Requirements Directive) (Amendment) Regulations, 2022

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 20,774, 27 ta’ Jannar, 2022 B 235

L.N. 29 of 2022

INVESTMENT SERVICES ACT

(CAP. 370)

Investment Services Act (Supervisory Consolidation) (Capital

Requirements Directive) (Amendment) Regulations, 2022

IN EXERCISE of the powers conferred by article 12 of the

Investment Services 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 Investment Title and

Services Act (Supervisory Consolidation) (Capital Requirements commencement.

Directive) (Amendment) Regulations, 2022, and these regulations

shall be read and construed as one with the Investment Services Act L.N. 495 of

(Supervisory Consolidation) (Capital Requirements Directive) 2021.

Regulations, hereinafter referred to as the "principal regulations".

(2) These regulations shall come into force on such date as the

Minister may establish by notice in the Gazette.

In the proviso of regulation 2 of the principal regulations Amends

the definition "financial institution" shall be substituted by the regulation

the principal

following

regulations.

"Provided that the entities referred to in point (1) and in

points (3) to (24) of Article 2(5) of the CRD shall be treated as

financial institutions;".

Regulation 3 of the principal regulations shall be Amends

regulation 3 of

substituted by the following

the principal

regulations.

3. (1) The competent authority shall exercise

supervision on a consolidated basis

(a) where the parent undertaking is a

parent credit institution established in Malta or in

another Member State or an EU parent credit

institution supervised by the competent authority

on an individual basis;

(b) where a parent undertaking is a parent

investment firm established in Malta or in another

Member State or an EU parent investment firm

and at least one of its subsidiaries is a credit

institution supervised by the competent authority

Provided that, where there are several credit

institutions, the competent authority shall exercise

supervision on a consolidated basis where it supervises

the credit institution with the largest balance sheet total;

(c) where the parent of a credit institution

supervised by the competent authority on an

individual basis is a parent financial holding

company established in Malta or in another

Member State, a parent mixed financial holding

company established in Malta or in another

Member State, an EU parent financial holding

company or EU parent mixed financial holding

company;

(d) where two or more institutions

authorised in the European Union, one of which is

a credit institution supervised by the competent

authority, have the same parent financial holding

company established in Malta or in another

Member State, parent mixed financial holding

company established in Malta or in another

Member State, EU parent financial holding

company or EU parent mixed financial holding

company, and

(i) the

competent

authority

supervises the credit institution, which is the

only credit institution within the group; or

(ii) the

competent

authority

supervises the credit institution with the

largest balance sheet total, where there are

several credit institutions within the group

Provided that, for the purposes of this

paragraph, the term "institution" shall include credit

institutions and investment firms;

(e) where consolidation is required

pursuant to Article 18(3) or (6) of the CRR and

the competent authority supervises the credit

institution with the largest balance sheet total.

(2) By way of derogation from sub-regulation

(1)(b), (d)(ii) and (e), the competent authority shall be

the consolidating supervisor where it supervises on an

individual basis one or more investment firms within a

group, and the sum of the balance sheet totals of those

supervised investment firms is higher than that of the

investment firms supervised on an individual basis by

any other European regulatory authority, and there are

no credit institutions in the group.

(3) In particular cases, the criteria referred to in

sub-regulation (1)(a), (b), (d) and (e) may be waived by

common agreement of the competent authority with the

other relevant European regulatory authorities and a

European regulatory authority may be appointed to

exercise supervision on a consolidated basis where the

application of the criteria referred to in the said sub-

regulation (1)(a), (b), (d) and (e) would be

inappropriate, taking into account the credit institutions

or investment firms concerned and the relative

importance of their activities in the relevant Member

States, or the need to ensure the continuity of

supervision on a consolidated basis by the same

European regulatory authority. In these cases, before

such decision is taken the EU parent institution, the EU

parent financial holding company, the EU parent mixed

financial holding company or the institution with the

largest balance sheet total, as applicable, shall have the

right to be heard.

(4) The competent authority shall notify the

Commission and the EBA without delay of any

agreement falling within sub-regulation (3).

Immediately after sub-regulation 6(3) there shall be added Amends

regulation 6 of

the following new sub-regulations

the principal

regulations.

"(4) Where the competent authority is the consolidating

supervisor, and a financial holding company or a mixed financial

holding company that has been granted approval in accordance

with Article 21a of the CRD is established in a Member State

other than Malta, the co-ordination and co-operation

arrangements referred to in sub-regulations (1) and (2) shall also

be concluded with the European regulatory authority where the

parent undertaking is established.

(5) Where the competent authority is not the

consolidating supervisor, but a financial holding company or a

mixed financial holding company has been granted approval in

accordance with Article 21a of the CRD and is established in

Malta, the co-ordination and co-operation arrangements referred

to sub-regulations (1) and (2) shall be concluded with the

European regulatory authority acting as the consolidating

supervisor.".

Regulation 7 of the principal regulations shall be amended

as follows

(a) immediately after sub-regulation (2) thereof, there

shall be added the following new sub-regulation

"(2A) In order to facilitate the tasks referred to in

sub-regulation (1) and regulations 4(1), 5(1), 6(1), and

6(2), where the competent authority is the consolidating

supervisor, it shall also establish colleges of supervisors

where all the cross-border subsidiaries of an EU parent

institution, an EU parent financial holding company or an

EU parent mixed financial holding company have their

head offices in third countries

Provided that the third countries’ regulatory

authorities are subject to confidentiality requirements that

are equivalent to the requirements laid down in the Malta

Financial Services Authority Act and any other applicable

law.".

(b)

in sub-regulation (5) thereof

(i) in paragraph (a) thereof, the words "financial

holding company; and" shall be substituted by the words

"financial holding company;"; and

(ii) immediately after paragraph (b) thereof, there

shall be added the following new paragraph

"(c) Malta is the Member State where a

financial holding company or a mixed financial

holding company that has been granted approval in

accordance with Article 10CA of the Act is

established.".

Regulation 8 of the principal regulations shall be

substituted by the following

"8. (1) The competent authority, whether it is

the consolidating supervisor or the competent authority

responsible for the supervision of subsidiaries of an EU

parent institution, an EU parent financial holding

company or an EU parent mixed financial holding

company which are investment firms, shall do

everything within its power to reach a joint decision

with the other European regulatory authorities

(a) on the application of Articles 73 and

97 of the CRD as transposed in the Investment

Services Rules and in Investment Services Act

(Supervisory Review) Regulations to determine

the adequacy of the consolidated level of own

funds held by the group of institutions with

respect to its financial situation and risk profile

and the required level of own funds for the

application of point (a) of Article 104(1) of the

CRD as transposed in the Investment Services

Act (Supervisory Review) Regulations, each

entity within the group of institutions and on a

consolidated basis;

(b) on measures to address any significant

matters and material findings relating to liquidity

supervision, including relating to the adequacy of

the organisation and the treatment of risks as

required pursuant to Article 86 of the CRD as

transposed in the Investment Services Rules and

relating to the need for institution-specific

liquidity requirements in accordance with Article

105 of the CRD as transposed in the Investment

Services Act (Supervisory Review) Regulations.

(c) on any guidance on additional own

funds referred to in Article 104b(3) of the CRD as

transposed in the Investment Services Act

(Supervisory Review) Regulations.

(2) Where it is the consolidating supervisor, the

competent authority shall submit –

(a) for the purpose of sub-regulation

(1)(a), a report containing the risk assessment of

the group of institutions in accordance with

Article 104a of the CRD as transposed in the

Investment Services Act (Supervisory Review)

Regulations to the other relevant European

regulatory authorities;

(b) for the purpose of sub-regulation

(1)(b), a report containing the assessment of the

liquidity risk profile of the group of institutions in

accordance with Articles 86 and 105 of the CRD

as transposed in the Investment Services Rules

and in the Investment Services Act (Supervisory

Review) Regulations, to the other relevant

European regulatory authorities;

(c) for the purpose of sub-regulation

(1)(c), a report containing the risk assessment of

the group of institutions in accordance with

Article 104b of the CRD as transposed in the

Investment Services Act (Supervisory Review)

Regulations, to the other relevant European

regulatory authorities.

(3) The joint decisions referred to in sub-

regulation (1) shall be reached within four (4) months

from submission of the reports referred to in sub-

regulation (2)

Provided that the joint decisions

referred to in sub-regulation (1) shall also duly

consider the risk assessment of subsidiaries

performed by the competent authority and, or

relevant European regulatory authorities in

accordance with Articles 73, 97, 104a and 104b of

the CRD as transposed in the Investment Services

Rules and in the Investment Services Act

(Supervisory Review) Regulations.

(4) Where the competent authority is the

consolidating supervisor, it shall provide the EU parent

institution concerned with the joint decisions referred to

in sub-regulation (1), which shall be set out in a

document containing the full reasons for the decisions.

In the event of disagreement, the competent authority

shall, at the request of any of the other European

regulatory authorities concerned, consult the EBA

Provided that the competent authority, when

it is the consolidating supervisor, may consult the EBA

on its own initiative.

(5) In the absence of such a joint decision

within the time period referred to in sub-regulation (3)

and, or regulation 8, a decision on the application of

Articles 73, 86, 97, 104(1)(a), 104b and 105 of the CRD

as transposed in the Investment Services Rules and in

the Investment Services Act (Supervisory Review)

Regulations shall be taken by the competent authority,

where it is acting as the consolidating supervisor, on a

consolidated basis, after duly considering the risk

assessment of subsidiaries performed by the relevant

European regulatory authorities

Provided that

(a) if, at the end of the time period

referred to in sub-regulation (3), any of the

European regulatory authorities concerned have

referred the matter to the EBA in accordance with

Article 19 of Regulation (EU) No 1093/2010, the

competent authority shall defer its decision and

await any decision the EBA may take in

accordance with Article 19(3) of the said

Regulation. The competent authority shall take its

decision in conformity with the decision of the

EBA. The time period referred to in sub-

regulation (3) shall be deemed to be the

conciliation period within the meaning of

Regulation (EU) No 1093/2010;

(b) where the competent authority is not

acting as consolidated supervisor but is

responsible for the supervision of subsidiaries of

an EU parent institution or an EU parent financial

holding company or an EU parent mixed financial

holding company, it may refer the matter to the

EBA in accordance with Article 19 of Regulation

(EU) No 1093/2010. The matter shall not be

referred to the EBA after the end of the time

period referred to above in sub-regulation (3) or

after a joint decision has been reached.

(6) Where the competent authority is not the

consolidating supervisor but is responsible for the

supervision of a subsidiary of an EU parent credit

institution or an EU parent financial holding company

or an EU parent mixed financial holding company,

which is a credit institution, and in the absence of a

joint decision in terms of this regulation within the time

period referred to in regulation 8, the competent

authority shall decide on the application of Articles 73,

86, 97, 104(1)(a), 104b and 105 of the CRD as

transposed in the Investment Services Rules and in the

Investment Services Act (Supervisory Review)

Regulations on an individual or sub-consolidated basis,

after duly considering the views and reservations

expressed by the consolidating supervisor

Provided that if at the end of the time period

referred to in regulation 8 and as transposed in the

Investment Services Act (Supervisory Review)

Regulations, any of the European regulatory authorities

concerned have referred the matter to the EBA in

accordance with Article 19 of Regulation (EU) No

1093/2010, the competent authority shall defer its

decision and await any decision that the EBA shall take

in accordance with Article 19(3) of the said Regulation.

The competent authority shall take its decision in

conformity with the decision of the EBA. The time

period referred to above shall be deemed to be the

conciliation period within the meaning of the said

Regulation

(7) Where the competent authority is not acting

as consolidated supervisor but is responsible for the

supervision of subsidiaries of an EU parent institution

or an EU parent financial holding company or an EU

parent mixed financial holding company, it may, in the

event of any disagreement, refer a dispute to the EBA

on its own initiative but prior to a joint decision being

made, provided that no referral shall be made once the

time period specified in regulation 8 has expired.

(8) (a) The decisions taken by the competent

authority referred to in this regulation shall be set out in

a document containing fully reasoned decisions and

shall take into account the risk assessment, views and

reservations of the competent authority or the other

European regulatory authorities, as applicable,

expressed during the time period referred to in sub-

regulation (3).

(b) The competent authority shall provide

the document referred to above to the European

regulatory authorities concerned and to the EU

parent institution. Where the EBA has been

consulted, the competent authority shall consider

its advice and explain any significant deviation

therefrom.

(c) The joint decisions referred to in sub-

regulation (1) and the decisions taken by the

competent authority or European regulatory

authorities in terms of regulation 8 shall be

recognised as determinative and shall be applied

by the competent authority, where applicable.

(9) The decisions referred to in sub-regulation

(1) and any decision taken in terms of sub-regulations

(5) and (6) shall be updated on an annual basis or, in

exceptional circumstances, where the competent

authority is responsible for the supervision of

subsidiaries of an EU parent institution or an EU parent

financial holding company or an EU parent mixed

financial holding company which are credit institutions,

it may make a written and fully reasoned request to the

consolidating supervisor to update the decision on the

application of Article 104(1)(a), Article 104b and

Article 105 of the CRD as transposed in the Investment

Services Act (Supervisory Review) Regulations. In

those exceptional circumstances, such update may be

addressed on a bilateral basis between the competent

authority and the consolidating supervisor

Provided that, where the competent

authority is the consolidating supervisor, it shall update

the decisions at the request of the European regulatory

authorities responsible for the supervision of

subsidiaries of an EU parent institution, or an EU parent

financial company, or an EU parent mixed financial

holding company. The competent authority may address

the update to the European regulatory authority making

the request, on a bilateral basis.

Immediately after sub-regulation 6 of regulation 9 of the

principal regulations, there shall be added the following new sub-

regulation

"(6A) The competent authority shall cooperate closely

with the financial intelligence units and authorities entrusted

with the public duty of supervising the obliged entities listed in

points (1) and (2) of Article 2(1) of Directive (EU) 2015/849 for

compliance with the said Directive within their respective

competences and shall provide them with information relevant

for their respective tasks under the CRD as transposed in Maltese

Law, the CRR and under Directive (EU) 2015/849, provided that

such co-operation and information exchange do not impinge on

an on-going inquiry, investigation or proceedings in accordance

with the criminal or administrative law of the Member State

where the competent authority, financial intelligence unit or

authority entrusted with the public duty of supervising the

obliged entities listed in points (1) and (2) of Article 2(1) of

Directive (EU) 2015/849 is located.".

Immediately after sub-regulation (1) of regulation 11 of the

principal regulations, there shall be added the following new sub-

regulation

"(1A) Where, pursuant to regulation 3, the consolidating

supervisor of a group with a parent mixed financial holding

company is different from the coordinator determined in

accordance with Article 12 of Directive 2002/87/EC, the

consolidating supervisor and the co-ordinator shall co-operate

for the purpose of applying the provisions of the Act, and any

regulations or Rules made thereunder transposing the

requirements of the CRD, and under the CRR, on a consolidated

basis. In order to facilitate and establish effective co-operation,

the consolidating supervisor and the co-ordinator shall have

written co-ordination and co-operation agreements in place.".

Sub-regulation (2) of regulation 20 of the principal Amends

regulation 20 of

regulations shall be substituted by the following

the principal

regulations.

"(2) Where a mixed financial holding company is subject

to equivalent provisions under the Act and any regulations or

Rules made thereunder transposing the requirements of the CRD,

and under Directive 2002/87/EC, in particular in terms of risk-

based supervision, the competent authority may, as consolidating

supervisor, after consulting the other European regulatory

authorities responsible for the supervision of subsidiaries, apply

only the latter Directive to that mixed financial holding

company.".

€0.54