Financial Conglomerates Regulations, 2004

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 17,698, 24 ta’ Diçembru, 2004

L.N. 521 of 2004

MALTA FINANCIAL SERVICES AUTHORITY ACT,

(CAP. 330)

Financial Conglomerates Regulations, 2004

IN exercise of the powers conferred by article 20B of the Malta

Financial Services Authority Act, the Prime Minister and Minister of

Finance, after consultation with the Malta Financial Services Authority,

has made the following regulations>

(1) The title of these regulations is the Financial Citation and

commencement.

Conglomerates Regulations, 2004.

(2) These regulations shall come into force on the 1 st

January, 2005.

(3) The purpose of these regulations is to implement the

provisions of Directive 2002#87#EC of the European Parliament and of

the Council of 16 December, 2002 on the supplementary supervision

of credit institutions, insurance undertakings and investment firms in a

financial conglomerate and amending Council Directives 73#239#EEC,

2002#83#EC, 92#49#EEC, 92#96#EEC, 93#6#EEC and 93#22#EEC, and

Directives 98#78#EC and 2000#12#EC of the European Parliament and

of the Council as currently in force and as may be amended from time

to time, and shall be interpreted and applied accordingly.

Capital Adequacy

(Regulation 6)

The calculation of the supplementary capital adequacy requirements of the

regulated entities in a financial conglomerate referred to in sub-regulation (1) of

regulation 6 shall be carried out in accordance with the technical principles and one of

the methods described in this Schedule.

Without prejudice to the provisions (A) and (B), the Authority when appointed

coordinator with regard to a particular financial conglomerate, shall decide, after

consultation with the other relevant competent authorities and the financial conglomerate

itself, which method shall be applied by that financial conglomerate.

(A) Where a financial conglomerate is headed by a regulated entity authorised

in Malta, the Authority may determine which particular method among those described

in this Schedule shall be used for the purpose of the calculation< and

(B) Where a financial conglomerate is not headed by a regulated entity, a method

among those described in this Schedule shall be used for the purpose of the calculation.

I. Technical principles

1. Extent and form of the supplementary capital adequacy requirements calculation

Whichever method is used, when the entity is a subsidiary undertaking and has a

solvency deficit, or, in the case of a non-regulated financial sector entity, a notional

solvency deficit, the total solvency deficit of the subsidiary has to be taken into account.

Where in this case, in the opinion of the Authority when appointed coordinator, the

responsibility of the parent undertaking owning a share of the capital is limited strictly

and unambiguously to that share of the capital, the coordinator may give permission

for the solvency deficit of the subsidiary undertaking to be taken into account on a

proportional basis.

Where there are no capital ties between entities in a financial conglomerate, the

coordinator, after consultation with the other relevant competent authorities, shall

determine which proportional share will have to be taken into account, bearing in

mind the liability to which the existing relationship gives rise.

2. Other technical principles

Regardless of the method used for the calculation of the supplementary capital

adequacy requirements of regulated entities in a financial conglomerate as laid down

B

in Section II of this Schedule, the coordinator, and where necessary other competent

authorities concerned, shall ensure that the following principles will apply>

(i) the multiple use of elements eligible for the calculation of own funds at

the level of the financial conglomerate (multiple gearing) as well as any

inappropriate intra-group creation of own funds is not permissible< in order to

ensure the elimination of multiple gearing and the intra-group creation of own

funds, competent authorities shall apply by analogy the relevant principles laid

down in the relevant sectoral rules<

(ii) the solvency requirements for each different financial sector represented

in a financial conglomerate shall be covered by own funds elements in accordance

with the corresponding sectoral rules< when there is a deficit of own funds at the

financial conglomerate level, only own funds elements which are eligible according

to each of the sectoral rules (cross-sector capital) shall qualify for verification of

compliance with the additional solvency requirements<

where sectoral rules provide for limits on the eligibility of certain own funds

instruments, which would qualify as cross-sector capital, these limits shall apply

mutatis mutandis when calculating own funds at the level of the financial

conglomerate<

when calculating own funds at the level of the financial conglomerate,

competent authorities shall also take into account the effectiveness of the

transferability and availability of the own funds across the different legal entities

in the group, given the objectives of the capital adequacy rules<

where, in the case of a non-regulated financial sector entity, a notional

solvency requirement is calculated in accordance with Section II of this Schedule,

notional solvency requirement means the capital requirement with which such an

entity would have to comply under the relevant sectoral rules as if it were a

regulated entity of that particular financial sector< in the case of asset management

companies, solvency requirement means the capital requirement set out in Article

5a(1)(a) of Directive 85#611#EEC< the notional solvency requirement of a mixed

financial holding company shall be calculated according to the sectoral rules of

the most important financial sector in the financial conglomerate.

Technical calculation methods

Method 1> Accounting consolidation method

The calculation of the supplementary capital adequacy requirements of the

regulated entities in a financial conglomerate shall be carried out on the basis of the

consolidated accounts.

The supplementary capital adequacy requirements shall be calculated as the

difference between>

(i) the own funds of the financial conglomerate calculated on the basis of

the consolidated position of the group< the elements eligible are those that qualify

in accordance with the relevant sectoral rules< and

(ii) the sum of the solvency requirements for each different financial sector

represented in the group< the solvency requirements for each different financial

sector are calculated in accordance with the corresponding sectoral rules.

The sectoral rules referred to are in particular Directives 2000#12#EC, Title V,

Chapter 3, as regards credit institutions, 98#78#EC as regards insurance undertakings,

and 93#6#EEC as regards credit institutions and investment firms and the Financial

Institutions Act (Cap 376 of the Laws of Malta).

In the case of non-regulated financial sector entities which are not included in the

aforementioned sectoral solvency requirement calculations, a notional solvency

requirement shall be calculated.

The difference shall not be negative.

Method 2>

Deduction and aggregation method

The calculation of the supplementary capital adequacy requirements of the

regulated entities in a financial conglomerate shall be carried out on the basis of the

accounts of each of the entities in the group.

The supplementary capital adequacy requirements shall be calculated as the

difference between>

(i) the sum of the own funds of each regulated and non-regulated financial

sector entity in the financial conglomerate< the elements eligible are those which

qualify in accordance with the relevant sectoral rules< and

(ii) the sum of –

– the solvency requirements for each regulated and non regulated

financial sector entity in the group< the solvency requirements shall be

calculated in accordance with the relevant sectoral rules< and

–

the book value of the participations in other entities of the group.

In the case of non-regulated financial sector entities, a notional solvency

requirement shall be calculated. Own funds and solvency requirements shall be taken

B

into account for their proportional share as provided for in sub-regulation (9) of

regulation 6 and in accordance with Section I of this Schedule.

The difference shall not be negative.

Method 3> Book value#Requirement deduction method

The calculation of the supplementary capital adequacy requirements of the

regulated entities in a financial conglomerate shall be carried out on the basis of the

accounts of each of the entities in the group.

The supplementary capital adequacy requirements shall be calculated as the

difference between>

(i) the own funds of the parent undertaking or the entity at the head of the

financial conglomerate< the elements eligible are those which qualify in accordance

with the relevant sectoral rules< and

(ii) the sum of

– the solvency requirement of the parent undertaking or the head

referred to in (i) above< and

– the higher of the book value of the former’s participation in other

entities in the group and these entities’ solvency requirements< the solvency

requirements of the latter shall be taken into account for their proportional

share as provided for in sub-regulation (9) of regulation 6 and in accordance

with Section I of this Schedule.

In the case of non-regulated financial sector entities, a notional solvency

requirement shall be calculated. When valuing the elements eligible for the calculation

of the supplementary capital adequacy requirements, participations may be valued by

the equity method in accordance with the option set out in Article 59(2)(b) of Directive

78#660#EEC.

The difference shall not be negative.

Method 4>

Combination of methods 1, 2 and 3

The Authority in agreement with the other relevant competent authorities may

allow a combination of methods 1, 2 and 3, or a combination of two of these methods.

In these regulations, unless the context otherwise requires >

Interpretation.

“the Act” means the Malta Financial Services Authority Act<

“the Authority” means the Malta Financial Services Authority

established by article 3 of the Act<

“asset management company” means a management company

within the meaning of Article 1a(2) of Council Directive

85#611#EEC of 20 December, 1985 on the coordination of laws,

regulations and administrative provisions relating to undertakings

for collective investment in transferable securities (UCITS), and

an undertaking the registered office of which is outside the

Community and which would require authorisation in accordance

with Article 5(1) of that Directive if it had its registered office

within the Community<

“balance sheet total” means total assets reported in the balance

sheet<

“close links” means a situation in which two persons are linked

(a) “participation”, which shall mean the ownership,

direct or by way of control of 20 per centum or more of the

voting rights or capital of an undertaking< or

(b) “control”, which shall mean the relationship

between a parent undertaking and a subsidiary, in all the cases

referred to in Article 1(1) and (2) of Directive 83#349#EEC or

a similar relationship between any person and an undertaking<

any subsidiary undertaking of a subsidiary undertaking shall

also be considered a subsidiary of the parent undertaking

which is at the head of those undertakings>

Provided that a situation in which two or more persons

are permanently linked to one and the same person by a control

relationship shall also be regarded as constituting a close link

between such persons<

“the Commission” means the Commission of the European

Community<

“competent authorities”,

(a)

in the case of Malta, means the Authority<

(b) in the case of another Member State, means the

national authority or national authorities of the Member States

which are empowered by law or regulation to supervise credit

institutions, and, or insurance undertakings and, or investment

firms whether on an individual or a group-wide basis<

“coordinator” means the Authority or a competent authority

appointed under regulation 10<

“credit institution” means a credit institution within the

meaning of the second sub-paragraph of Article 1(1) of Directive

2000#12#EC and within the meaning of the Banking Act<

“the Directive” means Directive 2002#87#EC of the European

Parliament and of the Council of 16 December, 2002 on the

supplementary supervision of credit institutions, insurance

undertakings and investment firms in a financial conglomerate and

amending Council Directives 73#239#EEC, 2002#83#EC,

92#49#EEC, 92#96#EEC, 93#6#EEC and 93#22#EEC, and Directives

98#78#EC and 2000#12#EC of the European Parliament and of the

Council as currently in force and as may be amended from time to

time<

“financial conglomerate” means a group which meets, subject

to regulation 3, the following conditions>

(a) a regulated entity is at the head of the group or at

least one of the subsidiaries in the group<

(b) where there is a regulated entity at the head of the

group, it is either a parent undertaking of an entity in the

financial sector, an entity which holds a participation in an

entity in the financial sector, or an entity linked with an entity

in the financial sector by a relationship within the meaning of

Article 12(1) of Directive 83#349#EEC<

(c) where there is no regulated entity at the head of the

group, the group’s activities mainly occur in the financial

sector within the meaning of sub-regulation (1) of regulation

3<

(d) at least one of the entities in the group is within the

insurance sector and at least one is within the banking or

investment services sectors< and

(e) the consolidated and, or aggregated activities of the

entities in the group within the insurance sector and the

consolidated and, or aggregated activities of the entities within

the banking and investment services sectors are both

significant within the meaning of sub-regulations (2) and (3)

of regulation 3>

Provided that any sub-group of a group which meets the

criteria mentioned above shall be considered to be a financial

conglomerate<

“Financial Conglomerates Committee” means the Committee

set up by the Commission in pursuance of Article 21 of the

Directive<

“financial sector” refers to one or more of the following

different sectors or entities>

(a) a credit institution, a financial institution or an

ancillary banking services undertaking within the meaning

of Article 1(5) and (23) of Directive 2000#12#EC, individually

referred to herein as “the banking sector”<

(b) an insurance undertaking, a reinsurance

undertaking or an insurance holding company within the

meaning of Article 1(i) of Directive 98#78#EC, individually

referred to herein as “the insurance sector”<

(c) an investment firm or a financial institution within

the meaning of Article 2(7) of Directive 93#6#EEC,

individually referred to herein as “the investment services

sector”< and

(d) a mixed financial holding company<

“group” means a group of undertakings, which consists of a

parent undertaking, its subsidiaries and the entities in which the

parent undertaking or its subsidiaries hold a participation, as well

as undertakings linked to each other by a relationship within the

meaning of Article 12(1) of Directive 83#349#EEC<

“insurance undertaking” means an insurance undertaking

within the meaning of Article 6 of Directive 73#239#EEC, Article

4 of Directive 2002#83#EC or Article 1(b) of Directive 98#78#EC

and within the meaning of the Insurance Business Act and the

Insurance Brokers and other Intermediaries Act<

“intra-group transactions” means all transactions by which

regulated entities within a financial conglomerate rely either

directly or indirectly upon other undertakings within the same group

or upon any person linked to the undertakings within that group

by close links, for the fulfillment of an obligation, whether or not

contractual, and whether or not for payment<

“investment firm” means an investment firm within the

meaning of Article 1(2) of Directive 93#22#EEC, including the

undertakings referred to in Article 2(4) of Directive 93#6#EEC and

within the meaning of the Investment Services Act<

“Member State” means a state which is a member of the

European Community<

“mixed financial holding company” means a parent

undertaking which is not a regulated entity and which, together

with its subsidiaries and other entities, constitutes a financial

conglomerate, provided that at least one of its subsidiaries is a

regulated entity having its head office in the Community<

“parent undertaking” means a parent undertaking within the

meaning of Article 1 of the Seventh Council Directive 83#349#EEC

of 13 June, 1983 on consolidated accounts and any undertaking

which, in the opinion of the competent authorities, effectively

exercises a dominant influence over another undertaking<

“participation” means a participation within the meaning of

the first sentence of Article 17 of Fourth Council Directive

78#660#EEC of 25 July, 1978 on the annual accounts of certain

types of companies, or the direct or indirect ownership of 20 per

centum or more of the voting rights or capital of an undertaking<

“proportional share” means the proportion of the subscribed

capital which is held, directly or indirectly, by that undertaking<

“regulated entity” means a credit institution, an insurance

undertaking or an investment firm and includes a regulated entity

authorised in Malta<

“regulated entity authorised in Malta” means>

(a) a credit institution licensed in terms of article 5 of

the Banking Act<

(b) an insurance undertaking duly authorised in terms

of article 7 of the Insurance Business Act<

(c) an investment services licence holder licensed in

terms of article 3 of the Investment Services Act< or

(d) a financial institution licensed in terms of article 3

of the Financial Institutions Act<

“reinsurance undertaking” means a reinsurance undertaking

within the meaning of Article 1(c) of Directive 98#78#EC and within

the meaning of the Insurance Business Act<

“relevant competent authorities” means>

(a) the competent authorities of the Member States,

responsible for the sectoral group-wide supervision of any of

the regulated entities in a financial conglomerate<

(b) the coordinator appointed in accordance with

regulation 10 if different from the authorities referred to in

paragraph (a)<

(c) other competent authorities deemed to be relevant

by the authorities referred to in paragraphs (a) and (b)< this

opinion shall in particular take into account the market share

of the regulated entities of the conglomerate in other Member

States, in particular if it exceeds five (5) per centum, and the

importance in the conglomerate of any regulated entity

established in another Member State<

“risk concentration” means all exposures with a loss potential

borne by entities within a financial conglomerate, which are large

enough to threaten the solvency or the financial position in general

of the regulated entities in the financial conglomerate< such

exposures may be caused by counterparty risk#credit risk,

investment risk, insurance risk, market risk, other risks, or a

combination or interaction of these risks<

“sectoral rules” means the Community legislation relating to

the prudential supervision of regulated entities, in particular the

provisions of Directives 73#239#EEC, 2002#83#EC, 98#78#EC,

93#6#EEC, 93#22#EEC and 2000#12#EC and all laws, regulations,

rules, guidelines and directives under which the Authority has

functions or powers in relation to regulated entities licensed or

otherwise authorised in Malta<

“subsidiary undertaking” means a subsidiary undertaking

within the meaning of Article 1 of Directive 83#349#EEC and any

undertaking over which, in the opinion of the competent authorities,

a parent undertaking effectively exercises a dominant influence<

and all subsidiary undertakings of subsidiary undertakings shall

also be considered as subsidiary undertakings of the parent

undertaking<

“the Tribunal” means the Financial Services Tribunal

established under article 21 of the Act.

Technical application of the provisions on intra-group transactions

and risk concentration

(Regulations 7 and 8)

1. The coordinator, after consultation with the other relevant competent

authorities, shall identify the type of transactions and risks regulated entities in a

particular financial conglomerate have a duty to report in accordance with the provisions

of sub-regulation (2) of regulation 7 and sub-regulation (2) of regulation 8 on the

reporting of intra-group transactions and risk concentration.

2. When defining or giving their opinion about the type of transactions and

risks, the coordinator and the relevant competent authorities shall take into account the

specific group and risk management structure of the financial conglomerate.

3. In order to identify significant intra-group transactions and significant risk

concentration to be reported in accordance with the provisions of regulations 7 and 8,

the coordinator, after consultation with the other relevant competent authorities and

the conglomerate itself, shall define appropriate thresholds based on regulatory own

funds and#or technical provisions.

4. When overviewing the intra-group transactions and risk concentrations, the

coordinator shall in particular monitor the possible risk of contagion in the financial

conglomerate, the risk of a conflict of interests, the risk of circumvention of sectoral

rules, and the level or volume of risks.

(1) For the purposes of determining whether the

activities of a group mainly occur in the financial sector, the ratio of the

balance sheet total of the regulated and non-regulated financial sector

entities in the group to the balance sheet total of the group as a whole

shall exceed forty (40) per centum.

(2) For the purposes of determining whether activities in

different financial sectors are significant, for each financial sector the

average of the ratio of the balance sheet total of that financial sector to

the balance sheet total of the financial sector entities in the group and

the ratio of the solvency requirements of the same financial sector to

the total solvency requirements of the financial sector entities in the

group shall exceed ten (10) per centum>

Provided that for the purposes of these regulations, the

smallest financial sector in a financial conglomerate is the sector with

the smallest average and the most important financial sector in a financial

conglomerate is the sector with the highest average. For the purposes

of calculating the average and for the measurement of the smallest and

the most important financial sectors, the banking sector and the

investment services sector shall be considered together.

(3) Cross-sectoral activities shall also be presumed to be

significant if the balance sheet total of the smallest financial sector in

the group exceeds six (6) billion euro. If the group does not reach the

threshold referred to in sub-regulation (2) but satisfies such six (6) billion

euro threshold, the Authority, in agreement with the other relevant

competent authorities, may decide not to regard the group as a financial

conglomerate, or not to apply the provisions of regulations 7, 8 or 9, if

the Authority and the other relevant competent authorities are of the

opinion that the inclusion of the group in the scope of these regulations

or the application of such provisions is not necessary or would be

inappropriate or misleading with respect to the objectives of

supplementary supervision, taking into account, for instance, the fact

that>

(a) the relative size of its smallest financial sector does not

exceed five (5) per centum, measured either in terms of the average

referred to in sub-regulation (2) or in terms of the balance sheet

total or the solvency requirements of such financial sector< or

(b) the market share does not exceed five (5) per centum in

any Member State, measured in terms of the balance sheet total in

the banking or investment services sectors and in terms of gross

premiums written in the insurance sector>

Provided that decisions taken by the Authority in agreement

with the other relevant competent authorities in accordance with

this sub-regulation shall be notified to the other competent

authorities concerned.

(4) For the application of sub-regulations (1), (2) and (3),

the Authority, in agreement with the other relevant competent authorities,

may>

(a) exclude an entity when calculating the ratios, in the cases

referred to in sub-regulation (10) of regulation 6< and

(b) take into account compliance with the thresholds

envisaged in sub-regulations (1) and (2) for three consecutive years

so as to avoid sudden regime shifts, and disregard such compliance

if there are significant changes in the group’s structure>

Provided that where a financial conglomerate has been

identified in accordance with sub-regulations (1), (2) and (3), the

decisions referred to in paragraph (a) shall be taken on the basis of

a proposal made by the coordinator of that financial conglomerate.

(5) For the application of sub-regulations (1) and (2), the

Authority may, in exceptional cases and in agreement with the other

relevant competent authorities, replace the criterion based on balance

sheet total with one or both of the following parameters>

(a)

income structure,

(b) off-balance sheet activities>

Provided that the Authority may, alternatively, add one or

both of these parameters, if the Authority and the other relevant

competent authorities are of the opinion that these parameters are

of particular relevance for the purposes of supplementary

supervision under these regulations.

(6) For the application of sub-regulations (1) and (2), if the

ratios referred to in those sub-regulations fall below forty (40) per centum

and ten (10) per centum respectively for conglomerates already subject

to supplementary supervision, a lower ratio of thirty five (35) per centum

and eight (8) per centum respectively shall apply for the following three

years to avoid sudden regime shifts>

Provided that for the application of sub-regulation (3), if the

balance sheet total of the smallest financial sector in the group falls

below six (6) billion euro for conglomerates already subject to

supplementary supervision, a lower figure of five (5) billion euro shall

apply for the following three years to avoid sudden regime shifts>

Provided further that during the period referred to in this sub-

regulation, the coordinator may, with the agreement of the other relevant

competent authorities, decide that the lower ratios or the lower amount

referred to in this sub-regulation shall cease to apply.

(7) The calculations referred to in this regulation regarding

the balance sheet shall be made on the basis of the aggregated balance

sheet total of the entities of the group, according to their annual accounts.

For the purposes of this calculation, undertakings in which participation

is held shall be taken into account as regards the amount of their balance

sheet total corresponding to the aggregated proportional share held by

the group. Where consolidated accounts are available, they shall be

used instead of aggregated accounts>

Provided that the solvency requirements referred to in sub-

regulations (2) and (3) shall be calculated in accordance with the

provisions of the relevant sectoral rules.

(1) The Authority shall identify from among its regulated Identifying a

entities, in accordance with regulations 3 and 5, any group that falls financial

conglomerate.

within the scope of these regulations.

(2) The Authority shall cooperate closely, as necessary, with

other competent authorities when entities authorised in Malta form part

of any group which has been identified by other competent authorities

in accordance with the Directive or regulations transposing the Directive

in another Member State.

(3) If the Authority is of the opinion that a regulated entity

authorised in Malta is a member of a group which may be a financial

conglomerate and which has not already been identified in accordance

with these regulations, similar or equivalent regulations in another

Member State or the Directive, the Authority shall communicate its

view to the other competent authorities concerned.

(1) Without prejudice to the provisions on supervision Scope of

supplementary

contained in the sectoral rules, regulated entities which are part of a supervision of

financial conglomerate in terms of these regulations, shall be subject to regulated entities.

supplementary supervision to the extent and in the manner prescribed

by these regulations.

(2) The following regulated entities shall be subject to

supplementary supervision at the level of the financial conglomerate in

accordance with these regulations>

(a) every regulated entity which is at the head of a financial

conglomerate<

(b) every regulated entity, the parent undertaking of which

is a mixed financial holding company which has its head office in

the Community< and

(c) every regulated entity linked with another financial

sector entity by a relationship within the meaning of Article 12(1)

of Directive 83#349#EEC>

Provided that where a financial conglomerate is a subgroup,

of another financial conglomerate which has at its head a regulated

entity the Authority together with the other relevant competent

authorities, may agree that the provisions of these regulations and

the provisions of the Directive may be applied to the regulated

entities within the latter group and any reference in these regulations

to the terms “group” and “financial conglomerate” will then be

understood as referring to that latter group.

(3) A regulated entity, the parent undertaking of which is a

regulated entity or a mixed financial holding company having its head

office outside the Community, which is not subject to supplementary

supervision in accordance with sub-regulation (2), shall be subject to

supplementary supervision at the level of the financial conglomerate to

the extent and in the manner prescribed in regulation 20.

(4) Where a person holds a participation or capital ties in

one or more regulated entities or otherwise exercises significant

influence over such entities other than the cases referred to in sub-

regulations (2) and (3), the Authority, in agreement with the other

relevant competent authorities, shall determine whether and to what

extent supplementary supervision of the regulated entities is to be carried

out, in the same manner as if they constitute a financial conglomerate.

(5) In order to apply supplementary supervision as provided

in sub-regulation (4), at least one of the entities must be a regulated

entity and the conditions set out in paragraphs (d) and (e) of the definition

of the term “financial conglomerates” in regulation 2 must be satisfied.

The Authority in agreement with the other relevant competent authorities

shall take into account the objectives of the supplementary supervision

as provided for by these regulations in taking its decision in terms of

sub-regulation (4).

(6) For the purposes of applying the provisions of sub-

regulation (4) to cooperative groups, the Authority in agreement with

the other relevant competent authorities shall take into account the public

financial commitment of these groups with respect to other financial

entities.

(7) Without prejudice to regulation 13, the exercise of

supplementary supervision at the level of the financial conglomerate

shall in no way imply that the Authority or another coordinator is

required to play a supervisory role in relation to mixed financial holding

companies, third-country regulated entities in a financial conglomerate

or unregulated entities in a financial conglomerate, on a stand-alone

basis.

(1) Without prejudice to the sectoral rules, supplementary Capital adequacy.

supervision of the capital adequacy of the regulated entities in a financial

conglomerate shall be exercised in accordance with the rules laid down

in these regulations.

(2) Regulated entities forming part of a financial

conglomerate shall maintain own funds at the level of the financial

conglomerate at least equal to the capital adequacy requirements as

calculated in accordance with the First Schedule to these regulations.

(3) Regulated entities authorised in Malta which form part

of a financial conglomerate shall ensure that adequate capital adequacy

policies are in place at the level of the financial conglomerate.

(4) The requirements in sub-regulations (2) and (3) of this

regulation shall be subject to supervisory overview by the coordinator

in accordance with the provisions of regulations 10 to 17 and regulation

(5) Where the Authority is the coordinator, it shall ensure

that the calculation referred to in sub-regulation (2) of this regulation

shall be carried out once a year, either by the regulated entities or by the

mixed financial holding company.

(6) The results of the calculation referred to in sub-regulation

(2) and the relevant data for such calculation shall be submitted to the

coordinator>

(a) by the regulated entity which is at the head of the

financial conglomerate< or

(b) where the financial conglomerate is not headed by a

regulated entity, by the mixed financial holding company or by a

regulated entity in the financial conglomerate which has been

identified by the coordinator, after consultation with the other

relevant competent authorities and with the financial conglomerate.

(7) For the purposes of calculating the capital adequacy

requirements referred to in sub-regulation (2), the entities included in

the definition of the term “financial sector” in regulation 2 shall be

included within the scope of supplementary supervision in the manner

and to the extent provided in the First Schedule to these regulations.

(8) When calculating the supplementary capital adequacy

requirements with regard to a financial conglomerate by applying

method 1 as provided for in the First Schedule to these regulations, the

own funds and the solvency requirements of the entities in the group

shall be calculated by applying the corresponding sectoral rules on the

form and extent of consolidation as laid down in Article 54 of Directive

2000#12#EC and Annex I.1.B of Directive 98#78#EC.

(9) When applying methods 2 or 3 as provided for in the

First Schedule to these regulations, the calculation shall take account

of the proportional share held by the parent undertaking or the

undertaking which holds a participation in another entity of the group.

(10) The coordinator may decide not to include a particular

entity when calculating the supplementary capital adequacy

requirements in the following cases>

(a) if the entity is situated in a third country where there are

legal impediments to the transfer of the necessary information,

without prejudice to the sectoral rules regarding the obligation of

competent authorities to refuse authorisation where the effective

exercise of their supervisory functions is prevented<

(b) if the entity is of negligible interest with respect to the

objectives of the supplementary supervision of regulated entities

in a financial conglomerate< or

(c) if the inclusion of the entity would be inappropriate or

misleading with respect to the objectives of supplementary

supervision>

Provided that, if several entities are to be excluded pursuant

to paragraph (b), the coordinator must include them when

collectively they are of non-negligible interest>

Provided further that, in the case referred to in paragraph (c),

the coordinator shall, except in cases of urgency, consult the other

relevant competent authorities before taking a decision.

(11) When a coordinator, does not include a regulated entity

authorised in Malta when calculating the supplementary capital adequacy

requirement on the basis of paragraphs (b) or (c) of sub-regulation (10),

the Authority, may ask the entity which is at the head of the financial

conglomerate for information which may facilitate their supervision of

the regulated entity concerned>

Provided that, in the event such a request is made to a regulated

entity authorised in Malta which is at the head of a financial

conglomerate, such regulated entity shall provide such information.

7. (1) Without prejudice to the sectoral rules, supplementary Risk

supervision of the risk concentration of regulated entities in a financial concentration.

conglomerate shall be exercised in accordance with the rules laid down

in these regulations.

(2) Regulated entities authorised in Malta or a mixed

financial holding company of a group identified as a financial

conglomerate with its head office in Malta shall report at least once a

year to the coordinator any significant risk concentration at the level of

the financial conglomerate, in accordance with the rules laid down in

this regulation and in the Second Schedule to these regulations.

(3) The information required in terms of sub-regulation (2)

shall be submitted to the coordinator>

(a) by the regulated entity which is at the head of the

financial conglomerate< or

(b) where the financial conglomerate is not headed by a

regulated entity, by the mixed financial holding company or by a

regulated entity in the financial conglomerate identified by the

coordinator, after consultation with the other relevant competent

authorities and with the financial conglomerate.

(4) These risk concentrations shall be subject to supervisory

overview by the coordinator in accordance with regulations 10 to 17

and regulation 19.

(5) The Authority may by means of directives, guidelines

and, or rules set quantitative limits in relation to risk concentration at

the level of a financial conglomerate and may also take other supervisory

measures in relation to risk concentration which would achieve the

objectives of supplementary supervision with regard to any risk

concentration at the level of a financial conglomerate.

(6) Where a financial conglomerate is headed by a mixed

financial holding company, the sectoral rules applicable to risk

concentration of the most important financial sector in the financial

conglomerate, if any, shall apply to that sector as a whole, including the

mixed financial holding company.

8. (1) Without prejudice to the sectoral rules, supplementary

supervision of intra-group transactions of regulated entities in a financial

conglomerate shall be exercised in accordance with these regulations.

(2) Regulated entities authorised in Malta or a mixed

financial holding company with its head office in Malta shall report at

least once a year to the coordinator all significant intra-group transactions

of regulated entities within a financial conglomerate in accordance with

the rules laid down in this regulation and in the Second Schedule to

these regulations.

(3) In the absence of any definition of the thresholds in terms

of paragraph 3 of the Second Schedule to these regulations, an intra-

group transaction shall be presumed to be significant if its amount

exceeds at least 5 per centum of the total amount of capital adequacy

requirements at the level of a financial conglomerate.

(4) The information required in terms of sub-article (2) shall

be submitted to the coordinator>

(a) by the regulated entity which is at the head of the

financial conglomerate< or

(b) where the financial conglomerate is not headed by a

regulated entity, by the mixed financial holding company or by a

regulated entity in the financial conglomerate which has been

identified by the coordinator, after consultation with the other

relevant competent authorities and with the financial conglomerate.

(5) Intra-group transactions in terms of this regulation, shall

be subject to supervisory overview by the coordinator.

(6) The Authority may by means of directives, guidelines

and#or rules, set quantitative limits and qualitative requirements and

may also take other supervisory measures that would achieve the

objectives of supplementary supervision with regard to intra-group

transactions of regulated entities within a financial conglomerate.

(7) Where a financial conglomerate is headed by a mixed

financial holding company, the sectoral rules regarding intra-group

transactions of the most important financial sector in the financial

conglomerate shall apply to that sector as a whole, including the mixed

financial holding company.

9. (1) A regulated entity authorised in Malta identified as Internal control

mechanisms and

forming part of a financial conglomerate in terms of these regulations risk management

shall have in place at the level of the financial conglomerate, adequate processes.

risk management processes and internal control mechanisms, including

sound administrative and accounting procedures.

(2) The risk management processes refereed to in sub-

regulation (1) shall include>

(a) sound governance and management with the approval

and periodic review of the strategies and policies by the appropriate

governing bodies at the level of the financial conglomerate with

respect to all the risks they assume<

(b) adequate capital adequacy policies in order to anticipate

the impact of their business strategy on risk profile and capital

requirements as determined in accordance with regulation 6 and

the First Schedule to these regulations< and

(c) adequate procedures to ensure that their risk monitoring

systems are well integrated into their organisation and that all

measures are taken to ensure that the systems implemented in all

the undertakings included in the scope of supplementary

supervision are consistent so that the risks can be measured,

monitored and controlled at the level of the financial conglomerate.

(3) The internal control mechanisms referred to in sub-

regulation (1) shall include>

(a) adequate mechanisms as regards capital adequacy to

identify and measure all material risks incurred and to appropriately

relate own funds to risks< and

(b) sound reporting and accounting procedures to identify,

measure, monitor and control the intra-group transactions and the

risk concentration.

(4) All undertakings licensed, authorised, established,

situated or with their head office in Malta included in the scope of

supplementary supervision pursuant to regulation 5, shall have adequate

internal control mechanisms for the production of any data and

information which would be relevant for the purposes of the

supplementary supervision.

(5) The processes and mechanisms referred to in sub-

regulations (1) to (4) shall be subject to supervisory overview by the

coordinator.

10. (1) The Authority shall, together with the relevant

competent authorities, including those of the Member State in which a

mixed financial holding company has its head office, appoint from

among such competent authorities, a coordinator responsible for

coordination and exercise of supplementary supervision of the regulated

entities in a financial conglomerate in accordance with the provisions

of these regulations.

(2) The appointment of the coordinator in terms of sub-

regulation (1) shall be based on the following criteria>

(a) where a financial conglomerate is headed by a regulated

entity, the task of coordinator shall be exercised by the competent

authority which has authorised that regulated entity pursuant to

the relevant sectoral rules<

(b) where a financial conglomerate is not headed by a

regulated entity, the task of coordinator shall be exercised by the

competent authority identified in accordance with the following

principles>

(i) where the parent of a regulated entity is a mixed

financial holding company, the task of coordinator shall be

exercised by the competent authority which has authorised

that regulated entity pursuant to the relevant sectoral rules<

(ii) where more than one regulated entity with a head

office in the European Community have as their parent the

same mixed financial holding company, and one of these

entities has been authorised in the Member State in which the

mixed financial holding company has its head office, the task

of coordinator shall be exercised by the competent authority

of the regulated entity authorised in that Member State>

Provided that, where more than one regulated entity,

being active in different financial sectors, have been authorised

in the Member State in which the mixed financial holding

company has its head office, the task of coordinator shall be

exercised by the competent authority of the regulated entity

active in the most important financial sector as defined in the

proviso to sub-regulation (2) of regulation 3>

Provided further that where the financial conglomerate

is headed by more than one mixed financial holding company

with a head office in different Member States and there is a

regulated entity in each of these states, the task of coordinator

shall be exercised by the competent authority of the regulated

entity with the largest balance sheet total if these entities are

in the same financial sector, or by the competent authority of

the regulated entity in the most important financial sector as

defined in the proviso to sub-regulation (2) of regulation 3<

(iii) where more than one regulated entity with a head

office in the European Community has as its parent the same

mixed financial holding company and none of these entities

have been authorised in the Member State in which the mixed

financial holding company has its head office, the task of

coordinator shall be exercised by the competent authority

which authorised the regulated entity with the largest balance

sheet total in the most important financial sector as defined

in the proviso to sub-regulation (2) of regulation 3<

(iv) where the financial conglomerate is a group

without a parent undertaking, or in any other case, the task of

coordinator shall be exercised by the competent authority

which authorised the regulated entity with the largest balance

sheet total in the most important financial sector as defined

in the proviso to sub-regulation (2) of regulation 3.

(3) The Authority may, in particular cases, by common

agreement with the relevant competent authorities waive the criteria

referred to in sub-regulation (2) if their application would be

inappropriate, taking into account the structure of the conglomerate and

the relative importance of its activities in different countries, and may

appoint a different competent authority as coordinator.

(4) In the cases referred to in sub-regulation (3), before

taking a decision, the Authority and the other competent authorities

concerned shall give the financial conglomerate an opportunity to state

its opinion on the proposed decision.

(5) When a competent authority other than the Authority

has been appointed coordinator, that coordinator shall be recognised in

Malta for the purpose of exercising and enforcing its responsibilities

and for the purpose of exercising any powers given to the coordinator

under these regulations.

11. (1) The functions to be carried out by the coordinator with

regard to supplementary supervision shall include>

(a) coordination of the gathering and dissemination of

relevant or essential information in the ordinary exercise of its

functions and emergency situations, including the dissemination

of information which is of importance for a competent authority’s

supervisory task under sectoral rules<

(b) supervisory overview and assessment of the financial

situation of a financial conglomerate<

(c) assessment of compliance with the rules on capital

adequacy and of risk concentration and intra-group transactions

as provided in regulations 6, 7 and 8<

(d) assessment of the financial conglomerate’s structure,

organisation and internal control system as provided in regulation

9<

(e) planning and coordination of supervisory activities in

the ordinary exercise of its functions as well as in emergency

situations, in cooperation with the relevant competent authorities<

and

(f) exercising other tasks, measures and decisions assigned

to the coordinator by these regulations or deriving from the

application of the Directive and these regulations.

(2) The coordinator appointed in terms of regulation 10 in

respect of a particular group, shall inform the parent undertaking at the

head of the group or, in the absence of a parent undertaking, the regulated

entity with the largest balance sheet total in the most important financial

sector in a group, that the group has been identified as a financial

conglomerate and of its appointment as coordinator. The coordinator

shall also provide such information to the competent authorities which

have regulated entities in the group and the competent authorities of the

Member State in which the mixed financial holding company has its

head office, as well as the Commission.

(3) The coordinator may enter into coordination agreements

with the other relevant competent authorities and other competent

authorities concerned in order to facilitate and establish supplementary

supervision. Such coordination agreements may entrust additional tasks

to the coordinator and may specify the procedures for the decision-

making process among the relevant competent authorities as referred

to in these regulations.

(4) The coordinator shall, when it requires information

which has already been given to another competent authority in

accordance with the sectoral rules, contact such competent authority in

order to provide it with this information whenever possible, in order to

prevent duplication of reporting to the various authorities involved in

supervision.

(5) When the Authority receives a request from a

coordinator in terms of sub-regulation (3), the Authority shall make

available to the coordinator, any information which it has received in

accordance with the sectoral rules, subject to its obligations under

provisions relating to confidentiality in the Act and the relevant sectoral

rules.

(6) Without prejudice to the possibility of delegating specific

supervisory competences and responsibilities the presence of a

coordinator entrusted with the specific tasks concerning the

supplementary supervision of regulated entities in a financial

conglomerate shall not affect the tasks and responsibilities of the

competent authorities as provided for by the sectoral rules.

12. (1) The Authority shall cooperate closely with the Cooperation and

exchange of

coordinator and with the other competent authorities responsible for information

the supervision of regulated entities in that financial conglomerate in between competent

authorities.

performing its functions in terms of these regulations.

(2) The Authority shall, without prejudice to its

responsibilities under the Act and the sectoral rules, provide the

coordinator and, or the other competent authorities responsible for the

supervision of regulated entities in a financial conglomerate with any

information which is essential or relevant for the exercise of the other

authorities’ supervisory tasks under the sectoral rules and the Directive>

Provided that, upon a request by such entities, the Authority

shall provide the said entities with all relevant information>

Provided further that the Authority shall provide all essential

information on its own initiative.

(3) The cooperation referred to in this regulation shall, as a

minimum, provide for the gathering and the exchange of information

with regard to the following>

(a) identification of the group structure of all major entities

belonging to the financial conglomerate, as well as of the competent

authorities of the regulated entities in the group<

(b) the financial conglomerate’s strategic policies<

(c) the financial situation of the financial conglomerate, in

particular on capital adequacy, intra-group transactions, risk

concentration and profitability<

(d) the financial conglomerate’s major shareholders and

management<

(e) the organisation, risk management and internal control

systems at financial conglomerate level<

(f) procedures for the collection of information from the

entities in a financial conglomerate, and the verification of that

information<

(g) adverse developments in regulated entities or in other

entities of the financial conglomerate which could seriously affect

the regulated entities< and

(h) major sanctions and exceptional measures taken by any

competent authority in accordance with sectoral rules or these

regulations.

(4) The Authority may exchange such information as may

be needed for the performance of their respective tasks regarding

regulated entities in a financial conglomerate, in line with the provisions

laid down in the sectoral rules, with central banks, the European System

of Central Banks and the European Central Bank.

(5) Without prejudice to its responsibilities as defined in

the Act and under sectoral rules, the Authority shall, prior to taking a

decision, consult the other competent authorities concerned with regard

to the following matters where these decisions are of importance for

the competent authorities’ supervisory functions>

(a) changes in the shareholder, organisational or

management structure of regulated entities in a financial

conglomerate which require the approval or authorisation of the

Authority< and

(b) major sanctions or exceptional measures taken by the

Authority.

(6) The Authority may decide not to consult the other

competent authorities concerned in cases of urgency or where such

consultation may jeopardise the effectiveness of the decisions and in

such cases the Authority shall inform the other competent authorities

concerned without delay.

(7) Where the Authority does not exercise the

supplementary supervision pursuant to regulation 10 in respect of a

parent undertaking having its head office in Malta, the Authority shall,

upon a request by the coordinator, ask the parent undertaking for any

information which would be relevant for the exercise of the coordinator’s

coordination functions in terms of regulation 11, and shall transmit that

information once obtained to the coordinator.

(8) Where the Authority exercises the supplementary

supervision pursuant to regulation 10, it may request the competent

authority of the Member State in which a parent undertaking has its

head office to obtain information from the parent undertaking which

would be relevant for the exercise of its function as coordinator as laid

down in regulation 11, and to transmit that information, once obtained,

to the Authority.

(9) Where the information referred to in sub-regulations (2)

and (3) of regulation 14 has already been provided to the Authority in

accordance with the sectoral rules, the Authority shall, at the request of

the competent authorities responsible for exercising supplementary

supervision, transmit that information to them.

(10) The Authority shall have the power to exchange

information with other competent authorities and other authorities as

referred to in this regulation>

Provided that the collection or possession of information by

the Authority with regard to an entity within a financial conglomerate

which is not a regulated entity shall not in any way imply that the

Authority is required to play a supervisory role in relation to such entity

on a stand-alone basis.

(11) Any information received by the Authority under these

regulations, shall be subject to the provisions of professional secrecy

and confidentiality as laid down in the Act and the sectoral rules.

13. (1) The Authority may require persons who effectively direct

the business of a mixed financial holding company with its head office

in Malta to submit to the Authority such information, including that

relating to qualifications and experience, as it may require in respect of

the following>

(a)

any of its shareholders<

(b) its directors<

(c) those persons who, in the opinion of the Authority,

effectively direct the business< and

(d) the holders of such managerial posts as the Authority

may specify.

(2) Where it appears to the Authority that a person referred

to in sub-regulation (1) is not fit and proper to hold that position, the

Authority may decide that, as long as that person holds the position, the

mixed financial holding company with its head office in Malta shall

take such action as the Authority deems appropriate and such mixed

financial holding company shall comply with that decision.

(3) Every proposal to appoint a director, chief executive or

holders of such managerial posts by a company referred to in sub-

regulation (1) of this regulation shall be notified to the Authority and

shall not be made if the Authority objects to the proposal on the ground

that the person proposed is not deemed fit and proper for the post.

14. (1) Notwithstanding the provisions of any other law, all

persons included within the scope of supplementary supervision, whether

or not they are regulated entities, may exchange freely among themselves

any information which would be relevant for the purposes of

supplementary information.

(2) The Authority shall, either directly or indirectly, have

access to any information relating to entities in a financial conglomerate,

whether or not they are regulated entities, which would be relevant for

the purpose of supplementary supervision.

(3) Any person licensed, authorised, established, situated

or with its head office in Malta included within the scope of

supplementary supervision as provided for by these regulations, whether

or not a regulated entity, shall provide the Authority or coordinator on

request such information as may be required for the purpose of

supplementary supervision.

(4) Any person referred to in sub-regulation (3) from whom

the Authority or coordinator may require information in terms of these

regulations, shall put in place the necessary internal reporting,

managerial and technological arrangements to ensure that the required

information is capable of being provided to the Authority or coordinator.

15. (1) Where, in applying these regulations, the Authority Verification.

wants to verify the information concerning an entity, whether or not

regulated, which is part of a financial conglomerate and is licensed,

authorised, established, situated or with its head office in another

Member State, the Authority may ask the competent authorities of that

other Member State>

(a) to have the verification carried out by that competent

authority<

(b) to allow the Authority to otherwise participate in the

verification when it does not carry out the verification itself< or

(c) for permission to allow the Authority or one of its officers

or auditors or other experts appointed by the Authority to carry

out that verification including on-site verification.

(2) Subject to sub-regulation (3), where the competent

authorities of another Member State request the Authority to verify

information concerning an entity, whether or not regulated, licensed,

authorised, established, situated or with its head office in Malta and

which is part of a financial conglomerate, the Authority shall>

(a)

comply with the request<

(b) allow the competent authorities of the Member State

which made the request to participate in the verification if they do

not carry out the verification themselves< or

(c) allow the competent authorities of that other Member

State to carry out the verification, including on-site verification.

(3) Verification may be carried out by an official auditor

or other expert appointed by the competent authorities of the other

Member State, who may exercise all the powers vested in the Authority

necessary to conduct the verification.

16. (1) If the regulated entities in a financial conglomerate do

not comply with any of the requirements referred to in regulations 6 to

9, or where the requirements are met but solvency may nevertheless be

jeopardized, or where the intra-group transactions or the risk

concentrations are a threat to the financial position of such regulated

entities, the necessary measures shall be taken under these regulations

or the relevant sectoral rules in order to rectify the situation as soon as

possible. Such measures shall be taken by the following persons>

(a) by the coordinator in respect of a mixed financial holding

company with its head office in Malta<

(b) by the Authority, upon receiving information from the

coordinator, in respect of the regulated entities authorised in Malta<

and

(c) where the coordinator is the Authority, by the Authority

in respect of a mixed financial holding company with its head office

in a Member State other than in Malta>

Provided that where the Authority is appointed as coordinator

in terms of regulation 10, it shall inform the relevant competent

authorities of any findings in terms of this sub-regulation.

(2) Without prejudice to the sectoral rules>

(a) the Authority, where acting as coordinator, may take a

decision in respect of a mixed financial holding company with its

head office in Malta, in relation to any matter covered by these

regulations and shall notify the mixed financial holding company

in writing of such decision< and

(b) the Authority, where acting as a coordinator, may take

a decision in respect of a mixed financial holding company with

its head office in a Member State other than in Malta in relation to

any matter covered by these regulations and shall notify the relevant

competent authorities and the mixed financial holding company,

in writing, of such a decision.

(3) The Authority, where acting as a coordinator shall, where

appropriate, coordinate its supervisory actions with the other relevant

competent authorities.

(4) Where the Authority takes a decision in respect of a

mixed financial holding company directing it to comply with any

requirement resulting from these regulations or the Directive, that mixed

financial holding company shall comply with such decision.

(5) If a mixed financial holding company fails to comply

with a decision of the Authority or the coordinator given under this

regulation, the Authority or coordinator may notify the other relevant

competent authorities and, with their agreement, may decide on the

measures to be taken.

17. (1) The Authority may take any measures in terms of these Additional powers

regulations in relation to a regulated entity authorised in Malta within of

authority.

the financial conglomerate and may take any step or action permitted in

the sectoral rules or in any laws, rules, regulations, guidelines or

directives implementing or giving effect to the sectoral rules in respect

of such regulated entity in a financial conglomerate.

(2) The Authority may apply the provisions of the sectoral

rules on capital adequacy, intra-group transactions and risk concentration

at the level of the financial conglomerate.

(3) Where the Authority is of the opinion that a mixed

financial holding company with its head office in Malta>

(a) is or is likely to become unable to meet its obligations

towards its creditors or its clients<

(b) whose subsidiaries or entities in whom it holds a

participation or with whom it has close links are not maintaining

or are unlikely to be in a position to maintain adequate capital

resources having regard to the volume and nature of their business,

or which no longer comply with capital or other financial

requirements specified by the competent authorities from time to

time<

(c) fails to provide to the coordinator within such reasonable

period as may be specified by the coordinator such information as

it may reasonably request for the purpose of its functions under

these regulations< or

(d) fails to comply with any decision, direction, condition

or requirement imposed under these regulations, and the

circumstances are such that the Authority or the coordinator is of

the opinion that the stability or soundness of a mixed financial

holding company is materially affected by this failure,

it shall, subject to sub-regulation (4), inform the mixed financial holding

company accordingly of its decision and shall in writing direct the mixed

financial holding company to comply immediately with the decision

and any requirements set out by the Authority or the coordinator as the

case may be.

(4) Before taking a decision in respect of a mixed financial

holding company under sub-regulation (3), the Authority shall notify

the mixed financial holding company of its intention to take such

decision.

(5) Every notice given under sub-regulation (4) shall state

that the recipient of the notice may make representations, within such

reasonable period after the service thereof as may be stated in the notice,

being a period of not less than forty-eight hours and not longer than

thirty days. Such representations shall be made in writing to the

Authority giving reasons why the proposed decision should not be taken,

and the Authority shall consider any representation so made before

arriving at a final decision.

(6) The Authority shall, as soon as practicable, notify its

final decision in writing to the mixed financial holding company

concerned.

(7) If the mixed financial holding company fails to comply

with a decision of the Authority under sub-regulation (3), the Authority

shall notify the relevant competent authorities.

(8) Without prejudice to the provisions of these regulations,

the Authority shall cooperate with the other relevant competent

authorities to ensure the effectiveness of penalties and other measures

in relation to the mixed financial holding company concerned or their

effective manager, secretary, director or other person responsible

therefor.

(9) Any decision taken in terms of these regulations shall

have effect from the date specified by the Authority or the coordinator,

as the case may be therein.

18. (1) Subject to the provisions of the Act and of this Appeals.

regulation, any person in respect of whom a decision is taken by the

Authority under these regulations may appeal to the Tribunal.

(2) An appeal under these regulation shall lie only on the

following grounds>

(a) that the Authority has wrongly applied any of the

provisions of these regulations< or

(b) that the decision of the Authority constitutes an abuse

of discretion and is manifestly unfair, but the discretion of the

Authority may not, so long as it has been exercised properly, be

queried by the Tribunal.

(3) An appeal to the Tribunal shall be made in terms of

article 21 of the Act.

(4) An appeal made under this regulation shall not suspend

the operation of any decision from which the appeal is made.

19. (1) Where a mixed financial holding company or a regulated Penalties.

entity authorised in Malta, or the respective manager, secretary, director

or other person responsible therefor, contravenes or fails to comply

with the provisions of these regulations, the Authority may, by notice

in writing and without recourse to a court hearing, impose on such

person, as the case may be, an administrative penalty which may not

exceed the sum of Lm50,000 (fifty thousand Maltese Lira).

(2) Any administrative penalty imposed by the Authority

in terms of sub-regulation (1) in respect of a regulated entity authorised

in Malta shall be without prejudice to>

(a) the imposition of any penalties or other measures by the

Authority under the relevant sectoral rules< and

(b) the commencement of criminal proceedings and the

imposition of criminal sanctions for breaches of the sectoral rules.

(3) Within a period of thirty days from the date of service

of a notice imposing an administrative penalty in accordance with sub-

regulation (1), a person upon whom the notice is served may appeal to

the Tribunal against the decision of the Authority in accordance with

regulation 18.

(4) Where a notice as referred to in sub-regulation (1) has not

been appealed or, where such notice has been appealed within fifteen

days of the determination of such appeal, the administrative penalty as

contained in the notice or as reduced by the decision of the Tribunal

shall be due to the Authority and upon the service of a copy of the

notice or the decision, as the case may be, by means of a judicial act on

the person indicated in the notice or decision, the said notice or decision

shall constitute an executive title for all effects and purposes of Title

VII of Part I of Book Second of the Code of Organization and Civil

Procedure.

(1) Without prejudice to the sectoral rules, where the parent

undertaking of a regulated entity having its head office outside the

Community is subject to supervision by a third country competent

authority, a verification as to whether supplementary supervision is

equivalent to that provided for in these regulations shall be carried out

in terms of sub-regulation (2).

(2) The verification referred to in sub-regulation (1) shall

be carried out by the competent authority which would be the coordinator

if the criteria set out in sub-regulation (2) of regulation 10 were to apply.

The verification shall be carried out>

(a)

at the request of the parent undertaking<

(b) at the request of the regulated entities authorized in the

community< or

(c)

on such competent authority’s own initiative>

Provided that the competent authority shall consult the other

relevant competent authorities, and shall take into account any

applicable guidance given by the Financial Conglomerates

Committee in terms of the Directive<

Provided further that, prior to taking a decision under this

regulation, the Authority shall consult with the Financial

Conglomerates Committee.

(3) In the absence of equivalent supervision referred to in

sub-regulation (1), the provisions concerning the supplementary

supervision of regulated entities referred to in sub-regulation (2) of

regulation 5 shall apply by analogy to the regulated entities referred to

in sub-regulation (1)>

Provided that a competent authority deemed to be a

coordinator under this regulation may alternatively apply other methods

which ensure appropriate supplementary supervision of the regulated

entities in the financial conglomerate agreed upon by the coordinator

after consultation with the other relevant competent authorities>

Provided further that the competent authority deemed to be a

coordinator may, together with the competent authorities of other

Member States, require the establishment of a mixed financial holding

company which has its head office in the Community.

(4) The Authority shall, if deemed to be coordinator under

this regulation, notify the other competent authorities involved and the

Commission of the alternative methods agreed in terms of sub-regulation

(3).