Recovery and Resolution (Amendment No. 2) Regulations, 2024

Suppliment tal-Gazzetta tal-Gvern ta’ Malta, Nru. 21,346, 15 ta’ Novembru, 2024

L.N. 302 of 2024

MALTA FINANCIAL SERVICES AUTHORITY ACT

(CAP. 330)

Recovery and Resolution (Amendment No. 2) Regulations, 2024

IN EXERCISE of the powers conferred by articles 20A and 20D

of the Malta Financial Services Authority Act, the Minister

responsible for the regulation of financial services, acting on the

advice of the Malta Financial Services Authority and of the Resolution

Authority, has made the following regulations:-

(1) The title of these regulations is the Recovery and Citation, scope

Resolution (Amendment No. 2) Regulations, 2024 and these and

commencement.

regulations shall be read and construed as one with the Recovery and S.L. 330.09.

Resolution Regulations, hereinafter referred to as the "principal

regulations".

(2) The purpose of these regulations is to transpose the

provisions of Article 1 of Directive (EU) 2024/1174 of the European

Parliament and of the Council of 11 April 2024 amending Directive

2014/59/EU and Regulation (EU) No 806/2014 as regards certain

aspects of the minimum requirement for own funds and eligible

liabilities.

(3) These regulations shall be deemed to have come into force

on the 13th November 2024.

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

regulation 2 of

regulations shall be amended as follows

the principal

regulations.

(a) immediately after the definition "investor" there shall

be added the following definition

" "liquidation entity" means a legal person

established in the Union in respect of which the group

resolution plan or, for entities that are not part of a group,

the resolution plan, provides that the entity is to be wound

up under normal insolvency proceedings, or an entity,

within a resolution group other than a resolution entity, in

respect of which the group resolution plan does not provide

for the exercise of write-down and conversion powers;".

Regulation 45C of the principal regulations shall be Amends

regulation 45C

amended as follows

of the principal

regulations.

(a) paragraph (b) of sub-regulation (2) thereof shall be

amended as follows

(i) the words "for an appropriate period not longer

than one year:" shall be substituted by the words "for an

appropriate period not longer than one (1) year."; and

(ii)

the provisos thereof shall be deleted; and

(b) immediately after sub-regulation (2) thereof, as

amended, there shall be added the following new sub-regulation

"(2a) The Resolution Committee shall not

determine the requirement referred to in regulation 45(1)

for liquidation entities

Provided that by way of derogation from this

sub-regulation, the Resolution Committee may assess

whether it is justified to determine the requirement

referred to in regulation 45(1) for a liquidation entity on

an individual basis in an amount exceeding the amount

sufficient to absorb losses in accordance with paragraph

(a) of sub-regulation (2). The Resolution Committee

shall take into account in its assessment, in particular,

any possible impact on financial stability and on the risk

of contagion to the financial system, including with

regard to the financing capacity of the depositor

compensation scheme. Where the Resolution Committee

determines the requirement referred to in regulation

45(1), the liquidation entity shall meet such requirement

by using one or more of the following

(a) own funds;

(b) liabilities that fulfil the eligibility

criteria referred to in Article 72a of the CRR, with

the exception of points (b) and (d) of Article

72b(2) of the said Regulation;

(c) the liabilities referred to in regulation

45B(2)

Provided further that Article 77(2) and

Article 78a of the CRR shall not apply to liquidation

entities for which the Resolution Committee has not

determined the requirement referred to in regulation

45(1)

Provided further that holdings of own funds

instruments and eligible liabilities instruments issued by

subsidiary institutions which are liquidation entities for

which the Resolution Committee has not determined the

requirement referred to in regulation 45(1) shall not be

deducted under Article 72e(5) of the CRR

Provided further that, by way of derogation

from the third proviso hereof, an institution or entity

referred to in paragraphs (b), (c) or (d) of the definition

"entity" in regulation 2(1), that is not itself a resolution

entity but is a subsidiary of a resolution entity or of a

third-country entity that would be a resolution entity if it

were established in the Union, shall deduct its holdings

of own funds instruments in subsidiary institutions that

belong to the same resolution group and that are

liquidation entities for which the Resolution Committee

has not determined the requirement referred to in

regulation 45(1) where the aggregate amount of those

holdings is equal to, or exceeds seven percent (7%) of

the total amount of its own funds and liabilities that

comply with the eligibility criteria set out in regulation

45F(2), calculated annually as of 31 December as an

average over the previous twelve (12) months.".

Regulation 45F of the principal regulations shall be Amends

amended as follows

(a) immediately after sub-regulation (1) thereof there

shall be added the following new sub-regulation

"(1a) By way of derogation from paragraphs (a)

and (b) of sub-regulation (1), the Resolution Committee

may decide to determine the requirement laid down in

regulation 45C on a consolidated basis for a subsidiary

as referred to in this paragraph where the Resolution

Committee concludes that all of the following conditions

are met

(a) the subsidiary meets one of the

following conditions

(i) the subsidiary is held directly by

the resolution entity and

-

the resolution entity is a

Union

parent

financial

holding

company or a Union parent mixed

financial holding company;

-

both the subsidiary and the

resolution entity are established in

Malta and are part of the same

resolution group;

-

the resolution entity does

not hold directly any subsidiary

institution or any subsidiary entity

referred to in paragraphs (b), (c) or (d)

of the definition "entity" in regulation

2(1), where that entity is subject to the

requirements set out in this regulation

or to the requirement referred to in

regulation 45C, other than the

subsidiary concerned; and

-

the subsidiary would be

disproportionately affected by the

deductions required pursuant to Article

72e(5) of the CRR; or

(ii) the subsidiary is subject to the

requirement referred to in Article 104a of the

CRD on a consolidated basis only and the

determination of the requirement laid down

in regulation 45C on a consolidated basis,

would not lead to overstating the

recapitalisation needs, for the purposes of

paragraph (b) of regulation 45C(1), of the

sub-group consisting of entities within the

same consolidation perimeter; and

(b) compliance with the requirement laid

down in regulation 45C on a consolidated basis as

a substitute for compliance with that requirement

on an individual basis, does not impair in a

material way any of the following

(i) the credibility and feasibility of

the group resolution strategy;

(ii) the subsidiary’s capacity to

comply with its own funds requirement after

the exercise of write-down and conversion

powers; and

(iii) the adequacy of the internal loss

transfer and recapitalisation mechanism,

including the write-down or conversion, in

accordance with regulation 59, of relevant

capital instruments and eligible liabilities of

the subsidiary concerned or of other entities

in the resolution group."; and

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

shall be added the following new sub-regulations

"(2a) Where an entity as referred to in sub-

regulation (1) complies with the requirement referred to

in regulation 45(1) on a consolidated basis, the amount

of own funds and eligible liabilities of such entity shall

include the following liabilities issued in accordance

with sub-regulation (2)(a) by a subsidiary established in

the Union included in the consolidation of such entity

(a) liabilities issued to and bought by the

resolution entity, either directly, or indirectly

through other entities in the same resolution group

that are not included in the consolidation of the

entity complying with the requirement referred to

in regulation 45(1) on a consolidated basis; and

(b) liabilities issued to an existing

shareholder that is not part of the same resolution

group.

(2b) The liabilities referred to in paragraphs (a)

and (b) of sub-regulation (2a) shall not exceed the

amount determined by subtracting from the amount of

the requirement referred to in regulation 45(1) applicable

to the subsidiary included in the consolidation the sum of

all of the following

(a) the liabilities issued to and bought by

the entity complying with the requirement referred

to in regulation 45(1) on a consolidated basis,

either directly, or indirectly through other entities

in the same resolution group that are included in

the consolidation of such entity; and

(b) the amount of own funds that are issued

in accordance with sub-regulation (2)(b).".

Sub-regulation (4) of regulation 45I of the principal

regulations shall be substituted by the following new sub-regulation

"(4) Sub-regulations (1) and (3) shall not apply to a

liquidation entity unless the Resolution Committee has

determined the requirement referred to in regulation 45(1) for

such entity in accordance with the first proviso to regulation

45C(2a). In such a case, the Resolution Committee shall

determine the content and frequency of the reporting and

disclosure obligations referred to in Article 45i(5) and (6) of the

BRRD for such entity. The Resolution Committee shall

communicate those reporting and disclosure obligations to the

liquidation entity concerned. Those reporting and disclosure

obligations shall not go beyond what is necessary to monitor

compliance with the requirement determined pursuant to the first

proviso to regulation 45C(2a).".

Regulation 45J of the principal regulations shall be

substituted by the following new regulation

" Reporting to

45J. The Resolution Committee shall inform the

the EBA.

EBA of the minimum requirement for own funds and

eligible liabilities set in accordance with regulation 45E

or regulation 45F, including decisions taken pursuant to

paragraph (d) of regulation 45F(1), for each entity

established in Malta.".

€0.27