Regulations, 2015

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 19,406, 10 ta’ April, 2015

L.N. 131 of 2015

BANKING ACT

(CAP. 371)

Administrative Penalties, Measures and Investigatory Powers

Regulations, 2015

IN exercise of the powers conferred by article 3 of the Banking

Act, the Minister for Finance, acting on the advice of the Malta

Financial Services Authority, has made the following regulations:-

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

scope.

Penalties, Measures and Investigatory Powers Regulations, 2015.

(2) The purpose of these regulations is to implement Articles

64(2) and 65 to 72 of the CRD.

(1)

In these regulations, unless the context otherwise Interpretation.

requires -

"the Act" means the Banking Act;

"the CRD" means Directive 2013/36/EU of the European

Parliament and of the Council of 26 June 2013 on access to the

activity of credit institutions and the prudential supervision of credit

institutions and investment firms amending Directive 2002/87/EC

and repealing Directives 2006/48/EC and 2006/49/EC, as amended

from time to time, and includes any implementing measures that have

been or may be issued thereunder;

"the CRR" means Regulation (EU) No 575/2013 of the

European Parliament and of the Council of 26 June 2013 on

prudential requirements for credit institutions and investment firms

and amending Regulation (EU) No 648/2012, as amended from time

to time, and includes any implementing measures that have been or

maybe issued thereunder;

"mixed activity holding company" shall have the same meaning

as that assigned to it in point (22) of Article 4(1) of the CRR;

"subsidiary" shall have the same meaning as that assigned to it

in point (16) of Article 4(1) of the CRR.

(2) Words and expressions used in these regulations which are

also used in the Act but which are not defined herein, shall have the

same meaning as in the Act.

Part I - Powers of the competent authority

The competent authority shall exercise its supervisory

powers and its powers to impose penalties in such a way as to ensure

full and complete adherence to the requirements and obligations

arising out of the Act and any regulations made and Banking Rules

issued thereunder, and the CRR, either directly or in collaboration

with overseas regulatory authorities, in terms of law and as warranted

by the relevant circumstances, and shall take all measures necessary

to ensure that such administrative penalties are implemented.

(1) Without prejudice to articles 35 and 35A of the Act,

to any regulations made under article 3(1)(e) of the Act and to the

supervisory powers of the competent authority referred to in

regulation 3, the competent authority shall impose administrative

penalties and other administrative measures in respect of breaches of

(a) the provisions of the Act and, or of any regulations

made and, or Banking Rules issued thereunder, and, or

(b)

the provisions of the CRR.

(2) The administrative penalties and other administrative

measures taken pursuant to sub-regulation (1) shall be effective,

proportionate and dissuasive.

(3) Where the obligations arising under the Act or under any

regulations made or Banking Rules issued thereunder and the CRR,

apply to credit institutions, financial holding companies and mixed

financial holding companies, in the event of a breach of any such

obligation or of a failure to comply with a directive issued by the

competent authority under the Act, or any regulations made or

Banking Rules issued thereunder and under the CRR, the competent

authority may, subject to the conditions laid down in Maltese law, by

notice in writing and without recourse to a court hearing, impose

administrative penalties on directors, and on other natural persons

who under Maltese law are responsible for the breach or for the

failure to comply with any such directive.

(4) The competent authority may impose administrative

penalties or other administrative measures aiming to end observed

breaches or the causes of such breaches, on financial holding

companies, mixed financial holding companies, and mixed activity

holding companies, or their effective managers, which are responsible

for the breach of the provisions of the Act and any regulations made

and Banking Rules issued thereunder transposing the requirements of

Chapter 3 of Title VII of the CRD.

(1) The competent authority shall have all the Investigatory

information gathering powers and investigatory powers which are and

gathering

necessary for the exercise of its functions. Without prejudice to other powers

competent

relevant provisions laid down in the Act, in any regulations made and authority.

Banking Rules issued thereunder, in the CRD, and the CRR, the

powers shall include

(a) the power to require the following natural or legal

persons to provide all information that is necessary in order to

carry out the tasks of the competent authority, including

information to be provided at recurring intervals and in

specified formats for supervisory and related statistical

(i)

credit institutions established in Malta;

(ii) financial holding companies established in

Malta;

(iii) mixed

financial

holding

companies

established in Malta;

(iv) mixed activity holding companies established

in Malta;

(v) persons belonging to the entities referred to in

sub-paragraphs (i) to (iv);

(vi) third parties to whom the entities referred to

in sub-paragraphs (i) to (iv) have outsourced operational

functions or activities;

(b) the power to conduct all necessary investigations of

any person referred to in paragraph (a)(i) to (vi) established or

located in Malta where necessary to carry out the tasks of the

competent authority, including the right to

(i)

require the submission of documents;

(ii) examine the books and records of the persons

referred to in paragraph (a)(i) to (vi) and the right to take

copies or extracts from such books and records;

(iii) obtain written or oral explanations from any

person referred to in paragraph (a)(i) to (vi) or their

representatives or staff; and

(iv) interview any other person who consents to

be interviewed for the purpose of collecting information

relating to the subject matter of an investigation;

(c)

the power, subject to other conditions set out in

European Union law, to conduct all necessary inspections at the

business premises of the legal persons referred to in paragraph

(a)(i) to (vi) and any other undertaking included in consolidated

supervision where the competent authority is the consolidating

supervisor, subject to the prior notification of the overseas

regulatory authorities concerned.

Where a natural or legal person is found by the competent

authority to have committed any of the following breaches

(a)

carrying out the business of taking deposits or other

repayable funds from the public without being a credit

institution, in breach of article 5 of the Act;

(b) commencing activities as a credit institution without

obtaining a licence, in breach of article 5 of the Act;

(c)

acquiring, directly or indirectly, a qualifying holding

in a credit institution licensed in terms of the Act or further

increasing, directly or indirectly, such a qualifying holding, as a

result of which the proportion of the voting rights or of the

capital held would reach or exceed the thresholds referred to in

article 13(1) of the Act or so that such credit institution would

become its subsidiary, without notifying in writing the

competent authority, during the assessment period, or

notwithstanding the refusal of the competent authority, in

breach of article 13(1) of the Act;

(d) disposing, directly or indirectly, of a qualifying

holding in a credit institution licensed in terms of the Act or

reducing a qualifying holding so that the proportion of the

voting rights or of the capital held would fall below the

thresholds referred to in article 13(3) of the Act or so that such

credit institution would cease to be a subsidiary, without

notifying in writing the competent authority;

the administrative penalties and other administrative measures which

the administrative penalties and other administrative measures which

the competent authority may apply on such a person shall include at

least the following

(i) a public statement which identifies the natural

person, credit institution, financial holding company or

mixed financial holding company responsible and the

nature of the breach;

(ii) an order requiring the natural or legal person

responsible to cease the conduct and to desist from a

repetition of that conduct;

(iii) in the case of a legal person, administrative

pecuniary penalties of up to 10% of the total annual net

turnover including the gross income consisting of interest

receivable and similar income, income from shares and

other variable or fixed-yield securities, and commissions

or fees receivable in accordance with Article 316 of the

CRR of the undertaking in the preceding business year

Provided that where the legal person is a

subsidiary of a parent undertaking, the relevant gross

income shall be the gross income resulting from the

consolidated account of the ultimate parent undertaking in

the preceding business year;

(iv) in the case of a natural person, administrative

pecuniary penalties of up to five million euro

(€5,000,000);

(v) administrative pecuniary penalties of up to

twice the amount of the benefit derived from the breach

where that benefit can be determined;

(vi) suspension of the voting rights of the

shareholder or shareholders held responsible for the

breaches referred to in this regulation.

(1) This regulation shall apply at least in any of the Other

provisions.

following circumstances

(a)

a credit institution has obtained a licence through

false statements or any other irregular means;

(b) a credit institution, on becoming aware of any

acquisitions or disposals of holdings in their capital that cause

holdings to exceed or fall below one of the thresholds referred

to in article 13(1) or article 13(3) of the Act, fails to inform the

competent authority of those acquisitions or disposals in breach

of article 13(5) of the Act;

(c)

a credit institution listed on a regulated market as

referred to in the list to be published by the European Securities

and Markets Authority established by Regulation (EU) No

1095/2010 in accordance with Article 47 of Directive 2004/39/

EC of the European Parliament and of the Council of 21 April

2004 on markets in financial instruments, does not, at least

annually, inform the competent authority of the names of

shareholders and members possessing qualifying holdings and

the sizes of such holdings in breach of article 13(5) of the Act;

(d) a credit institution fails to have in place governance

arrangements required by the competent authority in accordance

with article 17B of the Act;

(e)

a credit institution fails to report information or

provides incomplete or inaccurate information on compliance

with the obligation to meet own funds requirements set out in

Article 92 of the CRR to the competent authorities in breach of

Article 99(1) of the CRR;

(f)

a credit institution fails to report or provides

incomplete or inaccurate information to the competent authority

in relation to the data referred to in Article 101 of the CRR;

(g) a credit institution fails to report information or

provides incomplete or inaccurate information about a large

exposure to the competent authority in breach of Article 394(1)

of the CRR;

(h) a credit institution fails to report information or

provides incomplete or inaccurate information on liquidity to

the competent authority in breach of Article 415(1) and (2) of

the CRR;

(i)

a credit institution fails to report information or

provides incomplete or inaccurate information on the leverage

ratio to the competent authority in breach of Article 430(1) of

the CRR;

(j)

a credit institution repeatedly or persistently fails to

hold liquid assets in breach of Article 412 of the CRR;

(k) a credit institution incurs an exposure in excess of

the limits set out in Article 395 of the CRR;

(l)

a credit institution is exposed to the credit risk of a

securitisation position without satisfying the conditions set out

in Article 405 of the CRR;

(m) a credit institution fails to disclose information or

provides incomplete or inaccurate information in breach of

Article 431(1), (2) and (3) or Article 451(1) of the CRR;

(n) a credit institution makes payments to holders of

instruments included in the own funds of the institution in

breach of Article 141 of the CRD or in cases where Articles 28,

51 or 63 of the CRR prohibit such payments to holders of

instruments included in own funds;

(o) a credit institution is found liable for a serious

breach of the Prevention of Money Laundering Act and, or of Cap. 373.

any regulations made thereunder;

(p) a credit institution allows one or more persons not

complying with article 14(2) of the Act to become or remain a

director.

(2) In the cases referred to in sub-regulation (1), the

administrative penalties and other administrative measures that can

be applied by the competent authority shall include at least the

following

(a)

a public statement which identifies the natural

person, credit institution, financial holding company or mixed

financial holding company responsible, and the nature of the

breach;

(b) an order requiring the natural or legal person

responsible to cease the conduct and to desist from a repetition

of that conduct;

(c)

in the case of a credit institution, withdrawal of the

licence of the said credit institution in accordance with article 9

of the Act;

(d) subject to regulation 4(3), a temporary ban against a

director of the credit institution or any other natural person, who

is held responsible, from exercising functions in credit

institutions;

(e)

in the case of a legal person, administrative

pecuniary penalties of up to 10% of the total annual net turnover

including the gross income consisting of interest receivable and

similar income, income from shares and other variable or fixed-

yield securities, and commissions or fees receivable in

accordance with Article 316 of the CRR of the undertaking in

the preceding business year

Provided that where the legal person is a subsidiary

of a parent undertaking, the relevant gross income shall be the

gross income resulting from the consolidated account of the

ultimate parent undertaking in the preceding business year;

(f)

in the case of a natural person, administrative

pecuniary penalties of up to five million euro (€5,000,000);

(g) administrative pecuniary penalties of up to twice the

amount of the profits gained or losses avoided because of the

breach where those can be determined.

(1) Subject to professional secrecy requirements

referred to in article 34(4) of the Act, the competent authority shall

inform the EBA of all administrative penalties, including all

permanent prohibitions, imposed under these regulations, and

including any appeal in relation thereto and the outcome thereof for

the purpose of publication on the EBA central database of

administrative penalties, which the competent authority shall consult,

where appropriate, in the carrying out of its functions and duties.

(2) Where the competent authority assesses good repute for

the purposes of articles 7(1)(b), 7B(3), 14(2) and 14(3) of the Act, it

shall consult the EBA database of administrative penalties

Provided that the competent authority shall check, in

accordance with Maltese law, the existence of a relevant conviction in

the criminal record of the person concerned. For those purposes,

information shall be exchanged in accordance with European Council

Decision 2009/316/JHA and European Council Framework Decision

2009/315/JHA.

When determining the type of administrative penalties or

other administrative measures and the level of administrative

pecuniary penalties, the competent authority shall take into account

all relevant circumstances, including, where appropriate

(a)

the gravity and the duration of the breach;

(b) the degree of responsibility of the natural or legal

person responsible for the breach;

(c)

the financial strength of the natural or legal person

responsible for the breach, as indicated, for example, by the

total turnover of the responsible legal person or the annual

income of the responsible natural person;

(d) the amount of profits gained or losses avoided by the

natural or legal person responsible for the breach, insofar as

they can be determined;

(e)

the losses for third parties caused by the breach,

insofar as they can be determined;

(f)

the level of cooperation of the natural or legal

person responsible for the breach with the competent authority;

(g) previous breaches by the natural or legal person

responsible for the breach;

(h)

any potential systemic consequences of the breach.

(1) The competent authority shall establish effective Reporting of

and reliable mechanisms to encourage reporting of potential or actual breaches.

breaches of the provisions of the Act, regulations made and Banking

Rules issued thereunder, and of the provisions of the CRR.

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

include at least

(a)

specific procedures for the receipt of reports on

breaches and their follow-up;

(b) appropriate protection for employees of credit

institutions who report breaches committed within the credit

institution against retaliation, discrimination or other types of

unfair treatment at a minimum;

(c)

protection of personal data concerning both the

person who reports the breaches and the natural person who is

allegedly responsible for a breach, in accordance with the Data Cap. 440.

Protection Act and any regulations made thereunder;

(d) clear rules that ensure that confidentiality is

guaranteed in all cases in relation to the person who reports the

breaches committed within the credit institution, unless

disclosure is required by Maltese law in the context of further

investigations or subsequent judicial proceedings.

(3) Credit institutions shall have in place appropriate

procedures for their employees to report breaches internally through a

specific, independent and autonomous channel. Such a channel may

also be provided through arrangements provided for by social

partners. The same protection as referred to in sub-regulation (2)(b),

(c) and (d) shall apply.

Part II - Right of Appeal

Any person subject to a decision taken by the competent

authority in terms of these regulations may appeal to the Financial

Services Tribunal established under the Malta Financial Services

Authority Act, against any decision and, or measure taken by the

competent authority under these regulations and, or under the CRR,

imposing upon such person an administrative penalty and, or

administrative measure.

Part III - Revocation

The Penalties for Offences Regulations, 1999, are hereby

revoked.

1999. €0.45