FINANCIAL CONGLOMERATES REGULATIONS

SUBSIDIARY LEGISLATION 330.06

FINANCIAL CONGLOMERATES REGULATIONS

12th July, 2013

LEGAL NOTICE 182 of 2013, as amended by Legal Notices 103 of 2014,

111 of 2015 and 359 of 2021.

(1) The title of these regulations is the Financial

Conglomerates Regulations.

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

provisions of the Financial Conglomerates Directive, as currently

in force and as may be amended from time to time, and these

regulations shall be interpreted and applied accordingly.

Capital Adequacy

(Regulation 6)

The calculation of the supplementary capital adequacy requirements of the

regulated entities in a financial conglomerate referred to in regulation 6(1) shall be

carried out in accordance with the technical principles and one of the methods

described in this Schedule.

Without prejudice to the provisions (A) and (B), the Authority, when appointed

coordinator with regard to a particular financial conglomerate, shall decide, after

consultation with the other relevant competent authorities and the financial

conglomerate itself, which method shall be applied by that financial conglomerate.

(A) Where a financial conglomerate is headed by a regulated entity authorised in

Malta, the Authority may determine which particular method among those described

in this Schedule shall be used for the purpose of the calculation; and

(B) Where a financial conglomerate is not headed by a regulated entity, a

method among those described in this Schedule shall be used for the purpose of the

calculation.

I.

Technical principles

1. Extent and form of the supplementary capital adequacy requirements

calculation

Whichever method is used, when the entity is a subsidiary undertaking and has a

solvency deficit or, in the case of a non-regulated financial sector entity, a notional

solvency deficit, the total solvency deficit of the subsidiary has to be taken into

account. Where, in the opinion of the Authority in this case, when appointed

coordinator, the responsibility of the parent undertaking owning a share of the

capital is limited strictly and unambiguously to that share of the capital, the

coordinator may give permission for the solvency deficit of the subsidiary

undertaking to be taken into account on a proportional basis.

Where there are no capital ties between entities in a financial conglomerate, the

coordinator, after consultation with the other relevant competent authorities, shall

determine which proportional share will have to be taken into account, bearing in

mind the liability to which the existing relationship gives rise.

2. Other technical principles

Regardless of the method used for the calculation of the supplementary capital

adequacy requirements of regulated entities in a financial conglomerate as laid down

in section II of this Schedule, the coordinator and, where necessary, other competent

authorities concerned, shall ensure that the following principles will apply

(i)

the multiple use of elements eligible for the calculation of own funds at

the level of the financial conglomerate (multiple gearing) as well as any

inappropriate intra-group creation of own funds is not permissible; in

order to ensure the elimination of multiple gearing and the intra-group

creation of own funds, competent authorities shall apply by analogy the

relevant principles laid down in the relevant sectoral rules;

(ii) the solvency requirements for each different financial sector represented

in a financial conglomerate shall be covered by own funds elements in

accordance with the corresponding sectoral rules; when there is a deficit

of own funds at the financial conglomerate level, only own funds

elements which are eligible according to each of the sectoral rules

(cross-sector capital) shall qualify for verification of compliance with

the additional solvency requirements;

(iii) where sectoral rules provide for limits on the eligibility of certain own

funds instruments, which would qualify as cross-sector capital, these

limits shall apply mutatis mutandis when calculating own funds at the

level of the financial conglomerate;

(iv) when calculating own funds at the level of the financial conglomerate,

competent authorities shall also take into account the effectiveness of

the transferability and availability of the own funds across the different

legal entities in the group, given the objectives of the capital adequacy

rules;

(v) where, in the case of a non-regulated financial sector entity, a notional

solvency requirement is calculated in accordance with Section II of this

Schedule, notional solvency requirement means the capital requirement

with which such an entity would have to comply under the relevant

sectoral rules as if it were a regulated entity of that particular financial

sector; in the case of asset management companies, solvency

requirement means the capital requirement set out in Article 5a(1)(a) of

Directive 85/611/EEC; the notional solvency requirement of a mixed

financial holding company shall be calculated according to the sectoral

rules of the most important financial sector in the financial

conglomerate.

Technical calculation methods

Method 1: Accounting consolidation method

The calculation of the supplementary capital adequacy requirements of the

regulated entities in a financial conglomerate shall be carried out on the basis of the

consolidated accounts.

The supplementary capital adequacy requirements shall be calculated as the

difference between

(i)

the own funds of the financial conglomerate calculated on the basis of

the consolidated position of the group; the elements eligible are those

that qualify in accordance with the relevant sectoral rules; and

(ii) the sum of the solvency requirements for each different financial sector

represented in the group; the solvency requirements for each different

financial sector are calculated in accordance with the corresponding

sectoral rules.

In the case of non-regulated financial sector entities which are not included in the

aforementioned sectoral solvency requirement calculations, a notional solvency

requirement shall be calculated.

The difference shall not be negative.

Method 2: Deduction and aggregation method

The calculation of the supplementary capital adequacy requirements of the

regulated entities in a financial conglomerate shall be carried out on the basis of the

accounts of each of the entities in the group.

The supplementary capital adequacy requirements shall be calculated as the

difference between

(i)

the sum of the own funds of each regulated and non-regulated financial

sector entity in the financial conglomerate; the elements eligible are

FINANCIAL CONGLOMERATES

those which qualify in accordance with the relevant sectoral rules; and

(ii) the sum of -

-

the solvency requirements for each regulated and non-regulated

financial sector entity in the group; the solvency requirements

shall be calculated in accordance with the relevant sectoral rules;

and

-

the book value of the participations in other entities of the group.

In the case of non-regulated financial sector entities, a notional solvency

requirement shall be calculated. Own funds and solvency requirements shall be taken

into account for their proportional share as provided for in regulation 6(9) and in

accordance with Section I of this Schedule.

The difference shall not be negative.

Method 3: Combination method

The Authority in agreement with the other relevant competent authorities may

allow a combination of method 1 and method 2.

In these regulations, unless the context otherwise requires

"the Act" means the Malta Financial Services Authority Act;

"the Authority" means the Malta Financial Services Authority

established by article 3 of the Act;

"alternative investment fund manager" means a manager of

alternative investment funds within the meaning of Article 4(1)(b),

(l) and (ab) of Directive 2011/61/EU or an undertaking the

registered office of which is in a third country and which would

require authorisation under that Directive if its registered office

were within the European Union;

"asset management company" means a management company

within the meaning of Article 2(1)(b) of Directive 2009/65/EC or

an undertaking the registered office of which is in a third country

and which would require authorisation under that Directive if it had

its registered office within the European Union;

"balance sheet total" means total assets reported in the balance

sheet;

"binding legal instruments" means any directly applicable measures,

including, but not limited to, any implementing technical standards,

regulatory technical standards or similar measures, issued under

European Union legislation;

"close links" means a situation in which two or more natural or

legal persons are linked by control or participation, or a situation in

which two or more natural or legal persons are permanently linked

to the same person by a control relationship;

"the Commission" means the Commission of the European

Union;

"competent authorities"

(a) in the case of Malta, means the Authority;

(b) in the case of another Member State, means the

national authority or national authorities of the

Member State which are empowered by law or

regulation to supervise credit institutions, insurance

undertakings, reinsurance undertakings, investment

firms, asset management companies or alternative

investment fund managers whether on an individual or

a group-wide basis;

"control" means a relationship between a parent undertaking and

a subsidiary undertaking as set out in Article 1 of Directive 83/349/

EEC and includes a similar relationship between a natural or legal

person and an undertaking;

"coordinator" means the Authority or a competent authority

appointed under regulation 11;

"credit institution" shall have the same meaning as is assigned to

it in paragraph (1) of Article 4(1) of Regulation (EU) No. 575/

2013;

"the Financial Conglomerates Directive" means Directive 2002/

87/EC of the European Parliament and of the Council of 16

December, 2002 on the supplementary supervision of credit

institutions, insurance undertakings and investment firms in a

financial conglomerate and amending Council Directives 73/239/

EEC, 2002/83/EC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/

EEC, and Directives 98/78/EC and 2000/12/EC of the European

Parliament and of the Council as amended by Directive 2011/89/EC

of the European Parliament and of the Council of 16 November

2011 amending Directive 98/78/EC, 2002/87/EC, 2006/48/EC and

2009/138/EC as regards supplementary supervision of financial

entities in a financial conglomerate and as may be amended from

time to time;

"financial conglomerate" means a group or subgroup, where a

regulated entity is at the head of the group or subgroup, or where at

least one of the subsidiaries in that group or subgroup is a regulated

entity and which meets the following conditions

(a) where there is a regulated entity at the head of the

group or subgroup

(i)

that entity is a parent undertaking of an entity in

the financial sector, an entity which holds a

participation in an entity in the financial sector,

or an entity linked with an entity in the financial

sector by a relationship within the meaning of

Article 12(1) of Directive 83/349/EEC;

(ii) at least one of the entities in the group or

subgroup is within the insurance sector and at

least one is within the banking or investment

services sector; and

(iii) the consolidated or aggregated activities of the

entities in the group or subgroup within the

insurance sector and of the entities within the

banking and investment services sector are both

significant within the meaning of Article 3(2) or

(3) of the Financial Conglomerates Directive; or

(b) where there is no regulated entity at the head of the

group or subgroup

(i)

the group’s or subgroup’s activities mainly occur

in the financial sector within the meaning of

regulation 3(1);

(ii) at least one of the entities in the group or

subgroup is within the insurance sector and at

least one is within the banking or investment

services sector; and

(iii) the consolidated or aggregated activities of the

entities in the group or subgroup within the

insurance sector and of the entities within the

banking and investment services sector are both

significant within the meaning of Article 3(2) or

(3) of the Financial Conglomerates Directive;

"Financial Conglomerates Committee" means the Committee set

up by the Commission in pursuance of Article 21 of the Financial

Conglomerates Directive;

"financial sector" means a sector composed of one or more of the

following entities

(a) a credit institution, a financial institution or an

ancillary services undertaking within the meaning of

paragraphs (1), (26) or (18), respectively, of Article 4(1)

of Regulation (EU) No. 575/2013, hereinafter

collectively referred to as "the banking sector";

(b) an insurance undertaking, a reinsurance undertaking or

an insurance holding company within the meaning of

Article 13(1), (2), (4) or (5) or of Article 212(1)(f) of

Directive 2009/138/EC, hereinafter collectively

referred to as "the insurance sector";

(c) an investment firm within the meaning of Article

3(1)(b) of Directive 2006/49/EC, hereinafter

collectively referred as "the investment services

sector";

"group" means a group of undertakings which consists of a

parent undertaking, its subsidiaries and the entities in which the

parent undertaking or its subsidiaries hold a participation, as well

as undertakings linked to each other by a relationship within the

meaning of Article 12(1) of Directive 83/349/EEC, including any

subgroup thereof;

"insurance undertaking" shall have the same meaning as is

assigned to it in Article 13(1), (2) or (3) of Directive 2009/138/EC;

"intra-group transactions" means all transactions by which

regulated entities within a financial conglomerate rely either

directly or indirectly upon other undertakings within the same

group or on any natural or legal person linked to the undertakings

within that group by close links, for the fulfilment of an obligation,

whether or not contractual, and whether or not for payment;

"investment firm" shall have the same meaning as is assigned to

it in point 1 of Article 4(1) of Directive 2004/39/EC, including the

undertakings referred to in Article 3(1)(d) of Directive 2006/49/EC

of the European Parliament and of the Council of 14 June 2006 on

the capital adequacy of investment firms and credit institutions or

an undertaking the registered office of which is in a third country

and which would require authorisation under Directive 2004/39/EC

if its registered office were in the European Union;

"Joint Committee" means the Committee of the European

Supervisory Authorities (ESA) established by Article 54 of

Regulation (EU) No 1093/2010 of the European Parliament and of

the Council of 24 November 2010, of Regulation (EU) No 1094/

2 0 10 of th e E u r op e a n P a r l ia m e n t an d o f t h e C o un c i l o f 2 4

November 2010 and of Regulation (EU) No 1095/2010 of the

European Parliament and of the Council of 24 November 2010;

"M ember St ate" m eans a State which is a m ember of the

European Union;

"mixed financial holding company" means a parent undertaking

which is not a regulated entity and which, together with its

subsidiaries and other entities, constitutes a financial conglomerate,

provided that at least one of its subsidiaries is a regulated entity

having its head office in the European Union;

"parent undertaking" shall have the same meaning as is assigned

to it in Article 1 of the Seventh Council Directive 83/349/EEC of

13 June, 1983 on consolidated accounts and shall include any

undertaking which, in the opinion of the competent authorities,

effectively exercises a dominant influence over another

undertaking;

"participation" shall have the same meaning as is assigned to it

in the first sentence of Article 17 of Fourth Council Directive 78/

660/EEC of 25 July, 1978 on the annual accounts of certain types of

companies and shall include the direct or indirect ownership of 20

per centum or more of the voting rights or capital of an

undertaking;

"proportional share" means the proportion of the subscribed

capital which is held, directly or indirectly, by that undertaking;

"regulated entity " means a credit institution, an insurance

undertaking, a reinsurance undertaking, an investment firm, an

asset management company or an alternative investment fund

manager and includes a regulated entity authorised in Malta;

"regulated entity authorised in Malta" means

(a) a credit institution licensed in terms of article 5 of the

Banking Act;

(b) an insurance undertaking or a reinsurance undertaking

duly authorised in terms of article 7 of the Insurance

Business Act;

(c) an investment services licence holder licensed in terms

of article 3 of the Investment Services Act; or

(d) a financial institution licensed in terms of article 3 of

the Financial Institutions Act;

"reinsurance undertaking" shall have the same meaning as is

assigned to it in Article 13(4), (5) or (6) of Directive 2009/138/EC

and shall include a special purpose vehicle within the meaning of

Article 13(26) of Directive 2009/138/EC;

"relevant competent authorities" means

(a) the competent authorities of the Member States

responsible for the sectoral group-wide supervision of

any of the regulated entities in a financial

conglomerate, in particular of the ultimate parent of a

sector;

(b) the coordinator appointed in accordance with

regulation 11, if different from the authorities referred

to in paragraph (a);

(c) where appropriate, other competent authorities deemed

to be relevant by the authorities referred to in

paragraphs (a) and (b); this opinion shall in particular

take into account the market share of the regulated

entities of the conglomerate in other Member States, in

particular if it exceeds five (5) per centum, and the

importance in the conglomerate of any regulated entity

established in another Member State;

"risk concentration" means all risk exposures with a loss

potential which is large enough to threaten the solvency or the

financial position in general of the regulated entities in the

financial conglomerate whether such exposures are caused by

counterparty risk/credit risk, investment risk, insurance risk,

market risk, other risks, or a combination or interaction of these

risks;

"sectoral rules" means

(a) European Union legislation relating to the prudential

supervision of regulated entities, in particular the

provisions of

(i)

Regulation (EU) No 575/2013 of the European

Parliament and of the Council of 26 June 2013

on prudential requirements for credit institutions

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

may be amended from time to time, and includes

any binding legal instruments, guidelines and

other measures that have been or may be issued

thereunder;

(ii) Regulation (EU) 2019/2033 of the European

Parliament and of the Council of 27 November

2019 on the prudential requirements of

investment firms and amending Regulations

(EU) No 1093/2010, (EU) No 575/2013, (EU)

No 600/2014 and (EU) No 806/2014, as may be

amended from time to time, and includes any

binding legal instruments, guidelines and other

measures that have been or may be issued

thereunder;

(iii) Directive 2009/138/EC of the European

Parliament and of the Council of 25 November

2009 on the taking-up and pursuit of the

business of Insurance and Reinsurance

(Solvency II), as amended from time to time,

and includes any binding legal instruments,

guidelines and other measures that have been or

may be issued under the said Directive;

(iv)

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,

amending Directive 2002/87/EC and repealing

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

amended from time to time, and includes any

binding legal instruments, guidelines and other

measures that have been or may be issued under

the said Directive 2013/36/EU;

(v)

MiFID;

(b) any applicable Acts administered by the Authority,

including any regulations and rules issued thereunder,

in relation to any regulated entity;

(vi) Directive (EU) 2019/2034 of the European Parliament and of

the Council of 27 November 2019 on the prudential supervision of

investment firms and amending Directives 2002/87/EC, 2009/65/EC,

2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU, as amended

from time to time, and includes any binding legal instruments,

guidelines and other measures that have been or may be issued under

the said Directive (EU) 2019/2034;"subsidiary undertaking" shall

have the same meaning as is assigned to it in Article 1 of Directive

83/349/EEC and shall include any undertaking over which, in the

o pin ion of th e com pet ent auth ori ties, a paren t u ndertaki ng

effectively exercises a dominant influence; and all subsidiary

undertakings of subsidiary undertakings shall also be considered as

subsidiary undertakings of the parent undertaking;

"the Tribunal" means the Financial Services Tribunal established

under article 21 of the Act.

Technical application of the provisions on intra-group transactions

and risk concentration

(Regulations 7 and 8)

The coordinator, after consultation with the other relevant competent authorities,

shall identify the type of transactions and risks regulated entities in a particular

financial conglomerate have a duty to report in accordance with the provisions of

regulation 7(2) and regulation 8(2) on the reporting of intra-group transactions and

risk concentration.

When defining or giving their opinion about the type of transactions and risks, the

coordinator and the relevant competent authorities shall take into account the

specific group and risk management structure of the financial conglomerate.

In order to identify significant intra-group transactions and significant risk

concentration to be reported in accordance with the provisions of regulations 7 and

8, the coordinator, after consultation with the other relevant competent authorities

and the conglomerate itself, shall define appropriate thresholds based on regulatory

own funds and/or technical provisions.

When overviewing the intra-group transactions and risk concentrations, the

coordinator shall in particular monitor the possible risk of contagion in the financial

conglomerate, the risk of a conflict of interests, the risk of circumvention of sectoral

rules, and the level or volume of risks.

(1) For the purposes of determining whether the activities

of a group mainly occur in the financial sector, the ratio of the

balance sheet total of the regulated and non-regulated financial

sector entities in the group to the balance sheet total of the group as

a whole shall exceed forty (40) per centum.

(2) For the purposes of determining whether activities in

different financial sectors are significant, for each financial sector

the average of the ratio of the balance sheet total of that financial

sector to the balance sheet total of the financial sector entities in

the group and the ratio of the solvency requirements of the same

financial sector to the total solvency requirements of the financial

sector entities in the group shall exceed ten (10) per centum

Provided that for the purposes of these regulations, the

smallest financial sector in a financial conglomerate is the sector

with the smallest average and the most important financial sector in

a financial conglomerate is the sector with the highest average. For

the purposes of calculating the average and for the measurement of

the smallest and the most important financial sectors, the banking

sector and the investment services sector shall be considered

together.

(3) Asset management companies shall be added to the sector

to which they belong within the group. If they do not belong

exclusively to one sector within the group, they shall be added to

the smallest financial sector.

(4) Alternative investment fund managers shall be added to the

sector to which they belong within the group. If they do not belong

exclusively to one sector within the group, they shall be added to

the smallest financial sector.

(5) Cross-sectoral activities shall also be presumed to be

significant if the balance sheet total of the smallest financial sector

in the group exceeds six (6) billion euro. If the group does not

reach the threshold referred to in sub-regulation (2), the Authority

may decide in agreement with the other relevant competent

authorities not to regard the group as a financial conglomerate or

not to apply the provisions of regulations 7, 8 or 9, if the Authority

and the other relevant competent authorities are of the opinion that

the inclusion of the group in the scope of these regulations or the

application of such provisions is not necessary or would be

inappropriate or misleading with respect to the objectives of

supplementary supervision

Provided that decisions taken in accordance with this sub-

regulation shall be notified to the other competent authorities and

shall, save in exceptional circumstances, be made public by the

Authority.

(6) If the group reaches the threshold referred to in sub-

regulation (2), but the smallest sector does not exceed the six (6)

billion euro threshold, the Authority may decide in agreement with

the other relevant competent authorities not to regard the group as a

financial conglomerate or not to apply the provisions of regulations

7, 8 or 9, if the Authority and the other relevant competent

authorities are of the opinion that the inclusion of the group in the

scope of these regulations or the application of such provisions is

not necessary or would be inappropriate or misleading with respect

to the objectives of supplementary supervision

Provided that decisions taken in accordance with this sub-

regulation shall be notified to the other competent authorities and

shall, save in exceptional circumstances, be made public by the

Authority.

(7) For the application of sub-regulations (1) to (6), the

A u t ho r it y, i n a gr e e m e n t w i t h the o the r r elevant compe te nt

authorities, may

(a) exclude an entity when calculating the ratios in the

cases referred to in regulation 6(10) unless the entity

moved from a Member State to a third country and

there is evidence that the entity changed its location in

order to avoid regulation; and

(b) take into account compliance with the thresholds

envisaged in sub-regulations (1) and (2) for three

consecutive years so as to avoid sudden regime shifts

and disregard such compliance if there are significant

changes in the group’s structure;

(c) exclude one or more participations in the smaller

sector if such participations are decisive for the

identification of a financial conglomerate and are

collectively of negligible interest with respect to the

objectives of supplementary supervision

Provided that where a financial conglomerate has been

identified in accordance with sub-regulations (1) to (6), the

decisions referred to in paragraph (a) shall be taken on the basis of

a proposal made by the coordinator of that financial conglomerate.

(8) For the application of sub-regulations (1) to (4), the

Authority may, in exceptional cases and in agreement with the

other relevant competent authorities, replace the criterion based on

balance sheet total with one or both of the following parameters

(a) income structure;

(b) off-balance sheet activities; and

(c) total assets under management

Provided that the Authority may, alternatively, add one or

both of these parameters if the Authority and the other relevant

competent authorities are of the opinion that these parameters are

of particular relevance for the purposes of supplementary

supervision under these regulations.

(9) For the application of sub-regulations (1) to (4), if the ratios

referred to in those sub-regulations fall below forty (40) per centum

and ten (10) per centum respectively for conglomerates already

subject to supplementary supervision, a lower ratio of thirty-five

(35) per centum and eight (8) per centum respectively shall apply

for the following three years to avoid sudden regime shifts

Provided that for the application of sub-regulation (5), if

the balance sheet total of the smallest financial sector in the group

falls below six (6) billion euro for conglomerates already subject to

supplementary supervision, a lower figure of five (5) billion euro

shall apply for the following three years to avoid sudden regime

shifts

Provided further that during the period referred to in this

sub-regulation, the coordinator may, with the agreement of the

other relevant competent authorities, decide that the lower ratios or

the lower amount referred to in this sub-regulation shall cease to

apply.

(10) The calculations referred to in this regulation regarding the

balance sheet shall be made on the basis of the aggregated balance

sheet total of the entities of the group, according to their annual

accounts. For the purposes of this calculation, undertakings in

which participation is held shall be taken into account as regards

the amount of their balance sheet total corresponding to the

aggregated proportional share held by the group. Where

consolidated accounts are available, they shall be used instead of

aggregated accounts

Provided that the solvency requirements referred to in sub-

regulations (2) to (5) shall be calculated in accordance with the

provisions of the relevant sectoral rules.

(11) The Authority shall, on an annual basis, reassess waivers of

the application of supplementary supervision and shall review the

quantitative indicators set out in this regulation and risk-based

assessments applied to financial groups.

(1) The Authority shall identify from among its regulated

entities, in accordance with regulations 2, 3 and 5, any group that

falls within the scope of these regulations.

(2) The Authority shall cooperate closely with other competent

authorities when regulated entities authorised in Malta form part of

any group which has been identified by other competent authorities

in accordance with the Financial Conglomerates Directive or

regulations transposing the Financial Conglomerates Directive in

another Member State.

(3) If the Authority is of the opinion that a regulated entity

authorised in Malta is a member of a group which may be a

financial conglomerate and which has not already been identified in

accordance with these regulations, similar or equivalent regulations

in another Member State or the Financial Conglomerates Directive,

the Authority shall communicate its view to the other competent

authorities concerned and to the Joint Committee.

(4) The Authority, when appointed as coordinator in

accordance with regulation 11, shall inform the parent undertaking

at the head of a group or, in the absence of a parent undertaking, the

regulated entity with the largest balance sheet total in the most

important financial sector in a group, that the group has been

identified as a financial conglomerate and of its appointment as

coordinator. The Authority shall also inform the competent

authorities which authorised the regulated entities in the group, the

competent authorities of the Member State in which the mixed

financial holding company has its head office as well as the Joint

Committee.

(1) Without prejudice to the provisions on supervision

contained in the sectoral rules, regulated entities which are part of a

financial conglomerate in terms of these regulations shall be

subject to supplementary supervision to the extent and in the

manner prescribed by these regulations.

(2) The following regulated entities shall be subject to

supplementary supervision at the level of the financial

conglomerate in accordance with these regulations

(a) every regulated entity which is at the head of a

financial conglomerate;

(b) every regulated entity, the parent undertaking of which

is a mixed financial holding company which has its

head office in the European Union; and

(c) every regulated entity linked with another financial

sector entity by a relationship within the meaning of

Article 12(1) of Directive 83/349/EEC

Provided that where a financial conglomerate is a subgroup

of another financial conglomerate which has at its head a regulated

entity the Authority, together with the other relevant competent

authorities, may agree that the provisions of these regulations and

the provisions of the Financial Conglomerates Directive may be

applied to the regulated entities within the latter group and any

reference in these regulations to the terms "group" and "financial

conglomerate" will then be understood as referring to that latter

group.

(3) A regulated entity which is not subject to supplementary

supervision in accordance with sub-regulation (2), the parent

undertaking of which is a regulated entity or a mixed financial

holding company which has its head office in a third country, shall

be subject to supplementary supervision at the level of the financial

conglomerate to the extent and in the manner prescribed in

regulation 24.

(4) Where a person holds a participation or capital ties in one

or more regulated entities or otherwise exercises significant

influence over such entities other than the cases referred to in sub-

regulations (2) and (3), the Authority, in agreement with the other

relevant competent authorities, shall determine whether and to what

extent supplementary supervision of the regulated entities is to be

carried out in the same manner as if they constitute a financial

conglomerate.

(5) In order to apply supplementary supervision, at least one of

the entities must be a regulated entity as defined in regulation 2(1)

and the conditions prescribed in paragraphs (a)(ii) or (b)(ii) and

( a )(iii) or ( b )(iii) of the definition of the term "financial

conglomerates" in regulation 2 must be satisfied. The Authority in

agreement with the other relevant competent authorities shall take

into account the objectives of the supplementary supervision as

provided for by these regulations in taking its decision.

(6) For the purposes of applying the provisions of sub-

regulation (4) to cooperative groups, the Authority, in agreement

with the other relevant competent authorities, shall take into

account the public financial commitment of these groups with

respect to other financial entities.

(7) Without prejudice to regulation 15, the exercise of

supplementary supervision at the level of the financial

conglomerate shall in no way imply that the Authority or another

coordinator is required to play a supervisory role in relation to

mixed financial holding companies, third-country regulated entities

in a financial conglomerate or unregulated entities in a financial

conglomerate on a stand-alone basis.

(1) Without prejudice to the sectoral rules, supplementary

supervision of the capital adequacy of the regulated entities in a

financial conglomerate shall be exercised in accordance with the

rules laid down in these regulations.

(2) Regulated entities forming part of a financial conglomerate

shall maintain own funds at the level of the financial conglomerate

at least equal to the capital adequacy requirements as calculated in

accordance with the First Schedule.

(3) Regulated entities authorised in Malta which form part of a

financial conglomerate shall ensure that adequate capital adequacy

policies are in place at the level of the financial conglomerate.

(4) The requirements in sub-regulations (2) and (3) shall be

subject to supervisory overview by the Authority when acting as

coordinator or by another coordinator in accordance with the

provisions of regulations 11 to 15 and regulations 18 to 21.

(5) Where the Authority is the coordinator, it shall ensure that

the calculation referred to in sub-regulation (2) shall be carried out

once a year, either by the regulated entities or by the mixed

financial holding company.

(6) The results of the calculation referred to in sub-regulation

(2) and the relevant data for such calculation shall be submitted to

the Authority when acting as coordinator or to another coordinator

(a) by the regulated entity which is at the head of the

financial conglomerate; or

(b) where the financial conglomerate is not headed by a

regulated entity, by the mixed financial holding

company or by a regulated entity in the financial

conglomerate which has been identified by the

Authority or by another coordinator as the case may

be, after consultation with the other relevant

competent authorities and with the financial

conglomerate.

(7) For the purposes of calculating the capital adequacy

requirements referred to in sub-regulation (2), the following

entities shall be included within the scope of supplementary

supervision in the manner and to the extent provided in the First

Schedule

(a) a credit institution, a financial institution or an

ancillary services undertaking;

(b) an insurance undertaking, a reinsurance undertaking or

an insurance holding company;

(c) an investment firm; and

(d) a mixed financial holding company.

(8) When calculating the supplementary capital adequacy

requirements with regard to a financial conglomerate by applying

method 1 (Accounting Consolidation) as provided for in the First

Schedule, the own funds and the solvency requirements of the

entities in the group shall be calculated by applying the

corresponding sectoral rules on the form and extent of

consolidation as laid down in Article 18 of Regulation (EU) No.

575/2013 and Article 221 of Directive 2009/138/EC.

(9) When applying method 2 (Deduction and Aggregation)

referred to in the First Schedule, the calculation shall take account

of the proportion of the subscribed capital which is directly or

indirectly held by the parent undertaking or undertaking which

holds a participation in another entity of the group.

(10) The Authority when acting as coordinator or another

coordinator may decide not to include a particular entity when

calculating the supplementary capital adequacy requirements in the

following cases

(a) if the entity is situated in a third country where there

are legal impediments to the transfer of the necessary

information, without prejudice to the sectoral rules

regarding the obligation of competent authorities to

refuse authorisation where the effective exercise of

their supervisory functions is prevented;

(b) if the entity is of negligible interest with respect to the

objectives of the supplementary supervision of

regulated entities in a financial conglomerate; or

(c) if the inclusion of the entity would be inappropriate or

misleading with respect to the objectives of

supplementary supervision

Provided that, if several entities are to be excluded pursuant

to paragraph (b), the Authority when acting as coordinator or

another coordinator must include them when collectively they are

of non-negligible interest

Provided further that, in the case referred to in paragraph

( c ), the Authority when acting as coordinator or another

coordinator shall, except in cases of urgency, consult the other

relevant competent authorities before taking a decision.

(11) When a coordinator does not include a regulated entity

authorised in Malta when calculating the supplementary capital

adequacy requirement on the basis of sub-regulation (10)(b) or (c),

the Authority may ask the entity which is at the head of the

financial conglomerate for information which may facilitate their

supervision of the regulated entity concerned

Provided that, in the event such a request is made to a

regulated entity authorised in Malta which is at the head of a

financial conglomerate, such regulated entity shall provide such

information.

(1) Without prejudice to the sectoral rules, supplementary

supervision of the risk concentration of regulated entities in a

financial conglomerate shall be exercised in accordance with the

rules laid down in these regulations.

(2) Regulated entities authorised in Malta or a mixed financial

holding company of a group identified as a financial conglomerate

with its head office in Malta shall report at least once a year to the

coordinator any significant risk concentration at the level of the

financial conglomerate, in accordance with the rules laid down in

this regulation and in the Second Schedule.

(3) The information required in terms of sub-regulation (2)

shall be submitted to the coordinator

(a) by the regulated entity which is at the head of the

financial conglomerate; or

(b) where the financial conglomerate is not headed by a

regulated entity, by the mixed financial holding

company or by a regulated entity in the financial

conglomerate identified by the coordinator, after

consultation with the other relevant competent

authorities and with the financial conglomerate.

(4) These risk concentrations shall be subject to supervisory

overview by the coordinator in accordance with regulations 11 to

15 and regulations 18 to 21.

(5) The Authority may by means of rules set quantitative limits

or adopt other supervisory measures which would achieve the

objectives of supplementary supervision with regard to any risk

concentration at the level of a financial conglomerate.

(6) Where a financial conglomerate is headed by a mixed

financial holding company, the sectoral rules applicable to risk

concentration of the most important financial sector in the financial

conglomerate, if any, shall apply to that sector as a whole,

including the mixed financial holding company.

(1) Without prejudice to the sectoral rules, supplementary

supervision of intra-group transactions of regulated entities in a

financial conglomerate shall be exercised in accordance with these

regulations.

(2) Regulated entities authorised in Malta or a mixed financial

holding company with its head office in Malta shall report at least

once a year to the coordinator all significant intra-group

transactions of regulated entities within a financial conglomerate in

accordance with the rules laid down in this regulation and in the

Second Schedule.

(3) In the absence of any definition of the thresholds in terms

of paragraph 3 of the Second Schedule, an intra-group transaction

shall be presumed to be significant if its amount exceeds at least

five (5) per centum of the total amount of capital adequacy

requirements at the level of a financial conglomerate.

(4) The information required in terms of sub-regulation (2)

shall be submitted to the coordinator

(a) by the regulated entity which is at the head of the

financial conglomerate; or

(b) where the financial conglomerate is not headed by a

regulated entity, by the mixed financial holding

company or by a regulated entity in the financial

conglomerate which has been identified by the

coordinator, after consultation with the other relevant

competent authorities and with the financial

conglomerate.

(5)

Intra-group transactions in terms of this regulation shall be

subject to supervisory overview by the coordinator.

(6) The Authority may by means of sectoral rules set

quantitative limits and qualitative requirements and may also take

other supervisory measures that would achieve the objectives of

supplementary supervision with regard to intra-group transactions

of regulated entities within a financial conglomerate.

(7) Where a financial conglomerate is headed by a mixed

financial holding company, the sectoral rules regarding intra-group

transactions of the most important financial sector in the financial

conglomerate shall apply to that sector as a whole, including the

mixed financial holding company.

(1) A regulated entity authorised in Malta identified as

form ing p art o f a fina ncial co ng lom erate in te rm s o f these

regulations shall have in place, at the level of the financial

conglomerate, adequate risk management processes and internal

control mechanisms, including sound administrative and

accounting procedures.

(2) The risk management processes referred to in sub-

regulation (1) shall include

(a) sound governance and management with the approval

and periodic review of the strategies and policies by

the appropriate governing bodies at the level of the

financial conglomerate with respect to all the risks

they assume;

(b) adequate capital adequacy policies in order to

anticipate the impact of their business strategy on risk

profile and capital requirements as determined in

accordance with regulation 6 and the First Schedule;

and

(c) adequate procedures to ensure that their risk

monitoring systems are well integrated into their

organisation and that all measures are taken to ensure

that the systems implemented in all the undertakings

included in the scope of supplementary supervision are

consistent so that the risks can be measured, monitored

and controlled at the level of the financial

conglomerate; and

(d) arrangements in place to contribute to and develop, if

required,

adequate

recovery

and

resolution

arrangements and plans. Such arrangements shall be

updated regularly.

(3) The internal control mechanisms referred to in sub-

regulation (1) shall include

(a) adequate mechanisms as regards capital adequacy to

identify and measure all material risks incurred and to

appropriately relate own funds to risks; and

(b) sound reporting and accounting procedures to identify,

measure, monitor and control the intra-group

transactions and the risk concentration.

(4) The Authority shall ensure that in all undertakings included

in the scope of supplementary supervision pursuant to regulation 5,

there are adequate internal control mechanisms for the production

of any data and information which would be relevant for the

purposes of supplementary supervision.

(5) The Authority shall require the regulated entities at the

level of the financial conglomerate to regularly provide details on

their legal structure, governance and organisational structure

including all regulated entities, non-regulated subsidiaries and

significant branches.

(6) The Authority shall require the regulated entities to

disclose publicly, at the level of the financial conglomerate, on an

annual basis, either in full or by way of references to equivalent

information, a description of their legal structure and governance

and organisational structure.

(7) The processes and mechanisms referred to in sub-

regulations (1) to (6) shall be subject to supervisory overview by

the Authority when acting as coordinator or by another coordinator.

(8) The Authority shall align the application of supplementary

supervision of internal control mechanisms and risk management

processes as provided for in this regulation with the supervisory

review processes as provided for by Article 97 of Directive 2013/

36/EU and Article 248 of Directive 2009/138/EC.

The Authority when acting as coordinator may, whenever it

deems it appropriate, require financial conglomerates to undertake

regular stress testing within the meaning of the Financial

Conglomerates Directive and, in this respect, the Authority shall

cooperate fully with other competent authorities when acting as

coordinators.

(1) The Authority shall, together with the relevant

competent authorities, including those of the Member State in

which a mixed financial holding company has its head office,

appoint from among such competent authorities a coordinator

responsible for coordination and exercise of supplementary

supervision of the regulated entities in a financial conglomerate in

accordance with the provisions of these regulations.

(2) The appointment of the coordinator in terms of sub-

regulation (1) shall be based on the following criteria

(a) where a financial conglomerate is headed by a

regulated entity, the task of coordinator shall be

exercised by the competent authority which has

authorised that regulated entity pursuant to the

relevant sectoral rules;

(b) where a financial conglomerate is not headed by a

regulated entity, the task of coordinator shall be

exercised by the competent authority identified in

accordance with the following principles

(i)

where the parent of a regulated entity is a mixed

financial holding company, the task of

FINANCIAL CONGLOMERATES

coordinator shall be exercised by the competent

authority which has authorised that regulated

entity pursuant to the relevant sectoral rules;

(ii) where at least two regulated entities which have

their registered office in the European Union

have as their parent the same mixed financial

holding company, and one of these entities has

been authorised in the Member State in which

the mixed financial holding company has its

head office, the task of coordinator shall be

exercised by the competent authority of the

regulated entity authorised in that Member State.

When one of these regulated entities has been

authorised in Malta and the mixed financial

holding company also has its head office in

Malta, the coordinator shall be the Authority

Provided that, where more than one regulated

entity, being active in different financial sectors,

have been authorised in the Member State in

which the mixed financial holding company has

its head office, the task of coordinator shall be

exercised by the competent authority of the

regulated entity active in the most important

financial sector as defined in the proviso to

regulation 3(2);

Provided further that, where the financial

conglomerate is headed by more than one mixed

financial holding company with a head office in

different Member States and there is a regulated

entity in each of these states, the task of

coordinator shall be exercised by the competent

authority of the regulated entity with the largest

balance sheet total if these entities are in the

same financial sector, or by the competent

authority of the regulated entity in the most

important financial sector as defined in the

proviso to regulation 3(2);

(iii) where at least two regulated entities which have

their registered office in the European Union

have as their parent the same mixed financial

holding company and none of these entities has

been authorised in the Member State in which

the mixed financial holding company has its

head office, the task of coordinator shall be

exercised by the competent authority which

authorised the regulated entity with the largest

balance sheet total in the most important

financial sector. When one of these regulated

entities has been authorised in Malta and the

mixed financial holding company also has its

head office in Malta, the coordinator shall be the

Authority;

(iv) where the financial conglomerate is a group

without a parent undertaking, or in any other

case, the task of coordinator shall be exercised

by the competent authority which authorised the

regulated entity with the largest balance sheet

total in the most important financial sector as

defined in the proviso to regulation 3(2).

(3) The Authority may, in particular cases, by common

agreement with the relevant competent authorities, waive the

criteria referred to in sub-regulation (2) if their application would

be inappropriate, taking into account the structure of the

conglomerate and the relative importance of its activities in

different cou ntries, and m ay appoint a different comp etent

authority as coordinator.

(4) In the cases referred to in sub-regulation (3), before taking

a decision, the Authority and the other competent authorities

concerned shall give the financial conglomerate an opportunity to

state its opinion on the proposed decision.

(5) When a competent authority other than the Authority has

been appointed coordinator, that coordinator shall be recognised in

Malta for the purpose of exercising and enforcing its

responsibilities and for the purpose of exercising any powers given

to the coordinator under these regulations.

(1) The functions to be carried out by the Authority when

acting as coordinator or by another coordinator with regard to

supplementary supervision shall include

(a) coordination of the gathering and dissemination of

relevant or essential information in the ordinary

exercise of its functions and emergency situations,

including the dissemination of information which is of

importance for a competent authority’s supervisory

task under sectoral rules;

(b) supervisory overview and assessment of the financial

situation of a financial conglomerate;

(c) assessment of compliance with the rules on capital

adequacy and of risk concentration and intra-group

transactions as provided in regulations 6, 7 and 8;

(d) assessment of the financial conglomerate’s structure,

organisation and internal control system as provided in

regulation 9;

(e) planning and coordination of supervisory activities in

the ordinary exercise of its functions as well as in

emergency situations, in cooperation with the relevant

competent authorities; and

(f)

exercising other tasks, measures and decisions

assigned to the coordinator by these regulations or

deriving from the application of the Financial

Conglomerates Directive and these regulations.

(2) The coordinator appointed in terms of regulation 11 in

respect of a particular group shall inform the parent undertaking at

the head of the group or, in the absence of a parent undertaking, the

regulated entity with the largest balance sheet total in the most

important financial sector in a group, that the group has been

identified as a financial conglomerate and of its appointment as

coordinator. The coordinator shall also provide such information to

the competent authorities which have regulated entities in the group

and the competent authorities of the Member State in which the

mixed financial holding company has its head office, and the Joint

Committee.

(3) The coordinator may enter into coordination agreements

with the other relevant competent authorities and other competent

authorities concerned in order to facilitate and establish

supplementary supervision. Such coordination agreements may

entrust additional tasks to the coordinator and may specify the

procedures for the decision-making process among the relevant

competent authorities as referred to in these regulations.

(4) The coordinator shall, when it requires information which

has already been given to another competent authority in

accordance with the sectoral rules, contact such competent

authority in order to provide it with this information whenever

possible and in order to prevent duplication of reporting to the

various authorities involved in supervision.

(5) When the Authority receives a request from a coordinator

in terms of sub-regulation (3), the Authority shall make available to

the coordinator any information which it has received in

accordance with the sectoral rules, subject to its obligations under

provisions relating to confidentiality in the Act and the relevant

sectoral rules.

(6) Without prejudice to the possibility of delegating specific

supervisory competences and responsibilities as provided for by

European Union legislative acts, the presence of a coordinator

entrusted with specific tasks concerning the supplementary

supervision of regulated entities in a financial conglomerate shall

not affect the tasks and responsibilities of the competent authorities

as provided for by the sectoral rules.

(7) The required cooperation under this regulation and the

exercise of the tasks listed in sub-regulations (1) to (6) of this

regulation and in regulation 13 and, subject to confidentiality

r e q u i r e m e n t s a n d E u r o p e a n U n i o n L a w, t h e a p p r o p r i a t e

coordination and cooperation with relevant third-country

supervisory authorities, where appropriate, shall be fulfilled

through colleges, established pursuant to Article 116 of Directive

2013/36/EU or Article 248(2) of Directive 2009/138/EC.

(8) The coordination arrangements referred to in sub-regulation

(2) shall be separately reflected in the written coordination

arrangements in place pursuant to Article 115 of Directive 2013/36/

EU or Article 248 of Directive 2009/138/EC. The Authority, when

appointed coordinator and Chair of the College established

pursuant to Article 116 of Directive 2013/36/EU or Article 248(2)

of Directive 2009/138/EC, shall decide which other competent

authorities participate in a meeting or in any activity of that

college.

(1) The Authority shall cooperate closely with the

coordinator and with the other competent authorities responsible

for the supervision of regulated entities in that financial

cong lomerate in performing it s functi ons i n terms of these

regulations.

(2) The Authority shall, without prejudice to its responsibilities

under the Act and the sectoral rules, provide the coordinator and, or

the other competent authorities responsible for the supervision of

regulated entities in a financial conglomerate with any information

which is esse ntial or r elevant for the e xercise o f th e ot her

authorities’ supervisory tasks under the sectoral rules and the

Financial Conglomerates Directive

Provided that, upon a request by such entities, the Authority

shall provide the said entities with all relevant information

Provided further that the Authority shall provide all

essential information on its own initiative.

(3) The cooperation referred to in this regulation shall, as a

minimum, provide for the gathering and the exchange of

information with regard to the following

(a) identification of the group’s legal structure and the

governance and organisational structure, including all

regulated entities, non-regulated subsidiaries and

significant branches belonging to the financial

conglomerate, the holders of qualifying holdings at the

ultimate parent level, as well as of the competent

authorities of the regulated entities in the group;

(b) the financial conglomerate’s strategic policies;

(c) the financial situation of the financial conglomerate, in

particular

on

capital

adequacy,

intra-group

transactions, risk concentration and profitability;

(d) the financial conglomerate’s major shareholders and

management;

(e) the organisation, risk management and internal control

systems at financial conglomerate level;

(f)

procedures for the collection of information from the

entities in a financial conglomerate, and the

verification of that information;

(g) adverse developments in regulated entities or in other

entities of the financial conglomerate which could

seriously affect the regulated entities; and

(h) major sanctions and exceptional measures taken by

any competent authority in accordance with sectoral

rules or these regulations.

(4) The Authority may exchange such information as may be

needed for the performance of their respective tasks regarding

regulated entities in a financial conglomerate, in line with the

provisions laid down in the sectoral rules, with central banks, the

European System of Central Banks and the European Central Bank

and the European Systemic Risk Board in accordance with Article

15 of Regulation (EU) No 1092/2010 of the European Parliament

and of the Council of 24 November 2010 on European Union

macro-prudential oversight of the financial system and establishing

a European Systemic Risk Board.

(5) Without prejudice to its responsibilities as defined in the

Act and under sectoral rules, the Authority shall, prior to taking a

decision, consult the other competent authorities concerned with

regard to the following matters where these decisions are of

importance for the competent authorities’ supervisory functions

(a) changes in the shareholder, organisational or

management structure of regulated entities in a

financial conglomerate which require the approval or

authorisation of the Authority; and

(b) major sanctions or exceptional measures taken by the

Authority.

(6) The Authority may decide not to consult the other

competent authorities concerned in cases of urgency or where such

consultation may jeopardise the effectiveness of the decisions and

in such cases the Authority shall inform the other competent

authorities concerned without delay.

(7) Where the Authority does not exercise the supplementary

supervision pursuant to regulation 11 in respect of a parent

undertaking having its head office in Malta, the Authority shall,

upon a request by the coordinator, ask the parent undertaking for

any information which would be relevant for the exercise of the

coordinator’s coordination functions in terms of regulation 12 and

shall transmit that information, once obtained, to the coordinator.

(8) Where the Authority exercises the supplementary

supervision pursuant to regulation 11, it may request the competent

authority of the Member State in which a parent undertaking has its

head office to obtain information from the parent undertaking

which would be relevant for the exercise of its function as

coordinator as laid down in regulation 12 and to transmit that

information, once obtained, to the Authority.

(9) Where the information referred to in regulation 18(2) and

(3) has already been provided to the Authority in accordance with

the sectoral rules, the Authority shall, at the request of the

competent authorities responsible for exercising supplementary

supervision, transmit that information to them.

(10) The Authority shall have the power to exchange

information with other competent authorities and other authorities

as referred to in this regulation

Provided that the collection or possession of information by

the Authority with regard to an entity within a financial

conglomerate which is not a regulated entity shall not in any way

imply that the Authority is required to play a supervisory role in

relation to such entity on a stand-alone basis.

(11) Any information received by the Authority under these

regulations shall be subject to the provisions of professional

secrecy and confidentiality as laid down in the Act and the sectoral

rules.

(1) The Authority shall cooperate with the Joint

Committee for the purposes of these regulations, in accordance

with Regulation (EU) No 1093/2010, Regulation (EU) No 1094/

2010, and Regulation (EU) No 1095/2010.

(2) The Authority shall without delay provide the Joint

Committee with all information necessary to carry out its duties in

accordance with Article 35 of Regulation (EU) No 1093/2010, of

Regulation (EU) No 1094/2010, and of Regulation (EU) No 1095/

2010, respectively.

(3) The Authority, when appointed coordinator, shall provide

the Joint Committee with the information referred to in regulation

9(4) and regulation 13(3)(a). The Joint Committee shall make

available to the competent authorities information regarding the

legal structure and the governance and organisational structure of

financial conglomerates.

(1) The Authority may require persons who effectively

direct the business of a mixed financial holding company with its

head office in Malta to submit to the Authority such information,

including that relating to qualifications and experience, as it may

require in respect of the following

(a) any of its shareholders;

(b) its directors;

(c) those persons who, in the opinion of the Authority,

effectively direct the business; and

(d) the holders of such managerial posts as the Authority

may specify.

(2) Where it appears to the Authority that a person referred to

in sub-regulation (1) is not fit and proper to hold that position, the

Authority may decide that, as long as that person holds the

position, the mixed financial holding company with its head office

in Malta shall take such action as the Authority deems appropriate

and such mixed financial holding company shall comply with that

decision.

(3) Every proposal to appoint a director, chief executive or

holders of such managerial posts by a company referred to in sub-

regulation (1) shall be notified to the Authority and shall not be

made if the Authority objects to the proposal on the ground that the

person proposed is not deemed fit and proper for the post.

(1) Pending further coordination of European Union

sectoral rules, the Authority shall, at its discretion, include asset

management companies within the scope of consolidated

supervision of credit institutions and investment firms, or within

the scope of supplementary supervision of insurance undertakings

in an insurance group.

(2)

Where the group is a financial conglomerate, the Authority

shall include such asset management companies within the scope of

supplementary supervision within the meaning of the Financial

Conglomerates Directive.

(3) The Authority shall provide for the inclusion of asset

management companies within the identification process in

accordance with regulation 3

Provided that the relevant sectoral rules regarding the form

and extent of the inclusion of financial institutions (where asset

management companies are included in the scope of consolidated

supervision of credit institutions and investment firms) and of

reinsurance undertakings (where asset management companies are

included in the scope of supplementary supervision of insurance

undertakings) shall apply mutatis mutandis to asset management

companies

Provided further that, for the purposes of supplementary

supervision referred to in sub-regulation (2), the asset management

company shall be treated as part of whichever sector it is included

in by virtue of sub-regulation (1).

(1) Pending further coordination of European Union

sectoral rules, the Authority shall, at its discretion, include

alternative investment fund managers within the scope of

consolidated supervision of credit institutions and investment

firms, or within the scope of supplementary supervision of

insurance undertakings in an insurance group.

(2) Where the group is a financial conglomerate, the Authority

shall include such asset management companies within the scope of

supplementary supervision within the meaning of the Financial

Conglomerates Directive.

(3) The Authority shall provide for the inclusion of asset

management companies within the identification process in

accordance with regulation 3

Provided that the relevant sectoral rules regarding the form

and extent of the inclusion of financial institutions shall apply

mutatis mutandis to alternative investment fund managers

Provided further that, for the purposes of supplementary

supervision referred to in sub-regulation (2), the alternative

investment fund manager shall be treated as part of whichever

sector it is included in by virtue of sub-regulation (1)

Provided further that this shall apply as regards groups

referred to in sub-regulation (1).

(1) Notwithstanding the provisions of any other law, all

persons included within the scope of supplementary supervision,

whether or not they are regulated entities, may exchange freely

among themselves any information which would be relevant for the

purposes of supplementary information and shall exchange such

information in accordance with these regulations and with the

European Supervisory Authorities in accordance with Article 35 of

Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010,

and of Regulation (EU) No 1095/2010, respectively, where

necessary through the Joint Committee.

(2) The Authority shall, either directly or indirectly, have

access to any information relating to entities in a financial

conglomerate, whether or not they are regulated entities, which

would be relevant for the purpose of supplementary supervision.

(3) Any person licensed, authorised, established, situated or

w i t h i t s h e a d o ff i c e i n M a l t a i n c l u d e d w i t h i n t h e sc o p e o f

supplementary supervision as provided for by these regulations,

whether or not a regulated entity, shall provide the Authority or

coordinator on request such information as may be required for the

purpose of supplementary supervision.

(4) Any person referred to in sub-regulation (3) from whom the

Authority or coordinator may require information in terms of these

regulations shall put in place the necessary internal reporting,

managerial and technological arrangements to ensure that the

required information is capable of being provided to the Authority

or coordinator.

(1) Where, in applying these regulations, the Authority

wants to verify the information concerning an entity, whether or not

regulated, which is part of a financial conglomerate and is licensed,

authorised, established, situated or with its head office in another

Member State, the Authority may ask the competent authorities of

that other Member State

(a) to have the verification carried out by that competent

authority to allow the Authority to otherwise

participate in the verification when it does not carry

out the verification itself; or

(b) for permission to allow the Authority or one of its

officers or auditors or other experts appointed by the

Authority to carry out that verification including on-

site verification.

(2) Subject to the provisions of sub-regulation (3), where the

competent author ities of another Mem ber State r equest the

Authority to verify information concerning an entity, whether or

not regulated, licensed, authorised, established, situated or with its

head office in Malta and which is part of a financial conglomerate,

the Authority shall

(a) comply with the request;

(b) allow the competent authorities of the Member State

which made the request to participate in the

verification if they do not carry out the verification

themselves; or

(c) allow the competent authorities of that other Member

State to carry out the verification, including on-site

verification.

(3) Verification may be carried out by an official auditor or

other expert appointed by the competent authorities of the other

Member State, who may exercise all the powers vested in the

Authority necessary to conduct the verification.

(1) If the regulated entities in a financial conglomerate do

not comply with any of the requirements referred to in regulations 6

t o 9 , o r w h er e t h e r e q u i r e m e n t s a r e m e t b u t so l v e n c y m a y

nevertheless be jeopardized, or where the intra-group transactions

or the risk concentrations are a threat to the financial position of

such regulated entities, the necessary measures shall be taken under

these regulations or the relevant sectoral rules in order to rectify

the situation as soon as possible. Such measures shall be taken by

the following persons

(a) by the coordinator in respect of a mixed financial

holding company with its head office in Malta;

(b) by the Authority, upon receiving information from the

coordinator, in respect of the regulated entities

authorised in Malta; and

(c) where the coordinator is the Authority, by the

Authority in respect of a mixed financial holding

company with its head office in a Member State other

than in Malta

Provided that where the Authority is appointed as

coordinator in terms of regulation 11, it shall inform the relevant

competent authorities of any f indings in term s of this sub-

regulation.

(2)

Without prejudice to the sectoral rules

(a) the Authority, where acting as coordinator, may take a

decision in respect of a mixed financial holding

company with its head office in Malta in relation to

any matter covered by these regulations and shall

notify the mixed financial holding company in writing

of such decision; and

(b) the Authority, where acting as a coordinator, may take

a decision in respect of a mixed financial holding

company with its head office in a Member State other

than in Malta in relation to any matter covered by

these regulations and shall notify the relevant

competent authorities and the mixed financial holding

company, in writing, of such a decision.

(3) The Authority, where acting as a coordinator, shall, where

appropriate, coordinate its supervisory actions with the other

relevant competent authorities.

(4) Where the Authority takes a decision in respect of a mixed

financial h oldin g comp any directing it to compl y wit h any

requirement resulting from these regulations or the Financial

Conglomerates Directive, that mixed financial holding company

shall comply with such decision.

(5) If a mixed financial holding company fails to comply with a

decision of the Authority or the coordinator given under this

regulation, the Authority or coordinator may notify the other

relevant competent authorities and, with their agreement, may

decide on the measures to be taken.

(1) The Authority may take any measures in terms of these

regulations in relation to a regulated entity authorised in Malta

within the financial conglomerate and may take any step or action

permitted in the sectoral rules or in any laws, rules, regulations,

guidelines or directives implementing or giving effect to the

sectoral rules in respect of such regulated entity in a financial

conglomerate.

(2) The Authority may apply the provisions of the sectoral

rules on capital adequacy, intra-group transactions and risk

concentration at the level of the financial conglomerate.

(3) Where the Authority is of the opinion that a mixed financial

holding company with its head office in Malta

(a) is or is likely to become unable to meet its obligations

towards its creditors or its clients;

(b) whose subsidiaries or entities in whom it holds a

participation or with whom it has close links are not

maintaining or are unlikely to be in a position to

maintain adequate capital resources having regard to

the volume and nature of their business, or which no

longer comply with capital or other financial

requirements specified by the competent authorities

from time to time;

(c) fails to provide to the coordinator within such

reasonable period as may be specified by the

coordinator such information as it may reasonably

request for the purpose of its functions under these

regulations; or

(d) fails to comply with any decision, direction, condition

or requirement imposed under these regulations, and

the circumstances are such that the Authority or the

coordinator is of the opinion that the stability or

soundness of a mixed financial holding company is

materially affected by this failure;

it shall, subject to the provisions of sub-regulation (4), inform the

mixed financial holding company accordingly of its decision and

shall in writing direct the mixed financial holding company to

comply immediately with the decision and any requirements set out

by the Authority or the coordinator as the case may be.

(4) Before taking a decision in respect of a mixed financial

holding company under sub-regulation (3), the Authority shall

notify the mixed financial holding company of its intention to take

such decision.

(5) Every notice given under sub-regulation (4) shall state that

the recipient of the notice may make representations, within such

reasonable period after the service thereof as may be stated in the

notice, being a period of not less than forty-eight (48) hours and not

longer than thirty (30) days. Such representations shall be made in

writing to the Authority giving reasons why the proposed decision

should not be taken, and the Authority shall consider any

representation so made before arriving at a final decision.

(6) The Authority shall, as soon as practicable, notify its final

decision in writing to the mixed financial holding company

concerned.

(7) If the mixed financial holding company fails to comply

with a decision of the Authority under sub-regulation (3), the

Authority shall notify the relevant competent authorities.

(8) Without prejudice to the provisions of these regulations, the

Authority shall cooperate with the other relevant competent

authorities to ensure the effectiveness of penalties and other

measures in relation to the mixed financial holding company

concerned or their effective manager, secretary, director or other

person responsible therefor.

(9) Any decision taken in terms of these regulations shall have

effect from the date specified by the Authority or the coordinator,

as the case may be therein.

Subject to the provisions of the Act, any person in respect

of whom a decision is taken by the Authority under these

regulations may appeal to the Tribunal in terms of article 21 of the

Act.

(1) Where a mixed financial holding company or a

regulated entity authorised in Malta, or the respective manager,

secretary, director or other person responsible therefor, contravenes

or fails to comply with the provisions of these regulations, the

Authority may, by notice in writing and without recourse to a court

hearing, impose on such person, as the case may be, an

administrative penalty which may not exceed the sum of one

hundred and sixteen thousand and five hundred euro (€116,500).

(2) Any administrative penalty imposed by the Authority in

terms of sub-regulation (1) in r espect of a regulated entity

authorised in Malta shall be without prejudice to

(a) the imposition of any penalties or other measures by

the Authority under the relevant sectoral rules; and

(b) the commencement of criminal proceedings and the

imposition of criminal sanctions for breaches of the

sectoral rules.

(3) Within a period of thirty (30) days from the date of service

of a notice imposing an administrative penalty in accordance with

sub-regulation (1), a person upon whom the notice is served may

appeal to the Tribunal against the decision of the Authority in

accordance with regulation 22.

(4) Where a notice as referred to in sub-regulation (1) has not

been appealed or, where such notice has been appealed, within

fifteen (15) days of the determination of such appeal, the

administrative penalty as contained in the notice or as reduced by

the decision of the Tribunal shall be due to the Authority and upon

the service of a copy of the notice or the decision, as the case may

be, by means of a judicial act on the person indicated in the notice

or decision, the said notice or decision shall constitute an executive

title for all effects and purposes of Title VII of Part I of Book

Second of the Code of Organization and Civil Procedure.

(1) Without prejudice to the sectoral rules, where the

parent undertaking of a regulated entity, which parent undertaking

has its head office outside the European Union, is subject to

supervision by a third country competent authority, a verification as

to whether supplementary supervision is equivalent to that

provided for in these regulations shall be carried out in terms of

sub-regulation (2).

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

carried out by the competent authority which would be the

coordinator if the criteria set out in regulation 11(2) were to apply.

The verification shall be carried out

(a) at the request of the parent undertaking;

(b) at the request of the regulated entities authorized in the

European Union; or

(c) on such competent authority’s own initiative.

(3) The Authority shall consult with the other relevant

competent authorities and shall make every effort to comply with

any applicable guidelines prepared through the Joint Committee in

accordance with Articles 16 and 56 of Regulation (EU) No 1093/

2010, of Regulation (EU) No 1094/2010, and of Regulation (EU)

No 1095/2010, respectively.

(4) Where the Authority disagrees with the decision taken by

another relevant competent authority under sub-regulation (2),

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

Regulation (EU) No 1094/2010, and Article 19 of Regulation (EU)

No 1095/2010, respectively shall apply.

(5) In the absence of equivalent supervision referred to in sub-

regulation (1), the provisions concerning the supplementary

supervision of regulated entities referred to in regulation 5(2) shall

apply by analogy to the regulated entities referred to in sub-

regulation (1) or, as an alternative, one of the methods provided in

sub-regulation (6).

(6) The Authority may apply other methods which ensure

appropriate supplementary supervision of the regulated entities in

the financial conglomerate. Those methods shall be agreed by the

Authority when acting as coordinator after consulting the other

relevant competent authorities. The competent authorities may in

particular require the establishment of a mixed financial holding

company which has its head office in the European Union and

apply this Directive to the regulated entities in the financial

conglomerate headed by that holding company. The competent

authorities shall ensure that those methods achieve the objective of

supplementary supervision under this Directive and shall notify the

other competent authorities involved and the Commission thereof.

Article 48(1) and (2) of Directive 2013/36/EU, Article 10a

of Directive 98/78/EC and Article 264 of Directive 2009/138/EC

shall apply mutatis mutandis to the negotiation of agreements with

one or more third countries regarding the means of exercising

supplementary supervision of regulated entities in a financial

conglomerate.

For the better carrying out of the provisions of these

regulations, the competent authority shall apply the Joint

Guidelines on the convergence of supervisory practices relating to

the consistency of supervisory coordination arrangements for

financial conglomerates [JC/GL/2014/01] issued jointly by the

European Banking Authority, the European Securities and Markets

Authority and the European Insurance and Occupational Pensions

Authority.

FINANCIAL CONGLOMERATES