Depositor Compensation Scheme (Amendment) Regulations,

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 18,463, 7 ta’ Awissu, 2009

Taqsima B

L.N. 227 of 2009

BANKING ACT

(CAP. 371)

Depositor Compensation Scheme (Amendment) Regulations,

IN exercise of the powers conferred by articles 3 and 28A

of the Banking Act, the Minister of Finance, the Economy and

Investment, acting on the advice of the Malta Financial Services

Authority, has made the following regulations

(1) The title of these regulations is the Depositor Citation and scope.

Compensation Scheme (Amendment) Regulations, 2009 and

they shall be read and construed as one with the Depositor

Compensation Scheme Regulations, 2003, hereinafter referred to L.N. 369 of 2003.

as “the principal regulations”.

(2) The objective of these regulations is to implement

Directive 2009/14/EC of the European Parliament and of the

Council of the 11 March 2009 amending Directive 94/19/EC on

deposit guarantee schemes as regards the coverage level and the

payout delay.

In regulation 1A of the principal regulations, for the words Amends regulation

“on deposit guarantee schemes,”, there shall be substituted the words, 1A of the principal

“on deposit guarantee schemes, as amended by Directive 2009/14/EC

of the European Parliament and of the Council of the 11 March 2009,

hereinafter in these regulations referred to as the Directive,”.

In regulation 2 of the principal regulations, immediately Amends regulation

after the definition “depositor”, there shall be added the following 2 regulations.

new definition

“ “Depositor Guarantee Scheme Reserve” shall have the

meaning assigned to it in paragraph 5 of the Second Schedule

of the principal regulations;”.

Regulation 6 of the principal regulations shall be Amends regulation

amended as follows

(a) in sub-regulation (3) thereof, for the words

“under any terms it may consider appropriate, provided that

borrowings do not exceed 30 per cent of the net asset value of

the Scheme.”, there shall be substituted the words “under any

terms it may consider appropriate.”;

(b) sub-regulation (5) thereof shall be re-numbered as

sub-regulation (6); and

(c) immediately after sub-regulation (4) thereof, there

shall be inserted the following new sub-regulation

“(5) The Management Committee shall ensure

that the Scheme performs regular tests of its internal

systems.”.

Sub-regulation (2) of regulation 8 of the principal

regulations shall be amended as follows

(a) for the words “on the operation of the Scheme within

three months from the financial year end of the Scheme.”,

there shall be substituted the words “on the operation of the

Scheme within five months from the financial year end of the

Scheme.”;

(b) in paragraph (a) thereof, for the words “financial

year; and”, there shall be substituted the words “financial

year;”;

(c) paragraph (b) thereof shall be re-numbered as

paragraph (c); and

(d) immediately after paragraph (a) thereof, there shall

be inserted the following new paragraph

“(b) a statement showing the results of regular tests

of internal systems undertaken by the Scheme; and”.

Regulation 11 of the principal regulations shall be

amended as follows

(a) in sub-regulation (4) thereof, for the words “the

Management Committee shall determine all the relative

obligations and conditions of the new participant as set out in

the Third Schedule.”, there shall be substituted the words “it

shall pay contributions and establish a Reserve in the manner

established in the Second Schedule of these regulations.”; and

(b) immediately after sub-regulation (4) thereof there

shall be inserted the following new sub-regulation

“(5) In the cases referred to in subregulations (1)

to (4) of this regulation, the Scheme shall cooperate with

similar schemes set up in any other country.”.

In sub-regulation (1) of regulation 13 of the principal

regulations, for the words “within twenty one days of the

occurrence of such circumstances.”, there shall be substituted

the words “as soon as possible and in any event no later than five

working days after first becoming satisfied that a credit institution

has failed to repay deposits which are due and payable.”.

Regulation 14 of the principal regulations shall be

amended as follows

(a) for sub-regulation (4) thereof, there shall be

substituted the following

“(4) The Management Committee shall proceed

to pay compensation for verified claims within twenty

working days of the date of the determination given

in terms of regulation 13(1). This time limit includes

the collection and transmission of the accurate data on

depositors and deposits, which are necessary for the

verification of claims

Provided that the Management Committee may, in

wholly exceptional circumstances and in special cases,

apply to the competent authority for an extension of this

period by a further period not exceeding ten working

days.”; and

(b) immediately after sub-regulation (4) thereof, there

shall be added the following new sub-regulation

“(5) Credit institutions shall ensure that they

have electronic information systems in place to the

satisfaction of the Scheme to enable the Scheme to

process claims for compensation by depositors and this

at all times, whether or not a determination has been

made under regulation 13(1) of these regulations.”.

For regulation 16 of the principal regulations, there shall

be substituted the following

“16. Whenever it appears to the Management Committee

that the funds for the time being held by the Scheme are

inadequate for the Management Committee to exercise its

functions, the Management Committee may require a Special

Contribution to be paid to the Scheme by participants.

The Management Committee may direct that such Special

Contribution be paid in whole or in part out of funds

reserved for this purpose by the participant in the Depositor

Compensation Scheme Reserve in accordance with the

Second Schedule. Such Special Contribution shall be paid to

the Scheme within ten working days of its being requested.”.

For sub-regulation (1) of regulation 17 of the principal

regulations, there shall be substituted the following

“(1) The total amount of compensation that may be

paid out to a depositor in respect of that depositor’s eligible

deposits shall be 100,000 euro or its equivalent in any

designated currency.”.

In sub-regulation (1) of regulation 18 of the principal

regulations, for the words “means the total aggregate liability of

the credit institution”, there shall be substituted the words “means

the aggregate liability of the credit institution”.

For the marginal note to regulation 19 of the principal

regulations, there shall be substituted the words “Compensation

payable.”.

For regulation 25 of the principal regulations there

shall be substituted the following

(1) Credit institutions shall make available

“Availability

of information

to

current

or prospective depositors adequate and

advertisements. clear information for the identification of the deposit

compensation scheme to which the institution or its

branches are members within any EEA State or any

alternative arrangement provided for in the second

subparagraph of Article 3(1) or in Article 3(4) of the

Directive.

(2) Credit institutions shall also inform

current or prospective depositors of the provisions

of the deposit compensation scheme or any

alternative arrangement applicable, including the

amount, scope and conditions of the cover offered

by the Scheme.

(3) When a deposit is not guaranteed by a

deposit compensation scheme, the credit institution

shall inform its depositor accordingly.

(4) Upon request, credit institutions

shall also make available to current depositors

information about the conditions for compensation

and the formalities which must be completed to

obtain compensation from the Scheme.

(5) All information shall be made available

in a readily comprehensible manner.

(6) Credit institutions shall ensure that

any information on the protection of depositors

provided in advertisements shall be restricted to

references to the deposit protection scheme to

which the credit institution belongs.

(7) The competent authority may from

time to time, and in addition, specify such other

information that credit institutions are to provide to

depositors regarding the Scheme and its operations,

as well as the manner and form in which such

information shall be provided.”.

14. Regulation 35 of the principal regulations shall be re-

numbered as regulation 37 thereof.

15. Immediately after regulation 34 of the principal

regulations there shall be inserted the following new regulations 35

(1) The competent authority and the Scheme

“Exchange of

shall have the power to exchange any information to the

extent necessary for the performance of their functions

and duties and in furtherance of their respective

functions at law and the duties of confidentiality shall

apply to such communications.

(2) Where the competent authority detects

problems in a credit institution that are likely

to give rise to the intervention of the Scheme

or similar schemes in any other country, it shall

immediately inform such schemes of these

problems.

The Minister responsible for finance shall

Information to

be provided by inform the European Commission and the European

Banking Committee if it intends to change the scope

or level of coverage for deposits and on any difficulty

encountered when cooperating with other Member

States. The competent authority and the Scheme shall

inform the said Minister of any such difficulties.”.

16. For the Second Schedule to the principal regulations

there shall be substituted the following

“ SECOND SCHEDULE

Contributions in terms of regulation 12

1. Contributions to the Scheme

All credit institutions participating in the Scheme shall make

contributions to the Scheme as follows

(a) Initial Contribution;

(b) Supplementary Contributions;

(c) Special Contributions.

2. Initial Contribution

(a) An Initial Contribution shall be paid by every

participant.

(b) Such contribution shall be paid within 30 calendar

days from the date when the credit institution shall become

liable to participate in and contribute to the Scheme

Provided that in regard to participants to which the

second proviso to regulation 11 (1) applies, such contribution

shall be paid simultaneously with the credit institution’s

request to participate in the Scheme.

(c) The amount of the Initial Contribution shall be

€23,300 per participant.

(d) The Management Committee may, in consultation

with the competent authority, postpone part or all of the

payment of the Initial Contribution and determine a time

schedule for the payment thereof.

3. Supplementary Contribution

(a) A supplementary contribution shall be paid by

every participant.

(b) In every calendar year (hereinafter referred to as

“the year of assessment”), the accumulated supplementary

contributions for each participant shall be equivalent to

the value arrived at by multiplying the amount of the

eligible deposits of that participant as at the end of the year

immediately preceding the year of assessment with the

percentage rate that is applicable to the year of assessment in

accordance with the following table

Year of Assessment

Percentage rate

0.188 %

0.275 %

0.363 %

0.450 %

(c) By not later than 1st March in every year, every

participant shall ensure that the aggregate payments made

by it to the Scheme on or before such date in respect of the

supplementary contribution are equivalent to the amount as

determined in paragraph (b).

(d) A participant shall not be eligible for a refund if

the aggregate amount of payments to the Scheme in respect

of its supplementary contribution amounts to more than the

percentage rate.

(e) The Management Committee may authorize the

contribution due in any particular year to be paid in two

equal instalments; if such authorization is granted, the first

instalment shall be paid by not later than 1st March of that

year and the second instalment shall be paid by not later than

six months thereafter.

(f) In the case of eligible deposits held in a designated

currency other than euro, the Supplementary Contribution

shall be calculated on the euro equivalent of such eligible

deposits and in all cases shall be paid in euro.

4. Special Contribution

(a) The Management Committee may at any time levy

special contributions from participants in order to meet the

commitments of the Scheme.

(b) The Management Committee may refund part or

all of such special contributions not utilised, or not expected

to be utilised for the following twelve months, to participants.

No interest shall be payable on Special Contributions

refunded to participants.

(c) A request for payment of special contributions shall

be in writing, and shall specify the amount due and by when.

5. Setting up of a “Depositor Compensation Scheme

Reserve”

(a) Every participant shall establish a Depositor

Compensation Scheme Reserve (hereinafter referred to as

“the Reserve”) for the payment of its Special Contribution in

accordance with regulation 16.

(b) In every year of assessment, the Reserve of each

participant shall consist of funds, the accumulated value of

which shall be not less than the value arrived at by multiplying

the amount of the eligible deposits of that participant as at the

end of the year immediately preceding the year of assessment

with the percentage rate that is applicable to the year of

assessment in accordance with the following table

Year of Assessment

Percentage rate

0.20 %

0.24 %

0.28 %

0.32 %

(c) Funds in the Reserve shall be held by the

participant at all times in admissible assets, and shall be

pledged in favour of the Depositor Compensation Scheme in

guarantee of the participant’s liabilities under regulation 16 at

no cost to, and to the full satisfaction of, the Scheme.

(d) Assets shall be admissible within the meaning of

regulation 12 on condition that

(i) at least 60% thereof are denominated in euro,

and not more than 40% thereof are denominated in Great

Britain pounds and/or US dollars; and

(ii) at least 25% thereof have a maximum

maturity period of not more than thirty days; and

(iii) in the case of securities, they are listed on a

recognised investment exchange established in the EEA;

(iv) where at the start of any calendar year the

total value of the Reserve of a participant is more than

€100,000, then at least 60% of the admissible assets

shall consist of debt securities issued by national or

international institutions, governments or central bank

authorities that are established in the EEA, and which

have a long term credit rating of not less than A; and

(v) where at the start of any calendar year the

total value of the Reserve of a participant:-

(I) is more than €100,000, then not more

than 40% of the admissible assets may consist of

any one or more of the following

(a) deposits held with a bank

established in the EEA having a long term

credit rating of not less than A, which deposits

shall have a maximum maturity period of not

more than thirty days;

(b) debt securities issued by a

corporate entity established in the EEA which

security has a long term credit rating of not

less than AA;

(c) such other assets as may be

determined by the Competent Authority

in consultation with the Management

Committee.

(II) is equal to or less than €100,000, then

such admissible assets shall consist of any one or

more of the following

(a) debt securities issued by national

or international institutions, governments or

central bank authorities that are established in

the EEA, and which have a long term credit

rating of not less than A;

(b) deposits held with a bank established

in the EEA having a long term credit rating of

not less than A, which deposits shall have a

maximum maturity period of not more than

thirty days;

(c) debt securities issued by a corporate

entity established in the EEA which security

has a long term credit rating of not less than

AA;

(d) such other assets as may be

determined by the Competent Authority

in consultation with the Management

Committee.

(e) Assets shall not be admissible within

the meaning of regulation 12 if

(i) such assets are hypothecated, pledged

or otherwise charged in any manner to a

third party, or their alienation is otherwise

restricted; or

(ii) in the case of assets comprising

bank deposits or debt securities, such assets

are effected with the participant or a related

party of the participant. For the purposes of

these Regulations, a related party shall be

interpreted in accordance with International

Accounting Standard 24 issued by the

International Accounting Standards Board and

any amendment, modification or substitution

of such Standard, or in accordance with such

Guidelines as are issued by the Competent

Authority upon consultation with the

Management Committee; or

(iii) such assets do not comply with

such conditions as may be determined by the

Competent Authority in consultation with the

Management Committee.

(f) The value of assets in the Reserve shall

be the market value of such assets, determined

in accordance with such discounting rules

(hereinafter referred to as “Valuation Haircuts”) as

shall be established by the Competent Authority in

consultation with the Management Committee.

(g) At the start of every calendar year, each

participant shall ensure that the current value of the

assets in the Reserve is at least equal to the value

as determined in paragraphs (b) and (f). If this

requirement is not satisfied, the participant shall

take immediate steps to increase the amount of its

pledged investments by 1st March of that same

year.

(h) A participant may not switch from one

asset comprised in the Reserve to another asset,

without the written consent of the Management

Committee.

(i) A participant may deposit the entire

amount of the Reserve directly with the Scheme, in

which case such deposit shall be on account of the

participant’s liabilities under regulation 16, and the

provisions of this Schedule shall where applicable

also be applicable to such deposit. No interest

shall be payable by the Scheme to the participant

in regard to such deposit.

6. Other conditions

(a) A credit institution which has ceased to be a

participant of the Scheme shall not be entitled to a refund of

any contributions paid to the Scheme.

(b) A participant shall submit to the Management

Committee by not later than 1 April of each year a detailed

statement regarding its contributions and Reserve. Such

statement shall be signed by the authorized representative

of the participant and certified by the participant’s appointed

auditors. In respect of the Reserve, the statement shall also

include the nominal and market value of the Reserve assets,

their composition, as well as a maturity and liquidity date

schedule according to the type of each asset.”.

17. The Third Schedule to the principal regulations shall be

deleted.

€1.12