Regulations, 2004

L.N. 88 of 2004

BANKING ACT

(CAP. 371)

European Passport Rights for Credit Institutions

Regulations, 2004

IN exercise of the powers conferred by subarticle (6) of article

5 of the Banking Act, the Minister of Finance and Economic Affairs

acting on the advice of the Malta Financial Services Authority, as

the competent authority appointed for the purposes of the Act, has

made the following regulations >-

(1) The title of these regulations is the European Passport

Rights for Credit Institutions Regulations, 2004.

These regulations shall come into force on the 1 st May,

(2)

2004. In these regulations, unless the context otherwise requires -

Annex I to the Directive

“LIST OF ACTIVITIES SUBJECT TO MUTUAL RECOGNITION

1. Acceptance of deposits and other repayable funds

2. Lending

3. Financial Leasing

4. Money transmission services

5. Issuing and administering means of payment (e.g. credit card, travellers’

cheques and bankers’ drafts)

6. Guarantees and commitments

7. Trading for own account or for account of customers in>

(a)

money market instruments (cheques, bills, certificates of deposit, etc.)

(b)

foreign exchange<

(c)

financial futures and options<

(d)

exchange and interest-rate instruments<

(e)

transferable securities

8. Participation in securities issues and the provision of services related to

such issues

9. Advice to undertakings on capital structure, industrial strategy and related

questions and advice as well as services relating to mergers and the purchase of

undertakings

10. Money broking

11. Portfolio management and advice

12. Safekeeping and administration of securities

13. Credit reference services

14. Safe custody services”

Mitbug[ fl-Istamperija tal-Gvern — Printed at the Government Printing Press

“the Act” means the Banking Act<

“banking directives” means the banking directives within

the meaning of subarticle (2) of article 4 of the Act<

“branch” shall mean a place of business which forms a

legally dependant part of a credit institution and which carries

out directly all or some of the transactions inherent in the

business of credit institutions< any number of places of business

set up in the same Member State or EEA State by a credit

institution with headquarters in another Member State or EEA

State shall be regarded as a single branch<

“Commission” means the Commission of the European

Communities<

“competent authority” means the Malta Financial Services

Authority appointed under subarticle (1) of article 2 of the Act<

“credit institution” shall mean an undertaking whose

business is to receive deposits or other repayable funds from

the public and to grant credits for its own account<

“Directive” means Council Directive 2000#12#EC of 20

March 2000 relating to the taking up and pursuit of the business

of credit institutions as amended from time to time<

“EEA State” means a State which is a contracting party to

the agreement on the European Economic Area signed at Oporto

on the 2 nd May, 1992 as amended by the protocol signed at

Brussels on 17 th March 1993 and as amended from time to

time<

“European credit institution” means a credit institution as

defined in Article 1 of the Directive authorised by its foreign

authority within the meaning of Article 4 of the Directive or

authorised by a foreign authority in an EEA State<

“European right” means the entitlement of a person to

establish a branch, or provide services, in a Member State or

EEA State other than that in which it has its head office –

(a) in accordance with the Treaty as applied in the

Member States or EEA States< and

(b) subject to the requirements of the Directive and

subject to any rules, regulations or banking directives made

under the Act implementing such requirements<

“foreign authority” means the body or bodies designated

by a Member State or EEA State>

(a) to act as a supervisory authority in relation to

the European credit institution concerned in that Member

State or EEA State within the meaning of the Directive, or

(b) to carry out the duties provided for in the

Directive in relation to a Maltese credit institution

exercising or proposing to exercise a European right<

“home Member State or EEA State” means the Member

State or EEA State in which the registered office of a credit

institution is situated or, if under its national law it has no

registered office, the Member State or EEA State in which its

head office is situated<

“host Member State or EEA State” means the Member State

or EEA State where a Maltese credit institution exercises or

proposes to exercise European rights<

“Maltese credit institution” means a person licensed in

terms of the Act, whose head office is in Malta and who is

entitled to carry on an activity in a Member State or EEA State

other than Malta in exercise of a European right<

“Maltese rules” means rules -

(a) made in accordance with the Directive< and

(b) which are the responsibility of the competent

authority (as to implementation, supervision and

compliance) in accordance with the Directive and subject

to the provisions of the Act and any rules, regulations and

banking directives made thereunder<

“Member State” means a Member State of the European

Communities<

“supervisory authority” means the foreign authority in a

Member State or EEA State<

“Treaty” means Treaty of Rome signed in 1957,

establishing the European Economic Community as

subsequently amended<

“Tribunal” means the Financial Services Tribunal

established under the Malta Financial Services Authority Act.

Part I – Exercise of Passport Rights by European credit

institutions

(1) A European credit institution which is seeking to

establish a branch in Malta in exercise of a European right, shall

satisfy the establishment conditions specified in subregulation (2)

of this regulation and shall be exempt from the provisions of

subarticle (1) of article 5 of the Act.

(2) The establishment conditions for the purposes of this

regulation are that -

(a) the European credit institution has given the

supervisory authority in its home Member State or EEA State a

notice containing the requisite details of that State in terms of

Article 20 of the Directive<

(b) the competent authority has received a consent notice

in accordance with paragraph (c), from the supervisory authority

of such European credit institution stating that it has given its

consent to the credit institution to establish a branch in Malta<

and

(c) the consent notice shall –

(i) be given in accordance with the Directive<

(ii) certify that the European credit institution is

authorised to act as a credit institution by the foreign

authority<

(iii) identify the activities to which the consent

relates, which activities are included in the Schedule to

these regulations<

(iv) contain the information stated in the notice of

the European credit institution referred to in paragraph (a)

above<

(v) indicate the amount of own funds and solvency

ratio or capital adequacy ratio, as the case may be, of the

European credit institution< and

(vi) contain details of any deposit guarantee scheme

which is intended to protect the branch’s clients.

(3) The supervisory authority of the European credit

institution shall inform the competent authority of any change in

the details of a deposit guarantee scheme referred to in subregulation

(2) of this regulation.

(4) A branch of a European credit institution shall not

commence business unless -

(a) it has been informed by the competent authority of

any applicable provisions and that it may establish the branch<

(b) two months have elapsed from the date when the

competent authority received the consent notice.

(5) In the event of a change in any of the particulars

communicated in accordance with subregulation (2) of this

regulation, the European credit institution shall give written notice

of that change to the competent authority and its supervisory authority

at least one month before implementing the change.

(6) For the purposes of this regulation “applicable

provisions” means the Maltese rules with which the European credit

institution is required to comply when carrying on an activity

identified in the consent notice through a branch in Malta.

(1) A European credit institution which is seeking to

provide services in Malta in exercise of a European right shall satisfy

the service conditions specified in subregulation (2) of this regulation

and shall accordingly be exempt from the provisions of subarticle

(1) of article 5 of the Act.

(2) The service conditions for the purposes of this

regulation are that -

(a) the European credit institution has given its

supervisory authority a notice of intention to provide services

in Malta in terms of Article 21 of the Directive< and

(b) the competent authority has received a notice of such

intention from the supervisory authority of the European credit

institution.

(3) When the competent authority has received such a

notice and has been informed of the intention of the European credit

institution to provide services in Malta, it shall, where appropriate -

(a) prepare for the supervision of the European credit

institution< and

(b) notify the European credit institution of the applicable

provisions, if any.

(4) In the event of a change of any of the particulars

provided by the European credit institution in the notice of intention,

the European credit institution shall give written notice of that change

to the competent authority and its supervisory authority before

implementing such change.

(5) For the purposes of this regulation “applicable

provisions” means the Maltese rules which the European credit

institution is required to comply when carrying on an activity

identified in the notice from the supervisory authority of the European

credit institution by providing services in Malta.

(1) The competent authority may, for statistical purposes, Reporting to the

competent

require a European credit institution which has established a branch authority.

in Malta in terms of these regulations, to report periodically on its

activities in Malta.

(2) In discharging its responsibilities within the meaning

of Article 27 of the Directive, the competent authority may require

such a European credit institution to provide the same particulars as

Maltese credit institutions for that purpose.

(3) The competent authority may require a European

credit institution providing services in Malta, to provide the

information necessary for the monitoring of its compliance with the

standards set by the competent authority to the extent permitted by

the Directive.

A European credit institution shall not be prohibited from Advertising.

advertising its services through any available means of

communication in Malta provided that it complies with any

applicable laws and with any relevant banking directives.

(1) Where a European credit institution carries on business On-site

verifications.

in Malta through a branch in exercise of a European right, its

supervisory authority may, after informing the competent authority,

either directly or through an intermediary it appoints for the purpose,

carry out on-site verification of the information within the meaning

of Article 28 as referred to in subarticle (1) of Article 29 of the

Directive.

(2) The foreign authority may also ask the competent

authority to have such on-site verification carried out. The competent

authority shall, within the framework of its powers under the law,

act upon the request by carrying out the verification itself or by

allowing the foreign authority to carry it out or by allowing auditors

or experts to do so.

(3) This regulation shall not affect the right of the

competent authority, in discharging its responsibilities under the

Directive, to carry out on-site verifications of branches established

in Malta.

PART II – Exercise of Passport Rights by Maltese credit

institutions

(1) A Maltese credit institution may exercise a European

right to establish a branch if it satisfies the requirements set out in

the following provisions of this regulation.

(2) The Maltese credit institution shall give the competent

authority a notice of intention to establish a branch which shall

contain -

(a) the Member State or EEA State within the territory

of which the credit institution plans to establish a branch<

(b) a programme of operations identifying the activities

which it seeks to carry on through the branch<

(c) the address of the proposed branch from where

documents may be obtained<

(d) the proposed organizational structure of the branch

and the names of the proposed managers< and

(e) such other information as may be specified by means

of banking directives.

(3) Without prejudice to subregulations (6) and (8) of

this regulation the competent authority shall give a consent notice

within the terms of subregulation (4) of this regulation to the foreign

authority within three months of receiving a complete notice of

intention.

(4)

The consent notice shall –

(a) be given in accordance with the Directive<

(b) certify that the Maltese credit institution is

authorised to act as such a credit institution by the competent

authority<

(c) identify the activities to which consent relates,

which activities are included in the Schedule to these

regulations<

(d) contain the information stated in the notice of

intention given by the Maltese credit institution<

(e) indicate the amount of own funds and solvency ratio

or capital adequacy ratio, as the case may be, of the Maltese

credit institution<

(f) contain details of any deposit guarantee scheme which

is intended to protect the branch’s clients< and

(g) include such other information as may be established

by means of banking directives.

(5) The foreign authority shall be informed by the

competent authority of any change in the details of a deposit

guarantee scheme referred to in paragraph (f) of subregulation (4)

of this regulation.

(6) If the European right of the Maltese credit institution

derives from the Directive and the requirements specified in

subregulation (2) of this regulation are satisfied, the competent

authority shall issue a consent notice to the foreign authority unless

it has reason to doubt the adequacy of the administrative structure

or the financial situation of the Maltese credit institution, taking

into account the activities envisaged>

Provided that in the event of change in any of the particulars

referred to in this subregulation the competent authority shall inform

the foreign authority accordingly.

(7) If the competent authority decides to refuse to give a

consent notice -

(a) it shall, within three months from the date when it

received a complete notice of intention, give the person who

gave that notice the reasons for its decision in writing< and

(b) that person may appeal to the Tribunal and the

provisions of article 10 of the Act shall apply mutatis mutandis.

(8) A branch of the Maltese credit institution shall not

commence business unless -

(a) the foreign authority notifies the Maltese credit

institution of the applicable provisions< or

(b) two months have elapsed from the date on which the

competent authority has given the consent notice without receipt

of any communication from the foreign authority.

(9) In the event of change in any of the particulars

communicated in accordance with subregulation (2) of this

regulation, the Maltese credit institution shall give written notice of

that change to the competent authority and the foreign authority at

least one month before implementing the change.

(10) The prudential supervision of a Maltese credit

institution shall be the responsibility of the competent authority

whether the credit institution establishes a branch or provides services

in another Member State or EEA State or not, without prejudice to

those provisions of the Directive which give responsibility to the

foreign authority.

(11) In this regulation, “applicable provisions” means the

host state rules with which the Maltese credit institution will be

required to comply when conducting business through the proposed

branch in the Member State or EEA State concerned.

(12)

In this regulation, “host state rules” means rules -

(a) made in accordance with the Directive< and

(b) which are the responsibility of the foreign authority

of the Member State or EEA State concerned (as to

implementation, supervision and compliance) in accordance

with the Directive.

(13) The competent authority shall inform the

Commission of the number and type of cases in which there have

been refusals in terms of subregulation (7) of this regulation.

(1) A Maltese credit institution may not exercise a

European right to provide services unless the Maltese credit

institution has given the competent authority, a notice of its intention

to provide services as specified in subregulation (2) of this regulation.

(2) For the purposes of this regulation, a notice of

intention shall -

(a) identify the services which it intends to provide

together with a programme of operations<

(b) sets out the Member State or EEA State in which it

intends to operate< and

(c) includes such other information as may be specified

in banking directives.

(3) If the European right of the Maltese credit institution

derives from the Directive, the competent authority shall, within one

month of receiving a notice of intention, send a copy of it to the

foreign authority. It shall also communicate details of any applicable

deposit guarantee scheme intended to protect depositors.

(4) When the competent authority sends the copy under

subregulation (3) or gives a consent notice, it shall give written notice

to the Maltese credit institution concerned. The Maltese credit

institution may then start to provide the services in question in the

host Member State or EEA State>

Provided that where appropriate, the foreign authority shall, on

receipt of the information from the competent authority, indicate to

the Maltese credit institution the conditions, with which in the interest

of the general good, the provider of the services in question shall

comply in the host Member State or EEA State.

(5) In the event of change of any of the particulars

provided by the Maltese credit institution in the notice of intention,

the Maltese credit institution shall give written notice of that change

to the competent authority and the foreign authority before

implementing such change.

A European right shall entitle a Maltese credit institution Right of Maltese

credit institutions.

to provide one or more services.

Part III – Contraventions by European credit institutions

(1) Where the competent authority ascertains that a Contraventions by

European credit

European credit institution which has a branch or provides services institutions.

in Malta>

(a) has contravened or is likely to contravene the Maltese

rules or any provisions of the Act or any rules or regulations

made thereunder< or

(b) in purported compliance with any such provision, has

furnished it with false, inaccurate or misleading information<

the competent authority shall in writing require the credit institution

concerned to remedy and rectify its position.

(2) If the European credit institution concerned fails to

take the necessary steps to remedy and rectify its position, the

competent authority shall inform the foreign authority of such failure.

(3) If despite the actions taken by the foreign authority

or because such actions prove inadequate or are not available in

Malta, the European credit institution persists in violating the legal

or regulatory provisions referred to in subregulation (1) of this

regulation in force in Malta, the competent authority may, after

informing the foreign authority, take appropriate measures to prevent

or to penalize further irregularities and, in so far as necessary, to

prevent that European credit institution from initiating any further

transactions in Malta.

(4) Any measure adopted pursuant to this regulation shall

be communicated to the European credit institution concerned in

writing, together with reasons justifying such measures and shall be

subject to a right of appeal to the Tribunal and the provisions of

article 10 of the Act shall apply mutatis mutandis.

(5) Notwithstanding the provisions of this regulation, the

competent authority may, in exceptional circumstances, take any

precautionary measures necessary to protect the interests of

depositors and others for whom services are provided. The competent

authority shall inform the Commission and the foreign authority

concerned of such measures at the earliest opportunity.

(6) In the event of withdrawal of authorisation by the

foreign authority, the competent authority shall be informed by the

said foreign authority and shall take appropriate measures to prevent

the European credit institution concerned from initiating any further

transactions in Malta and to safeguard the depositor’s interests.

(7)

A prohibition under this regulation may be -

(a) absolute< or

(b) limited, that is, imposed for a specified event or until

specified conditions are complied with<

and any period, event or conditions specified in the case of a limited

prohibition may be varied by the competent authority and any such

notice shall take effect on such date as is specified in the notice.

PART IV – Companies other than credit institutions

(1) A company, other than a credit institution, the Companies

other than

principal activity of which is to acquire holdings or to carry on one credit institutions.

or more of the activities listed in points 2 to 12 of Annex I to the

Directive, incorporated in the Schedule to these regulations, shall

enjoy a European right in terms of these regulations provided the

following conditions are fulfilled>

(a) the company is a subsidiary of a credit institution or

the jointly-owned subsidiary of two or more credit institutions<

(b) the memorandum and articles of association of the

company permit the carrying on of those activities<

(c) the parent undertaking or undertakings of the

subsidiary are authorised as credit institutions in the Member

State or EEA State by the law of which the subsidiary is

governed<

(d) the activities in question are actually carried on within

the territory of the same Member State or EEA State<

(e) the parent undertaking or undertakings of the

subsidiary hold 90 per cent or more of the voting rights attaching

to shares in the capital of the subsidiary<

(f) the parent undertaking or undertakings of the

subsidiary satisfy the competent authority or the foreign

authority as the case may be, regarding the prudent management

of the subsidiary and have declared, with the consent of the

relevant foreign authority, that they jointly and severally

guarantee the commitments entered into by the subsidiary<

(g) the subsidiary is effectively included, for the activities

in question in particular, in the consolidated supervision of the

parent undertaking, or of each of the parent undertakings, in

accordance with Articles 52 to 56 of the Directive, in particular

for the calculation of the solvency ratio, for the control of large

exposures and for purposes of the limitation of holdings

provided for in Article 51 of the Directive.

(2) Compliance with the conditions referred to in the

foregoing subregulation shall be verified by the foreign authority or

by the competent authority if it is the home Member State or EEA

State, as the case may be, and the latter must supply the subsidiary

with a certificate of compliance which must form part of the consent

notice and notification referred to in paragraph (b) of subregulation

(2) of regulation 3, paragraph (b) of subregulation (2) of regulation

4, subregulation (3) of regulation 8 and subregulation (3) of

regulation 9 of these regulations.

(3) The competent authority or the foreign authority as

the case may be in accordance with the foregoing subregulation,

shall ensure the supervision of the subsidiary in accordance with

subarticle (3) of Article 5 and Articles16, 17, 26, 28, 29, 30 and 32

of the Directive>

Provided that the Articles of the Directive mentioned in this

subregulation shall apply mutatis mutandis to subsidiaries and the

words “credit institution” therein shall be read as if they were a

reference to “financial institution fulfilling the conditions laid down

in Article 19” and references to the word “authorisation” were

references to “memorandum and articles of association”.

(4) The competent authority or the foreign authority as

the case may be in accordance with subregulation (2) of this

regulation shall also communicate the amount of own funds of the

subsidiary financial institution and the consolidated solvency ratio

of the credit institution which is its parent undertaking.

(5) If a company eligible under this regulation should

cease to fulfil any of the conditions imposed, the competent authority

or the foreign authority as the case may be, shall notify the other

authority and the activities carried on by that institution in the host

Member State or EEA State become subject to the legislation of the

host Member State or EEA State.

PART V – Applicability Provisions

(1) A person who, on the date of the coming into force of

these regulations was in possession of a licence issued by the

competent authority which covers the provision of point 1 of Annex

I to the Directive, incorporated in the Schedule to these regulations

and any other additional activities included in such Annex shall be

deemed to be a Maltese credit institution for the purposes of these

regulations>

Provided that such person conforms with all applicable banking

directives issued by the said competent authority.

(2) Every licence issued after the coming into force of

these regulations shall indicate whether the licence holder is a credit

institution in terms of these regulations.

PART VI – Interpretation

These regulations shall apply mutatis mutandis to Interpretation.

companies fulfilling the conditions laid down in regulation 12 of

these regulations, being companies authorised either by the foreign

authority or by the competent authority< and accordingly the words

“European credit institution” shall be read as if it were a reference

to a company or other body corporate authorised by the foreign

authority and the words “Maltese credit institution” be read as if

they were a reference to companies authorised by the competent

authority.

(1) The objective of these regulations is to implement Objective.

the relevant provisions of the Directive as amended and shall be

interpreted and applied accordingly.

(2) In the event that any of these regulations conflict with

the provisions of the Directive, the latter shall prevail.