Regulations, 2022

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 20,774, 27 ta’ Jannar, 2022 B 247

L.N. 30 of 2022

INVESTMENT SERVICES ACT

(CAP. 370)

Investment Services Act (Supervisory Review) (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 Services Title and

Act (Supervisory Review) (Amendment) Regulations, 2022, and these commencement.

regulations shall be read and construed as one with the Investment S.L. 370.15.

Services Act (Supervisory Review) 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.

SUPERVISORY POWERS

(Regulations 11, 16, paragraphs (4) and (5) of Schedule I and

regulation 15(4))

(1) For the purposes of regulations 11, 16 and paragraphs (4)

and (5) of Schedule I, regulation 15(4), and the application of the

CRR, the competent authority shall have at least the following powers

(a) to require investment firms to have additional own

funds in excess of the requirements set out in the CRR under the

conditions set out in paragraphs 3 to 7 of this Schedule;

(b) to require the reinforcement of the arrangements,

processes, mechanisms and strategies implemented in

accordance with Articles 73 and 74 of the CRD as transposed in

Maltese Law;

(c) to require investment firms to present a plan to

restore compliance with supervisory requirements pursuant to

the Act, regulations or Investment Services Rules issued

thereunder, and to the CRR and set a deadline for its

implementation, including improvements to that plan regarding

the scope and the deadline;

(d)

to require investment firms to apply a specific

provisioning policy or treatment of assets in terms of own funds

requirements;

(e) to restrict or limit the business, operations or network

of institutions or to request the divestment of activities that pose

excessive risks to the soundness of an investment firm;

(f) to require the reduction of the risk inherent in the

activities, products and systems of investment firms, including

outsourced activities;

(g) to require investment firms to limit variable

remuneration as a percentage of net revenues where it is

inconsistent with the maintenance of a sound capital base;

(h) to require investment firms to use net profits to

strengthen own funds;

(i) to restrict or prohibit distributions or interest

payments by an investment firm to shareholders, members or

holders of Additional Tier 1 instruments within the meaning of

the CRR, where the prohibition does not constitute an event of

default of the investment firm;

(j) to impose additional or more frequent reporting

requirements, including reporting on own funds, liquidity and

leverage;

(k) to impose specific liquidity requirements, including

restrictions on maturity mismatches between assets and

liabilities;

(l)

to require additional disclosures.

(2) (1) For the purpose of paragraph 1(j) of this Schedule,

the competent authority may only impose additional or more frequent

reporting requirements on investment firms where the relevant

requirement is appropriate and proportionate with regard to the

purpose for which the information is required and where the

information requested is not duplicative.

(2) For the purposes of regulations 11 to 16, any additional

information that may be required from investment firms shall be

deemed as duplicative where the same, or substantially the same,

information has already been otherwise reported to the competent

authority or may be produced by the competent authority.

(3)

The competent authority shall not require an investment

firm to report additional information where it has previously received

it in a different format or level of granularity and that different format

or granularity does not prevent the competent authority from

producing information of the same quality and reliability as that

produced on the basis of the additional information that would be

otherwise reported.

(3) (1) The competent authority shall impose the additional

own funds requirement referred to in paragraph 1(a) of this Schedule

where, on the basis of the reviews carried out in accordance with

regulations 11 and 15, it determines any of the following situations for

an individual investment firm

(a) the investment firm is exposed to risks or elements of

risk that are not covered or sufficiently covered, as specified in

paragraph 4 of this Schedule, by the own funds requirements set

out in Parts Three, Four and Seven of the CRR and in Chapter 2

of Regulation (EU) No. 2017/2402;

(b) the investment firm does not meet the requirements

set out in Articles 73 and 74 of the CRD as transposed in the

Investment Services Rules or in Article 393 of the CRR and it is

unlikely that other supervisory measures would be sufficient to

ensure that those requirements can be met within an appropriate

time frame;

(c) the adjustments referred to in paragraph (4) of

Schedule I are deemed to be insufficient to enable the investment

firm to sell or hedge out its positions within a short period

without incurring material losses under normal market

conditions;

(d) the evaluation carried out in accordance with

regulation 15(4) reveals that the non-compliance with the

requirements for the application of the permitted approach shall

likely lead to inadequate own funds requirements;

(e) the investment firm repeatedly fails to establish or

maintain an adequate level of additional own funds to cover the

guidance communicated in accordance with paragraph 10 of this

Schedule;

(f) other institution-specific situations deemed by the

competent authority to raise material supervisory concerns.

(2) The competent authority shall only impose the additional

own funds requirement referred to in paragraph 1(a) of this Schedule

to cover the risks incurred by individual investment firms due to their

activities, including those reflecting the impact of certain economic

and market developments on the risk profile of an individual

investment firm.

(4) (1) For the purpose of paragraph 3(1)(a) of this Schedule,

risks or elements of risk shall only be considered as not covered or

sufficiently covered by the own funds requirements set out in Parts

Three, Four and Seven of the CRR and in Chapter 2 of Regulation

(EU) No. 2017/2402 where the amounts, types and distribution of

capital considered adequate by the competent authority, taking into

account the supervisory review of the assessment carried out by

investment firms in accordance with the first paragraph of Article 73

of the CRD as transposed in Maltese Law are higher than the own

funds requirements set out in Parts Three, Four and Seven of the CRR

and in Chapter 2 of Regulation (EU) No. 2017/2402.

(2) For the purpose of the first sub-paragraph, the competent

authority shall assess, taking into account the risk profile of each

individual investment firm, the risks to which the investment firm is

exposed, including

(a) institution-specific risks or elements of such risks that

are explicitly excluded from or not explicitly addressed by the

own funds requirements set out in Parts Three, Four and Seven

of the CRR and in Chapter 2 of Regulation (EU) No. 2017/2402;

(b) institution-specific risks or elements of such risks

likely to be underestimated despite compliance with the

applicable requirements set out in Parts Three, Four and Seven of

the CRR and in Chapter 2 of Regulation (EU) No. 2017/2402.

(3) To the extent that risks or elements of risk are subject to

transitional arrangements or grandfathering provisions laid down in

the CRD and transposed in Maltese Law or in the CRR, they shall not

be considered risks or elements of such risks likely to be

underestimated despite compliance with the applicable requirements

set out in Parts Three, Four and Seven of the CRR and in Chapter 2 of

Regulation (EU) No. 2017/2402.

(4) For the purposes of sub-paragraph (1), the capital

considered adequate shall cover all risks or elements of risks identified

as material pursuant to the assessment laid down in sub-paragraph (2)

that are not covered or not sufficiently covered by the own funds

requirements set out in Parts Three, Four and Seven of the CRR and in

Chapter 2 of Regulation (EU) No. 2017/2402.

(5) Interest rate risk arising from non-trading book positions

may be considered material at least in the cases referred to in

paragraph 5 of Schedule I, unless the competent authority, in

performing the review and evaluation, come to the conclusion that the

investment firm’s management of interest rate risk arising from non-

trading book activities is adequate and that the investment firm is not

excessively exposed to interest rate risk arising from non-trading book

activities.

(5) (1) Where additional own funds are required to address

risks other than the risk of excessive leverage not sufficiently covered

by point (d) of Article 92(1) of the CRR, the competent authority shall

determine the level of additional own funds required under paragraph

3(a) of this Schedule as the difference between the capital considered

adequate pursuant to paragraph 4 of this Schedule and the relevant

own funds requirements set out in Parts Three, Four and Seven of

Regulation (EU) No. 575/2013 and in Chapter 2 of Regulation (EU)

No. 2017/2402.

(2) Where additional own funds are required to address the risk

of excessive leverage not sufficiently covered by point (d) of Article

92(1) of the CRR, the competent authority shall determine the level of

the additional own funds required under paragraph 3(a) of this

Schedule as the difference between the capital considered adequate

pursuant to paragraph 4 of this Schedule and the relevant own funds

requirements set out in Parts Three, Four and Seven of the CRR.

(6) (1) The investment firm shall meet the additional own

funds requirement imposed by the competent authority under

paragraph 1(a) of this Schedule to address risks other than the risk of

excessive leverage with own funds that satisfy the following

conditions

(a) at least three quarters of the additional own funds

requirement shall be met with Tier 1 capital;

(b) at least three quarters of the Tier 1 capital referred to

in point (a) shall be composed of Common Equity Tier 1 capital.

(2) By way of derogation from the first sub-paragraph (1), the

competent authority may require the investment firm to meet its

additional own funds requirement with a higher portion of Tier 1

capital or Common Equity Tier 1 capital, where necessary, and having

regard to the specific circumstances of the investment firm.

(3) Own funds that are used to meet the additional own funds

requirement referred to in paragraph 1(a) of this Schedule imposed by

the competent authority to address the risk of excessive leverage not

sufficiently covered by point (d) of Article 92(1) of the CRR shall not

be used to meet any of the following

(a) the own funds requirement set out in point (d) of

Article 92(1) of the CRR;

(b)

the combined buffer requirement;

(c) the guidance on additional own funds referred to in

paragraph 10 of this Schedule where that guidance addresses the

risks other than the risk of excessive leverage.

(4) Own funds that are used to meet the additional own funds

requirement referred to in paragraph 1(a) of this Schedule imposed

by the competent authority to address the risk of excessive leverage

not sufficiently covered by point (d) of Article 92(1) of the CRR

shall not be used to meet any of the following

(a) the own funds requirement set out in point (d) of

Article 92(1) of the CRR;

(b) the leverage ratio buffer requirement referred to in

Article 92(1a) of the CRR;

(c) the guidance on additional own funds referred to in

paragraph 10 of this Schedule, where that guidance addresses

risks of excessive leverage.

(7) The competent authority shall duly justify in writing to

each investment firm the decision to impose an additional own funds

requirement under paragraph 1(a) of this Schedule. That justification

shall include, in the case set out in paragraph 3(e) of this Schedule, a

specific statement of the reasons for which the imposition of guidance

on additional own funds is no longer considered sufficient.

(8) Pursuant to the strategies and processes referred to in

Article 73 of the CRD as transposed in Maltese Law, investment firms

shall set their internal capital at an adequate level of own funds that is

sufficient to cover all the risks that an investment firm is exposed to

and to ensure that the investment firm’s own funds can absorb

potential losses resulting from stress scenarios, including those

identified under the supervisory stress test referred to in regulation 14.

(9) (1)

The competent authority shall regularly review the

level of the internal capital set by each investment firm in accordance

with paragraph 8 of this Schedule as part of the reviews and

evaluations performed in accordance with regulation 11(1) and 15(1).

(2) Pursuant to that review, the competent authority shall

determine for each investment firm the overall level of own funds it

considers appropriate.

(10) (1) The competent authority shall communicate its

guidance on additional own funds to investment firms.

(2) The guidance on additional own funds shall be the own

funds exceeding the relevant amount of own funds required pursuant

to Parts Three, Four and Seven of the CRR, Chapter 12 of Regulation

(EU) No. 2017/2402, paragraph 1(a) of this Schedule and Article

128(6) of the CRD as transposed in Maltese Law or pursuant to Article

92(1a) of the CRR as relevant, which are required to reach the overall

level of own funds considered appropriate by the competent authority

pursuant to paragraph 9 of this Schedule.

(11) The competent authority’s guidance on additional own

funds pursuant to paragraph 10 of this Schedule shall be institution-

specific. The guidance may cover risks addressed by the additional

own funds requirement imposed pursuant to paragraph 1(a) of this

Schedule.

(12) (1) Own funds that are used to meet the guidance on

additional own funds communicated in accordance with paragraph 10

of this Schedule to address risks other than the risk of excessive

leverage shall not be used to meet any of the following

(a) the own funds requirements set out in points (a), (b)

and (c) of Article 92(1) of the CRR;

(b) the requirement laid down in paragraphs 3 to 7 of this

Schedule imposed by the competent authority to address risks

other than the risk of excessive leverage and the combined buffer

requirement.

(2) Own funds that are used to meet the guidance on additional

own funds communicated in accordance with paragraph 10 of this

Schedule to address the risk of excessive leverage shall not be used to

meet the own funds requirement set out in point (d) of Article 92(1) of

the CRR, the requirement laid down in paragraphs 3 to 7 of this

Schedule imposed by the competent authority to address the risk of

excessive leverage and the leverage ratio buffer requirement referred

to in Article 92(1a) of the CRR.

(13) Failure to meet the guidance referred to in paragraph 10 of

this Schedule where an investment firm meets the relevant own funds

requirements set out in Parts Three, Four and Seven of the CRR and in

Chapter 2 of Regulation (EU) No. 2017/2402, the relevant additional

own funds requirement referred to in paragraph 1(a) of this Schedule

and, as relevant, the combined buffer requirement or the leverage ratio

buffer requirement referred to in Article 92(1a) of the CRR shall not

trigger the restrictions referred to in Article 141 or 141b of the CRD as

transposed in the Investment Services Rules.

(14) The competent authority shall notify the Resolution

Committee of the additional own funds requirement imposed on

investment firms pursuant to paragraph 1(a) of this Schedule and of

any guidance on additional own funds communicated to investment

firms in accordance with paragraph 10 of this Schedule.

12. Schedule V annexed to the principal regulations shall be

amended as follows

(1) immediately after paragraph (18) of this Schedule

there shall be added the following new paragraph

"(19) Authorities responsible for supervising the

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

Directive (EU) 2015/849 on the prevention of the use of the

financial system for the purposes of money laundering or

terrorist financing of the European Parliament and of the

Council for compliance with the said Directive.".

(2) Immediately after paragraph (19) of the Schedule, as

added, there shall be added the following new paragraph

"(20) (1) Notwithstanding Articles 26(1) and 17(7) of the

Investment Services Act, the competent authority may, subject to

the conditions set out in sub-paragraphs 2, 3 and 4 of this

paragraph, transmit or share certain information with the

following

(a) the International Monetary Fund and the World

Bank, for the purposes of assessments for the Financial

Sector Assessment Program;

(b) the Bank for International Settlements, for the

purposes of quantitative impact studies;

(c) the Financial Stability Board, for the purposes

of its surveillance function.

(2) The competent authority may only share confidential

information following an explicit request by the relevant body, where

at least the following conditions are met

(a) the request is duly justified in light of the specific

tasks performed by the requesting body in accordance with its

statutory mandate;

(b) the request is sufficiently precise as to the nature,

scope and format of the required information, and the means of

its disclosure or transmission;

(c) the requested information is strictly necessary for the

performance of the specific tasks of the requesting body and

does not go beyond the statutory tasks conferred on the

requesting body;

(d) the information is transmitted or disclosed

exclusively to the persons directly involved in the performance

of the specific task;

(e) the persons having access to the information are

subject to professional secrecy requirements at least equivalent

to those referred to in Article 26(1) of the Investment Services

Act.

(3) Where the request is made by any of the entities referred to

in sub-paragraph 1, the competent authority may only transmit

aggregate or anonymised information and may only share other

information at the premises of the competent authority.

(4) To the extent that the disclosure of information involves

processing of personal data, any processing of personal data by the

requesting body shall comply with the requirements laid down in

Regulation (EU) 2016/679 of the European Parliament and of the

Council."

€0.72

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

regulation 1 of

regulations shall be substituted as follows

the principal

regulations.

(2) The purpose of these regulations is to transpose articles 3

(in part), 4(1), 6, 7, 50, 52, 53(2), 56, 57, 58(1), 58 (3), 59, 60, 61,

74(4), 75(1), 75(3), 77(2), 78(2), 78(3), 78(4), 78(5), 86(3), 91(6),

91(11), 97, 98, 99, 100 to 105 inclusive, 107, 110, 143, 144, 151, 157,

159, 159a of the CRD.

Sub-regulation (1) of regulation 9 of the principal Amends

regulation 9 of

regulations shall be substituted as follows

the principal

regulations

"(1) The competent authority shall collect the information

disclosed publicly by investment firms in relation to points (g),

(h) and (i) of Article 450(1) of the CRR as well as the

information provided by investment firms on the gender pay gap

and shall use that information to benchmark remuneration trends

and practices. The competent authority shall provide this

information to the EBA.".

Regulation 11 of the principal regulations shall be amended Amends

regulation 11 of

as follows

the principal

regulations.

(a) sub-regulation (1) thereof, shall be substituted by the

following

"(1) The competent authority shall, taking into

account the technical criteria set out in Schedule I, review

the arrangements, strategies, processes and mechanisms

implemented by investment firms to comply with the CRR,

the Act, regulations or Investment Services Rules issued

thereunder and evaluate

(a) risks to which investment firms are or

might be exposed; and

(b) risks revealed by stress testing taking into

account the nature, scale and complexity of an

investment firm’s activities.";

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

shall be added the following new proviso

"Provided that when conducting the review and

evaluation referred to in sub-regulation (1), the competent

authority shall apply the principle of proportionality in

accordance with the criteria disclosed pursuant to

Regulation 21(1)(c).";

(c) immediately after sub-regulation (4), as amended,

there shall be added the following new sub-regulation

"(4A)The competent authority may tailor the

methodologies for the application of the review and

evaluation referred to in sub-regulation (1) to take into

account investment firms with a similar risk profile, such as

similar business models or geographical location of

exposures. Such tailored methodologies may include risk-

oriented benchmarks and quantitative indicators, shall

allow for due consideration of the specific risks that each

investment firm may be exposed to, and shall not affect the

institution-specific nature of measures imposed in

accordance with paragraph 1 of Schedule III

Provided that where the competent authority

uses tailored methodologies pursuant to this paragraph, it

shall notify the EBA.

(d) immediately after sub-regulation (5) thereof, there

shall be added the following new sub-regulation

"(6) Where a review, in particular the evaluation of

governance arrangements, the business model, or the

activities of an investment firm, gives the competent

authority reasonable grounds to suspect that, in connection

with that investment firm, money laundering or terrorist

financing is being or has been committed or attempted, or

there is increased risk thereof, the competent authority shall

immediately notify the EBA and the authority or body that

supervises the investment firm in accordance with

Directive (EU) 2015/849 and is competent for ensuring

compliance with the said Directive. In the event of

potential increased risk of money laundering or terrorist

financing, the competent authority and the authority or

body that supervises the investment firm in accordance

with Directive (EU) 2015/849 and is competent for

ensuring compliance with the said Directive shall liaise and

notify their common assessment immediately to the EBA.

The competent authority shall take the necessary measures,

as it deems appropriate, in accordance with the CRD as

transposed in Maltese Law.".

Regulation 17 of the principal regulations shall be deleted.

Deletes

regulation 17 of

the principal

regulations.

Sub-regulation 18(d) of the principal regulations shall be Amends

regulation 18 of

the principal

regulations.

Paragraph (b) of sub-regulation (1) of regulation 21 of the Amends

regulation 21 of

principal regulations shall be substituted by the following

the principal

regulations.

"(b) the general criteria and methodologies it uses in the

review and evaluation pursuant to regulation 11, including the

criteria for applying the principle of proportionality as referred to

in regulation 11(4);".

Immediately after regulation 28 of the principal regulations Adds a new

regulation to the

there shall be added the following new regulation

principal

regulations.

(1) Parent financial holding companies and

parent mixed financial holding companies already existing

on 27 June 2019 shall apply for approval in accordance

with Article 10CA of the Investment Services Act by 28

June 2021. If a financial holding company or mixed

financial holding company fails to apply for approval by

28 June 2021, appropriate measures shall be taken

pursuant to Article 10CA(6) of the Investment Services

Act.

(2) During the transitional period referred to in the

previous sub-regulation, the competent authority shall

have all the necessary supervisory powers conferred on it

by the CRD as transposed in Maltese Law with regard to

financial holding companies or mixed financial holding

companies subject to approval in accordance with Article

10CA of the Investment Services Act for the purposes of

consolidated supervision.".

9. Schedule I annexed to the principal regulations shall be

substituted by the following

"SCHEDULE I

SUPERVISORY REVIEW AND EVALUATION

(Regulation 11)

(1) In addition to credit, market and operational risks, the

review and evaluation performed by the competent authority pursuant

to regulation 11 shall include at least

(a) the results of the stress test carried out in accordance

with Article 177 of the CRR by investment firms applying an

internal ratings based approach to calculate their credit risk-

weighted exposure;

(b) the exposure to and management of concentration

risk by investment firms including their compliance with the

Investment Services Rules transposing the requirements of the

CRD and the requirements set out in Part Four of the CRR;

(c) the robustness, suitability and manner of application

of the policies and procedures implemented by investment firms

for the management of the residual risk associated with the use

of recognised credit risk mitigation techniques;

(d) the extent to which the own funds held by an

investment firm in respect of assets which it has securitised are

adequate having regard to the economic substance of the

transaction, including the degree of risk transfer achieved;

(e) the exposure to, measurement and management of

liquidity risk by investment firms including the development of

alternative scenario analyses, the management of risk mitigants

(in particular the level, composition and quality of liquidity

buffers) and effective contingency plans;

(f) the impact of diversification effects and how such

effects are factored into the risk measurement system;

(g) the results of stress tests carried out by investment

firms using an internal model to calculate market risk own funds

requirements under Part Three, Title IV of Chapter 5 of the CRR;

(h) the geographical location of investment firm’s

exposures;

(i)

the business model of the investment firm;

(2) For the purposes of point (e) of paragraph 1 of this

Schedule, the competent authority shall regularly carry out a

comprehensive assessment of the overall liquidity risk management by

investment firms and promote the development of sound internal

methodologies. In its review, the competent authority shall have regard

to the role played by investment firms in the financial markets. The

competent authority shall also duly consider the potential impact of

their decisions on the stability of the financial system in all other

Member States concerned.

(3) The competent authority shall monitor whether an

investment firm has provided implicit support to a securitisation. If an

investment firm is found to have provided implicit support on more

than one occasion the competent authority shall take appropriate

measures reflective of the increased expectation that it will provide

future support to its securitisation thus failing to achieve a significant

transfer of risk.

(4) For the purposes of the determination to be made under

regulation 11(3), the competent authority shall consider whether the

valuation adjustments taken for positions or portfolios in the trading

book, as set out in Article 105 of the CRR, enable the investment firm

to sell or hedge out its positions within a short period without incurring

material losses under normal market conditions.

(5) (1) The review and evaluation performed by the competent

authority shall include the exposure of investment firms to the interest

rate risk arising from non-trading activities.

(2) The supervisory powers shall be exercised at least in the

following cases

(a) where an investment firm’s economic value of equity

as referred to in Article 84(1) of the CRD as transposed in

Maltese Law declines by more than 15% of its Tier 1 capital as a

result of a sudden and unexpected change in interest rates as set

out in any of the six supervisory shock scenarios applied to

interest rates;

(b) where an investment firm’s net interest income

referred to in Article 84(1) of the CRD as transposed in Maltese

Law experiences a large decline as a result of a sudden and

unexpected change in interest rates as set out in any of the two

supervisory shock scenarios applied to interest rates.

(3) Notwithstanding sub-paragraph (2) of paragraph (5), the

competent authority shall not be obliged to exercise supervisory

powers where it considers, based on the review and evaluation referred

to in this paragraph, that the investment firm’s management of interest

rate risk arising from non-trading book activities is adequate and that

the investment firm is not excessively exposed to interest rate risk

arising from non-trading book activities.

(4) For the purpose of this paragraph, the term "supervisory

powers" means the powers referred to in paragraph 1 of Schedule III or

the power to specify modelling and parametric assumptions, other than

those identified by the EBA pursuant to point (b) of paragraph 5a of

Article 98 of the CRD as transposed in Maltese Law, to be reflected by

investment firms in their calculation of the economic value of equity

under Article 84(1) of the CRD as transposed in Maltese Law.

(5) The review and evaluation performed by the competent

authority shall include the exposure of investment firms to the risk of

excessive leverage as reflected by indicators of excessive leverage,

including the leverage ratio determined in accordance with Article 429

of the CRR. In determining the adequacy of the leverage ratio of

investment firms and of the arrangements, strategies, processes and

mechanisms implemented by investment firms to manage the risk of

excessive leverage, the competent authority shall take into account the

business model of those investment firms.

(6) The review and evaluation conducted by the competent

authority shall include governance arrangements of investment firms,

their corporate culture and values, and the ability of members of the

management body to perform their duties. In conducting that review

and evaluation, the competent authority shall, at least, have access to

agendas and supporting documents for meetings of the management

body and its committees, and the results of the internal or external

evaluation of performance of the management body. "

10. Sub-regulation (2) of Schedule II annexed to the principal Amends

Schedule II

regulations shall be substituted by the following

annexed to the

principal

regulations.

"(2) Supervisory examination programmes shall include

the following investment firms

(a) investment firms for which the results of the

stress tests referred to in points (a) and (g) of paragraph (1)

of Schedule I and regulation 14, or the outcome of the

supervisory review and evaluation process under regulation

11, indicate significant risks to their on going financial

soundness or indicate breaches of the Act, and any

regulations and rules issued thereunder transposing the

requirements of the CRD and of the CRR;

(b) any other investment firm which the competent

authority may deem necessary.".

11. Schedule III annexed to the principal regulations shall be Amends

Schedule III

substituted by the following

annexed to the

principal

regulations.