the colleges of supervisors. The

confidentiality requirements prescribed in this Act shall

not prevent the exchange of confidential information

within colleges of supervisors. The establishment and

functioning of colleges of supervisors shall not affect the

rights and responsibilities of the competent authority under

this Act.

(11) Where the competent authority is not a

consolidating supervisor and where the competent

authority is the supervisor of a credit institution with

significant branches in other Member States, it shall

establish and chair a college of supervisors to facilitate the

cooperation in terms of this article and article 25. The

establishment and functioning of the college shall be based

on written arrangements determined after consultation with

the overseas regulatory authorities concerned. The

competent authority shall decide which overseas

regulatory authorities participate in a meeting or in an

activity of the college.

(12) The competent authority shall, in the exercise

of its general duties, duly consider the potential impact of

its decisions on the stability of the financial system in all

other Member States concerned and, in particular, in

emergency situations, based on the information available

at the relevant time.".

Article 25B of the principal Act shall be renumbered as Renumbering of

article 25B of

article 25C thereof.

the principal

Act.

Immediately after article 25A of the principal Act, there Addition of new

article 25B of

shall be inserted the following new article

the principal

Act.

" Competent

25B. (1) In addition to the obligations

authority as

imposed by the provisions of this Act, where

consolidating

the competent authority is responsible for the

supervisor.

exercise of supervision on a consolidated basis

of EU parent credit institutions and credit

institutions controlled by EU parent financial

holding companies, it shall carry out the

following functions

(a)

co-ordination

of

the

gathering and dissemination of relevant

or essential information in going concern

situations and emergency situations;

(b) planning and co-ordination

of supervisory activities in going

concern situations, including the

activities referred to in articles 16A, 17C

and 17D and in a Banking Rule, in

cooperation with the overseas regulatory

authorities involved;

(c)

planning and co-ordination

of supervisory activities in co-operation

with the overseas regulatory authorities

involved, and if necessary with the

Central Bank and with other central

banks in other Member States, in

preparation for and during emergency

situations,

including

adverse

developments in credit institutions or in

financial markets using, where possible,

existing

defined

channels

of

communication for facilitating crisis

management.

(2) The planning and coordination of

supervisory activities referred to in subarticle

(1)(c) includes exceptional measures referred

to in article 25A(5), the preparation of joint

assessments,

the

implementation

of

contingency plans and communication to the

public.

(3) Where the competent authority is

the consolidating supervisor, the overseas

regulatory authority of the host Member State

may make a request to the competent

authority, for a branch of the credit institution

to be considered as significant. The competent

authority shall issue a Banking Rule

determining the reasons for considering the

branch as significant.

(4) The competent authority in its role

as consolidating supervisor shall, subject to

article 25, alert as soon as it is practicable the

authority referred to in subarticle (7) and shall

communicate all information that is essential

for the pursuance of their tasks, where an

emergency situation, including adverse

developments in financial markets, arises,

which potentially jeopardises the market

liquidity and the stability of the financial

system in any of the Member States where

entities of a group have been authorised or

where significant branches are established.

(5) If the competent authority becomes

aware of an emergency situation, it shall alert

as soon as it is practicable the overseas

regulatory authorities referred to in Articles

125 and 126 of the Capital Requirements

Directive.

(6) Where possible, the competent

authority and the central banks of the

European system of central banks shall use

existing defined channels of communication.

(7) If the competent authority as home

supervisor of a parent credit institution

becomes aware of an emergency situation

within a credit institution as referred to in

subarticle (4), it shall alert as soon as

practicable the central banks of the European

system of central banks when this information

is relevant for the exercise of their statutory

tasks including the conduct of monetary

policy and related liquidity provision, the

oversight of payments, clearing and settlement

systems, and safeguarding the stability of the

financial system and, as the case may be, those

other government departments responsible for

legislation on the supervision of credit

institutions. Such disclosures may only be

made where necessary for reasons of

prudential control.".

In subarticle (1) of article 25C, as renumbered, of the Amendment of

principal Act, for the words "In specific cases the competent article

renumbered, of

authority", there shall be substituted the words "In specific cases the

Act.

referred to in the provisions of this Act and Banking Rules

implementing the Capital Requirements Directive, the competent

authority".

In subarticle (1) of article 26 of the principal Act, the Amendment of

article 26 of the

words "and Electronic Money Rules" shall be deleted.

principal Act.

In article 28 of the principal Act, the words "and Electronic Amendment of

article 28 of the

Money Rules" shall be deleted.

principal Act.

Article 34 of the principal Act shall be amended as Amendment of

article 34 of the

follows

principal Act.

(a)

in subarticle (2) thereof, the words "and Electronic

Money Rules", wherever they appear, shall be deleted;

(b) subarticle (3) thereof shall be substituted by the

following

"(3) Where an officer of a credit institution has

reason to believe that a transaction or a proposed

transaction could involve money laundering, he shall

act in compliance with the reporting and other

obligations set out in the regulations made under

article 12 of the Prevention of Money Laundering

Act and any procedures and guidance issued

thereunder, and such disclosure shall not constitute a

breach of confidentiality."; and

(c)

in subarticle (5) thereof, for the words "which either

carry out the issuing of electronic money or any of the activities

referred to in the Schedule to the Financial Institutions Act,",

there shall be substituted the words "which carry out any of the

activities referred to in Schedule I to the Financial Institutions

Act,".

Subarticle (3) of Article 35 of the principal Act shall be Amendment of

article 35 of the

amended as follows

principal Act.

(a)

in paragraph (b) thereof, for the words "provisions

of any Banking Rule, Electronic Money Rule, regulation", there

shall be substituted the words "provisions of any Banking Rule,

regulation";

(b) in paragraph (e) thereof, the words "and Electronic

Money Rules" shall be deleted; and

(c)

in paragraph (f) thereof, the words "and Electronic

Money Rules" shall be deleted.

The Schedule to the principal Act shall be amended as

follows

(a)

for the words "12. Safe custody services.", there

shall be substituted the words "12. Safe custody services;"; and

(b) immediately after activity 12 there shall be inserted

a new activity as follows

"13. Issuing electronic money.".

Passed by the House of Representatives at Sitting No. 320 of the

1st March, 2011.

M ICHAEL F RENDO

Speaker

P AULINE A BELA

Clerk to the House of Representatives