Regulations, 2022

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 20,852, 6 ta’ Mejju, 2022 B 723

L.N. 132 of 2022

BANKING ACT

(CAP. 371)

CRR (Implementing and Transitional Provisions) (Amendment)

Regulations, 2022

IN EXERCISE of the powers conferred by article 3 of the

Banking Act, the Minister responsible for the regulation of Financial

Services, acting on the advice of the Malta Financial Services

Authority, has made the following regulations:-

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

and Transitional Provisions) (Amendment) Regulations, 2022 and scope.

these regulations shall be read and construed as one with the CRR S.L. 371.17.

(Implementing and Transitional Provisions) Regulations, hereinafter

referred to as "the principal regulations".

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

4(2), 7, 8, 49(2), 116(4), 284(4) and (9), 327(2), 396(1) of the CRR

and, in part, points (12), (37), (39), (60), (67), (108), (116), (117),

(118) and (119) of Article 1 of Regulation (EU) 2019/876 of the

European Parliament and of the Council of 20 May 2019 amending

Regulation (EU) No 575/2013 as regards the leverage ratio, the net

stable funding ratio, requirements for own funds and eligible

liabilities, counterparty credit risk, market risk, exposures to central

counterparties, exposures to collective investment undertakings, large

exposures, reporting and disclosure requirements, and Regulation

(EU) No 648/2012.

Sub-regulation (2) of regulation 1 of the principal Amends

regulation 1 of

regulations shall be substituted by the following

the principal

regulations.

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

4(2), 7, 8, 18(5), 18(6), 18(7), 49(1), 49(2), 78(1), 78(4), 79(1), 89(3),

116(4) 124(2), 125(2)(d), 164(5), 284(4) and (9), 327(2), 396(1),

400(2), 414, 428b(5), 428f(1), 428h, 428p(10), 428q(2), 428ai,

428aq(10), 428ar(2), 429a(5), 430(11), 439, 465, 467, 468, 469,

473(1), 474(a), 476(a), 478, 479, 480, 481, 486 and 493(3) of the

CRR.".

Sub-regulation (1) of regulation 2 of the principal

regulations shall be amended as follows

(a)

immediately after the definition "Additional Tier 1

items", there shall be added the following new definitions

""committed credit or liquidity facility" shall have the

same meaning as that assigned to it in point (17) of Article

411 of the CRR;

"Commission Delegated Regulation (EU) 241/2014"

means Commission Delegated Regulation (EU) 241/2014

of 7 January 2014 supplementing Regulation (EU) No 575/

2013 of the European Parliament and of the Council with

regard to regulatory technical standards for Own Funds

requirements for institutions, as amended from time to

time;";

(b) immediately after the definition "CRR", there shall be

added the following new definition

""Delegated Regulation (EU) 2015/61" means

Delegated Regulation (EU) 2015/61 of 10 October 2014 to

supplement Regulation (EU) No 575/2013 of the European

Parliament and the Council with regard to liquidity

coverage requirement for credit institutions, as amended

from time to time;";

(c) immediately after the definition "parent mixed

financial holding company", there shall be added the following

new definitions

" "participation" shall have the same meaning as that

assigned to it in point (35) of Article 4(1) of the CRR;

"Regulation (EU) No 648/2012" means Regulation

(EU) No 648/2012 of the European Parliament and of the

Council of 4 July 2012 on OTC derivatives, central

counterparties and trade repositories, as amended from time

to time, and includes any binding legal instruments,

guidelines and other measures that have been or may be

issued thereunder;".

Immediately after regulation 2 of the principal regulations,

there shall be added the following new regulations

2A. The competent authority may allow shares

"Treatment of

indirect holdings in

constituting an equivalent indirect holding of real estate

to be treated as a direct holding of real estate in

accordance with Article 4(2) of the CRR, provided that,

such indirect holding, when pledged as collateral, shall

provide an equivalent protection to creditors.

2B. (1) The competent authority may waive

the application of Article 6(1) of the CRR as follows

(a) where both the subsidiary and the

credit institution are licensed by the competent

authority, the competent authority may grant the

waiver to the subsidiary where it is included in

the supervision on a consolidated basis of the

credit institution which is the parent undertaking,

and all the conditions laid down in Article 7(1) of

the CRR are fulfilled, in order to ensure that the

own funds are distributed adequately between the

parent undertaking and the subsidiary; and

(b) where a parent institution in Malta is

licensed and supervised by the competent

authority and is included in the supervision on a

consolidated basis, the competent authority may

grant the waiver to the parent institution in Malta

where all the conditions laid down in Article 7(3)

of the CRR are fulfilled to ensure that own funds

are distributed adequately among the parent

undertaking and the subsidiaries.

(2) The competent authority may, in a Banking

Rule, lay down the conditions upon which the waivers

referred to above may be granted.

2C. (1) The competent authority shall waive in

requirements on an full or in part, the application of Part Six of the CRR to

a credit institution and to all or some of its subsidiaries

when these are established in the European Union or in

Malta and supervise them as a single liquidity sub-

group as long as the conditions referred to in Article 8

of the CRR are fulfilled.

(2) The competent authority may, in a Banking

Rule, lay down the conditions upon which the waiver

referred to above may be granted.

2D. In the case of participations or capital ties

Consolidation in the

other than those referred to in paragraphs 1 and 4 of

Article 18 of the CRR, the competent authority may

supervise such participation or capital ties on a

consolidated basis, in particular by requiring or

permitting the use of the equity method. In such case,

this method shall not constitute inclusion of the

undertakings concerned in supervision on a

consolidated basis.

2E. The competent authority may decide to

Consolidation in the

supervise on a consolidated basis, credit institutions

influence and single

referred to in Article 18(6) of the CRR in accordance

with the Supervisory Consolidation (Credit Institutions)

Regulations.

2F. Where a credit institution has a subsidiary

which is an undertaking other than an institution, a

financial institution or an ancillary services undertaking

or holds a participation in such an undertaking, it shall

apply to that subsidiary or participation the equity

method. In such case, this method shall not constitute

inclusion of the undertakings concerned in supervision

on a consolidated basis

Provided that the competent authority may

allow or require a credit institution to apply a different

method to such subsidiaries or participations, including

the method required by the applicable accounting

framework, in accordance with points (a) to (c) of

Article 18(7) of the CRR.".

Immediately after regulation 3 of the principal regulations,

there shall be added the following new regulations

3A. For the purposes of calculating own funds

on an individual basis and a sub-consolidated basis, in

terms of Article 49(2) of the CRR, where a credit

institution is subject to supervision on a consolidated

basis in accordance with Chapter 2 of Title II of Part

One of the CRR, the competent authority may require

the credit institution to deduct holdings of own funds

instruments issued by financial sector entities included

in the scope of consolidated supervision

Provided that this shall only be required in

specific cases, in particular in the case of structural

separation of banking activities and resolution

planning.

3B. (1) The competent authority may grant the

general prior permission referred to in the second sub-

paragraph of Article 78(1) of the CRR for a credit

institution to reduce its own funds where the conditions

laid down in Article 78(1) of the CRR and of the

Commission Delegated Regulation (EU) 241/2014 of 7

January 2014 supplementing Regulation (EU) No 575/

2013 of the European Parliament and of the Council

with regard to regulatory technical standards for Own

Funds requirements for institutions, are fulfilled.

(2) The competent authority may, in a Banking

Rule, lay down the conditions upon which the margin

referred to in the second sub-paragraph of Article 78(1)

of the CRR shall be determined.

3C. In accordance with Article 78(4) of the

additional Tier 1 or

Tier 2 instruments. CRR, the competent authority may grant permission for

credit institutions to call, redeem, repay or repurchase

Additional Tier 1 or Tier 2 instruments during the five

years following their date of issuance under

(a) the conditions laid down in points (c)

and (e) of Article 78(4) of the CRR;

(b) the conditions laid down in points (a),

(b) and (d) of Article 78(4) of the CRR

Provided that the conditions laid down in

Article 78(1) of the CRR are met.

3D. The competent authority shall grant a

temporary waiver for the deduction of own funds

eligible liabilities. instruments or eligible liabilities for the purpose of

facilitating a financial assistance operation in

accordance with the conditions specified in Article

79(1) of the CRR and in Article 33 of Commission

Delegated Regulation (EU) No 241/2014.

Immediately after regulation 4 of the principal regulations, Adds

regulations 4A

there shall be added the following new regulations

and 4B of the

principal

regulations.

4A. For the purposes of Article 116(4) of the

CRR, the competent authority shall, in a Banking Rule,

provide a list of the public sector entities established in

Malta for which exposures to such entities shall be

considered by credit institutions as exposures to the

Government of Malta.

4B. In terms of Article 4(2) of the Act, the

by

o n competent authority shall, at least annually and jointly

immovable property

with the Central Bank, assess whether the risk weights

referred to in Article 125(2) or 126(2) of the CRR

adequately reflect the actual risks related to exposures

to one or more property segments fully secured by

mortgages on residential property or on commercial

immovable property located in Malta in accordance

with Article 124 of the CRR. Where such risk weight is

deemed not appropriate, the competent authority,

jointly with the Central Bank, may adjust the risk

weights in accordance with the following ranges

(a) 35% to 150% for exposures secured by

mortgages on residential property;

(b) 50% to 150% for exposures secured by

mortgages on commercial immovable property.".

Regulation 5 of the principal regulations shall be

substituted by the following

5. For the purposes of Article 125(2)(d) of the

"Exposures secured

CRR, the part of the loan to which the 35% risk weight

immovable property.

is assigned, unless otherwise determined in accordance

with regulation 4B, shall not exceed 70% of the market

value of the property in question, as long as the

conditions laid down in Article 125 of the CRR are

met.".

Immediately after regulation 5 of the principal regulations,

as amended, there shall be added the following new regulations

5A. In terms of Article 4(2) of the Act, the

"Exposures secured

competent authority shall, at least annually, and jointly

with the Central Bank, assess whether the minimum

Loss Given Default (LGD), as referred to in paragraph

4 of Article 164 of the CRR, are appropriate for

exposures secured by mortgages on residential property

or commercial immovable property located in Malta.

Where the competent authority, jointly with the Central

Bank, conclude that such minimum LGD values are not

adequate and could adversely affect Malta’s current or

future financial stability, the competent authority,

jointly with the Central Bank, may set higher minimum

LGD values for those exposures located in Malta. Such

higher minimum LGD values may also be applied at the

level of one or more property segments of such

exposures.

5B. For the purposes of calculating the exposure

value in terms of Article 284 of the CRR, the competent

authority may require credit institutions to use a higher

alpha (α) or grant them the permission to use their own

estimates of α in accordance with the conditions laid

down in paragraph 9 of the Article 284 of the CRR.

5C. For the purposes of Article 396(1) of the

CRR, the competent authority may, in exceptional

cases, where exposures exceed the limit set out in

Article 395(1), allow a credit institution a limited

period of time within which to comply with such

limit.".

In sub-regulation (1) of regulation 6 of the principal Amends

regulations, for the words "Article 400(3) of the CRR are met." there regulation

the principal

shall be substituted the words "Article 400(3) of the CRR, and as may regulations.

be further specified in a Banking Rule, are met."

Immediately after regulation 6 of the principal regulations, Adds

regulations of

there shall be added the following new regulation

6A, 6B, 6C,

6D, 6E, 6F, 6G,

6H, and 6I of

6A. For the purposes of Article 414 of the CRR, the principal

the competent authority may allow a credit institution regulations.

that does not meet, or does not expect to meet, the

requirements set out in Article 412 or 413(1) of the

CRR, including during times of stress, to report the

items referred to in Title III and IV, in the implementing

act referred to in Article 415(3) or (3a) of the CRR or in

the delegated act referred to in Article 460(1) of the

CRR, at a lower reporting frequency and apply a longer

reporting delay, depending on the situation of the credit

institution.

6B. For the purposes of restricting currency

mismatches for the mismatches, the competent authority shall set limits on

the proportion of required stable funding in a particular

currency that can be met by available stable funding

that is not denominated in that currency, in accordance

with the conditions laid down in Article 428b(5) of the

CRR

Provided that such restriction may only be

applied for a currency that is subject to separate

reporting in accordance with Article 415(2) of the CRR.

6C. (1) The competent authority may grant

assets and liabilities

for the calculation approval to a credit institution to treat an asset and a

liability as interdependent where all of the conditions

that are laid down in Article 428f of the CRR are

fulfilled.

(2) The competent authority may issue a

Banking Rule laying down the requirements on the

information that shall be submitted by the credit

institution on such assets and liabilities.

6D. (1) The competent authority may, in

group or within an accordance with Article 428h of the CRR, allow a

protection scheme credit institution to apply a higher available stable

funding factor or a lower required stable funding factor

to assets, liabilities and committed credit or liquidity

facilities which meet all of the conditions laid down in

the said Article 428h.

(2) The competent authority may issue a

Banking Rule laying down the information that shall be

submitted by such credit institution when it applies for

preferential treatment and the conditions that shall be

met.

6E. For off-balance sheet exposures not referred

to in Chapter 4 of Title IV of Part Six of the CRR, the

competent authority shall, in accordance with Article

428p(10) of the CRR, apply required stable funding

factors that correspond to the outflow rates applicable

to related products and services referred to in Article 23

of the Delegated Regulation (EU) 2015/61 in the

liquidity coverage requirement.

6F. Credit institutions that are not able to freely

segregated assets. dispose of assets which have been segregated in

accordance with Article 11(3) of Regulation (EU) No

648/2012, shall consider such assets as encumbered for

a period corresponding to the term of the liabilities to

the credit institutions’ customers to whom that

segregation requirement relates.

6G. The competent authority may, in terms of

Article 428ai of the CRR, allow a small and non-

complex institution, as defined in point (145) of Article

4(1) of the CRR, to calculate the ratio between the

credit institution’s available and required stable funding

as referred to in Chapters 6 and 7 of Title IV, Part Six of

the CRR, expressed as a percentage.

6H. Where a credit institution has been granted

permission in accordance with regulation 6G, it shall,

exposures under the

for

the purposes of off-balance sheet exposures not

referred to in Chapter 4 of Title IV of Part Six of the

CRR and in terms of Article 428aq(10) of the CRR,

apply the required stable funding factors that

correspond to the outflow rates applicable to related

products and services referred to in Article 23 of the

Delegated Regulation (EU) 2015/61 in the liquidity

coverage requirement.

6I. Where a credit institution has been granted

permission in accordance with regulation 6G, it shall,

where it is not able to freely dispose of assets which

have been segregated in accordance with Article 11(3)

of Regulation (EU) No 648/2012, consider such assets

as encumbered for a period corresponding to the term of

the liabilities to the credit institutions’ customers to

whom that segregation requirement relates, in

accordance with Article 428ar(2) of the CRR.

Immediately after regulation 7 of the principal regulations, Adds

regulations 7A,

there shall be added the following new regulations

7B and 7C to

the principal

regulations.

7A. The competent authority shall, in order to

facilitate the implementation of monetary policies in

exposures from the

terms of Article 429a(5) of the CRR, and in

consultation with the Central Bank, publicly determine

whether exceptional circumstances exist under which

exposures listed in point (n) of paragraph 1 of Article

429a of the CRR may be excluded from the total

exposure measure referred to in such paragraph.

7B. Where the competent authority determines

that the reporting templates specified in the

implementing technical standards referred to in Article

430 of the CRR contain duplicative data points as

defined in such article, the competent authority may

waive the reporting requirements for such data points in

accordance with Article 430(11) of the CRR.

7C. (1) For the purposes of Article 439 of the

counterparty credit CRR, the competent authority may, where the Central

Bank provides liquidity assistance in the form of

collateral swap transaction, and where the competent

authority considers that the disclosure of such

information could reveal that emergency liquidity

assistance has been provided, exempt credit institutions

from abiding by the requirements laid down in points

(d) and (e) of Article 439 of the CRR.

(2) The competent authority may issue a

Banking Rule to set out the appropriate thresholds and

the objective criteria.".

Regulation 12 of the principal regulations shall be deleted.

Deletion of

regulation 12 of

the principal

regulations.

€0.45