European Passport Rights for Credit Institutions Regulations, 2011

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 18,835, 25 ta’ Novembru, 2011

Taqsima

L.N. 459 of 2011

BANKING ACT

(CAP. 371)

European Passport Rights for Credit Institutions Regulations, 2011

IN exercise of the powers conferred by article 3 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:-

The title of these regulations is the European Passport Citation.

Rights for Credit Institutions Regulations, 2011.

Annex I to the Capital Requirements Directive

LIST OF ACTIVITIES SUBJECT TO MUTUAL RECOGNITION

1. Acceptance of deposits and other repayable funds;

2. Lending including, inter alia: consumer credit, mortgage credit,

factoring, with or without recourse, financing of commercial transactions

(including forfeiting);

3. Financial Leasing;

4. Payment services as defined in Article 4(3) of Directive 2007/64/EC of

the European Parliament and of the Council of 13 November 2007 on payment

services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/

60/EC and 2006/48/EC and repealing Directive 97/5/EC;

5. Issuing and administering other means of payment (e.g. travellers

cheques and bankers’ drafts) in so far as this activity is not covered by activity 4

above;

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;

B B 5735

12. Safekeeping and administration of securities;

13. Credit reference services;

14. Safe custody services;

15. Issuing of electronic money.

The services and activities provided for in Section A and Section B of

Schedule I to the European Passport Rights for Investment Firms Regulations

when referring to the instruments provided for in Section C of the said Schedule

are subject to mutual recognition.

€0.81

(1)

In these regulations, unless the context otherwise Interpretation.

requires -

''the Act'' means the Banking Act;

''Banking Rules'' means the Banking Rules within the meaning

of article 4(2) of the Act;

''branch'' means 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;

''Capital Requirements Directive" means Council Directive

2006/48/EC of 14 June 2006, relating to the taking up and pursuit of

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

updated from time to time, and includes any implementing measures

that have been issued or may be issued thereunder;

''Commission'' means the Commission of the European

Communities;

''competent authority'' means the Malta Financial Services

Authority established under the Malta Financial Services Authority Cap. 330.

Act;

''credit institution" means an undertaking whose business is to

receive deposits or other repayable funds from the public and to grant

credits for its own account;

''EEA State'' means a State which is a contracting party to the

agreement on the European Economic Area signed at Oporto on the

2nd May, 1992 as amended by the Protocol signed at Brussels on 17th

March 1993 and as amended from time to time;

''European credit institution'' means a credit institution as

defined in Article 1 of the Capital Requirements Directive authorised

by its European regulatory authority within the meaning of Article 4

of the Capital Requirements Directive or authorised by a European

regulatory authority in an EEA State;

''European regulatory 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 Capital Requirements

Directive, or

(b)

to carry out the duties provided for in the Capital

Requirements Directive in relation to a Maltese credit

institution exercising or proposing to exercise a European right;

''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 Capital

Requirements Directive and subject to any rules, regulations or

Banking Rules made under the Act implementing such

requirements;

''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 Capital Requirements

Directive; and

(b)

which are the responsibility of the competent

authority (as to implementation, supervision and compliance) in

accordance with the Capital Requirements Directive and subject

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

Banking Rules made thereunder;

''Member State'' means a Member State of the European

Communities;

''Treaty'' means the 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.

(2) Words and expressions which are also used in the Act and

are not defined herein, shall have the same meaning as in the Act.

Part I - Exercise of passport rights by European credit

institutions

(1)

A European credit institution which is seeking to Exercise of

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

by European

satisfy the establishment conditions specified in sub-regulation (2) credit

institutions -

and shall be exempt from the provisions of article 5(1) of the Act.

establishment.

(2) The establishment conditions for the purposes of this

regulation are that -

(a)

the European credit institution has given the

European regulatory 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 Capital Requirements Directive;

(b)

the competent authority has received a consent

notice, in accordance with paragraph (c), from the European

regulatory 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 Capital

Requirements Directive;

(ii) certify that the European credit institution is

authorised to act as a credit institution by the European

regulatory authority;

(iii) identify the activities to which the consent

relates, which activities are included in the Schedule;

(iv) contain the information stated in the notice of

the European credit institution referred to in paragraph (a);

(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 European regulatory 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 sub-regulation (2).

(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) The competent authority shall, within the two month

period stipulated in sub-regulation (4), prepare for the supervision of

the European credit institution.

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

communicated in accordance with sub-regulation (2), the European

credit institution shall give written notice of that change to the

competent authority and its European regulatory authority at least one

month before implementing the change.

(7) 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 Exercise of

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

by European

the service conditions specified in sub-regulation (2) and shall credit

institutions -

accordingly be exempt from the provisions of article 5(1) of the Act. services.

(2) The service conditions for the purposes of this regulation

are that -

(a)

the European credit institution has given its

European regulatory authority a notice of intention to provide

services in Malta in terms of Article 21 of the Capital

Requirements Directive; and

(b)

the competent authority has received a notice of

such intention from the European regulatory 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, the competent authority shall,

where appropriate, notify the European credit institution of any

applicable provisions.

(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 European regulatory authority before

implementing such change.

(5) 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

notice from the European regulatory authority of the European credit

institution by providing services in Malta.

A European credit institution which is seeking to appoint Exercise of

tied agents in Malta in exercise of a European right and in terms of passport

by European

Council Directive 2004/39/EC of the European Parliament and of the credit

institutions -

Council of 21 April 2004 on markets in financial instruments, tied agents.

amending Council Directives 85/611/EEC and 93/6/EEC and

Directive 2000/12/EC of the European Parliament and of the Council

and repealing Council Directive 93/22/EEC, shall be subject to the

requirements of the Investment Services Act (Tied Agents) S.L. 370.14

Regulations.

(1)

The competent authority may, for statistical

purposes, require a European credit institution which has established

a branch 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 41 of the Capital Requirements 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 Capital

Requirements Directive.

A European credit institution shall not be prohibited from

advertising its services through any available means of

communication in Malta provided that it complies with any

applicable laws and with any relevant Banking Rules.

(1)

Where a European credit institution carries on

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

European regulatory 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 42 as referred to in Article 43(1) of the Capital

Requirements Directive.

(2) The European regulatory 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 European regulatory 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 Capital

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

established in Malta.

A European credit institution which has established a

branch in Malta in terms of these regulations shall be subject to a

yearly renewal fee equivalent to zero point zero zero zero one seven

five (0.000175) of the branch’s deposit liabilities as reported at the

end of the year preceding the year immediately before the year in

which the fee is payable

Provided that the annual amount payable by the branch of a

European credit institution established in Malta by way of renewal

fee shall in no case be less than twenty-one thousand two hundred and

fifty euro (€21,250) and more than five hundred thousand euro

(€500,000)

Provided further that the first renewal fee payable by the branch

of a European credit institution established in Malta after 1st January

of any calendar year shall be equal to a proportion of such fee that

would have been otherwise payable in respect of the whole calendar

year in which the branch was established.

Part II - Exercise of passport rights by Maltese credit institutions

(1)

A Maltese credit institution may exercise a Exercise of

European right to establish a branch if it satisfies the requirements set passport

by Maltese

out in the following provisions of this regulation.

credit

institutions -

establishment.

(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 Rules.

(3) Without prejudice to sub-regulations (6) and (8), the

competent authority shall give a consent notice within the terms of

sub-regulation (4) to the European regulatory authority within three

months of receiving a complete notice of intention.

(4) The consent notice shall -

(a)

be given in

accordance

with

the

Capital

Requirements 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;

(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 Rules.

(5) The European regulatory authority shall be informed by

the competent authority of any change in the details of a deposit

guarantee scheme referred to in sub-regulation (4)(f).

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

derives from the Capital Requirements Directive and the

requirements specified in sub-regulation (2) are satisfied, the

competent authority shall issue a consent notice to the European

regulatory 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 sub-regulation the competent authority shall inform

the European regulatory 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 European regulatory 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 European regulatory

authority.

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

communicated in accordance with sub-regulation (2), the Maltese

credit institution shall give written notice of that change to the

competent authority and the European regulatory 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 Capital Requirements Directive which give

responsibility to the European regulatory 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 Capital Requirements

Directive; and

(b)

which are the responsibility of the European

regulatory authority of the Member State or EEA State

concerned (as to implementation, supervision and compliance)

in accordance with the Capital Requirements Directive.

(13) The competent authority shall inform the Commission and

the European Banking Authority of the number and type of cases in

which there have been refusals in terms of sub-regulation (7).

(1)

A Maltese credit institution may not exercise a Exercise of

European right to provide services unless the Maltese credit passport

by Maltese

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

institutions -

to provide services as specified in sub-regulation (2).

services.

(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)

set out the Member State or EEA State in which it

intends to operate; and

(c)

include such other information as may be specified

in Banking Rules.

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

derives from the Capital Requirements Directive, the competent

authority shall, within one month of receiving a notice of intention,

send a copy of it to the European regulatory 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 sub-

regulation (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 European regulatory

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 European regulatory authority before

implementing such change.

A European right shall entitle a Maltese credit institution

to provide one or more services.

Part III - Contraventions by European credit institutions

(1)

Where the competent authority ascertains that a

European credit institution which has a branch or provides services 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 European regulatory authority of such

failure.

(3) If, despite the actions taken by the European regulatory

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 sub-regulation (1) in

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

European regulatory 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, the European Banking

Authority and the European regulatory authority concerned of such

measures at the earliest opportunity.

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

European regulatory authority, the competent authority shall be

informed by the said European regulatory 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 - Collaboration between Regulatory Authorities

(1)

Where credit institutions that have their head office

in Malta operate in another Member State or EEA State, or where

credit institutions have their head office in another Member State or

EEA State and operate in Malta, the competent authority shall

collaborate closely with the European regulatory authority concerned.

(2) The competent authority shall, in particular, collaborate

with the other European regulatory authority where branches are

concerned and it shall supply such European regulatory authority with

all information concerning

(a)

the management and ownership of such credit

institutions that is likely to facilitate their supervision;

(b)

the examination of the conditions for their

authorisation; and

(c)

all information likely to facilitate the monitoring of

such institutions, in particular with regard to liquidity, solvency,

deposit guarantees, the limiting of large exposures,

administrative and accounting procedures and internal control

mechanisms.

(3) Where the competent authority requests information to be

provided to it for the purposes of its obligations under the Capital

Requirements Directive, the Act, regulations or Banking Rules issued

under the Act, and such request for collaboration is rejected or is not

acted upon within a reasonable time, the competent authority may

refer such situation to the European Banking Authority.

Part V - Companies other than credit institutions

(1)

A company, other than a credit institution, the

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

more of the activities listed in points 2, 3 and 5 to 12 of Annex I to the

Capital Requirements 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 European

regulatory authority, as the case may be, regarding the prudent

management of the subsidiary and have declared, with the

consent of the relevant European regulatory 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 125 to 143 of the

Capital Requirements Directive, in particular for the calculation

of the capital requirements, for the control of large exposures

and for the purposes of the limitation of holdings provided for in

Articles 120 to 122 of the Capital Requirements Directive.

(2) Compliance with the conditions referred to in the

foregoing sub-regulation shall be verified by the European regulatory

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 regulation 3(2)(b),

regulation 4(2)(b), regulation 10(3) and regulation 11(3).

(3) The competent authority or the European regulatory

authority, as the case may be, in accordance with the foregoing sub-

regulation, shall ensure the supervision of the subsidiary in

accordance with Articles 10(1), 19 to 22, 40, 42 to 52 and 54 of the

Capital Requirements Directive

Provided that the Articles of the Capital Requirements Directive

mentioned in this sub-regulation 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 European regulatory

authority, as the case may be, in accordance with sub-regulation (2)

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

European regulatory 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 shall become subject to the

legislation of the host Member State or EEA State.

Part VI - 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 Capital Requirements 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

Rules 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 VII - Interpretation

These regulations shall apply mutatis mutandis to

companies fulfilling the conditions laid down in regulation 15, being

companies authorised either by the European regulatory authority or

by the competent authority; and accordingly the words ''European

credit institution'' shall be read as if they were a reference to a

company or other body corporate authorised by the European

regulatory authority, and the words ''Maltese credit institution'' shall

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 Capital Requirements 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 Capital Requirements Directive, the latter shall

prevail.

(1)

The European Passport Rights

for

Credit Revokes the

European

Institutions Regulations, 2004 are hereby revoked.

Passport Rights

for Credit

Institutions

(2) Every authorisation, licence, approval or order taken,

Regulations,

granted or commenced thereunder, shall continue to be valid and in

2004. L.N. 88 of 2004.

force, as if such authorisation, licence, approval or order were taken,

granted or commenced under these regulations.

In terms of article 29B of the Act, these regulations are Language.

being published in the English language only.

B B 5734