CRR (IMPLEMENTING AND TRANSITIONAL PROVISIONS) REGULATIONS

SUBSIDIARY LEGISLATION 371.17

CRR (IMPLEMENTING AND TRANSITIONAL

PROVISIONS) REGULATIONS

10th April, 2015

LEGAL NOTICE 130 of 2015, by amended by Legal Notice 132 of 2022.

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

and Transitional Provisions) Regulations.

(2) The purpose of these regulations is to implement Articles 4(2),

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

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

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

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

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

CRR.

(1)

In these regulations, unless the context otherwise

requires -

"the Act" means the Banking Act;

"Additional Tier 1 capital" shall have the same meaning as that

assigned to it in Article 61 of the CRR;

"Additional Tier 1 items" shall consist of the items indicated in

Article 51 of the CRR;

"committed credit or liquidity facility" shall have the same

meaning as that assigned to it in point (17) of Article 411 of the

CRR;

"Commission Delegated Regulation (EU) 241/2014" means

Commission Delegated Regulation (EU) 241/2014 of 7 January 2014

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

Parliament and of the Council with regard to regulatory technical

standards for Own Funds requirements for institutions, as amended

from time to time;

"Common Equity Tier 1 capital" shall have the same meaning as

that assigned to it in Article 50 of the CRR;

"Common Equity Tier 1 capital ratio" shall be calculated in

accordance with point (a) of Article 92(2) of the CRR;

"Common Equity Tier 1 items" shall consist of the items

indicated in Article 26 of the CRR;

"CRR" means Regulation (EU) No 575/2013 of the European

Parliament and of the Council of 26 June 2013 on prudential

requirements for credit institutions and investment firms and

amending Regulation (EU) No 648/2012, as amended from time to

time, and includes any implementing measures that have been or

may be made thereunder;

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

(EU) 2015/61 of 10 October 2014 to supplement Regulation (EU) No

575/2013 of the European Parliament and the Council with regard to

liquidity coverage requirement for credit institutions, as amended from

time to time;

"market value" shall have the same meaning as that assigned to it

in point (76) of Article 4(1) of the CRR;

"own funds instruments" shall have the same meaning as that

assigned to it in point (119) of Article 4(1) of the CRR;

"parent financial holding company" shall have the same meaning

as that assigned to it in point (30) or (31) of Article 4(1) of the

CRR;

"parent institution" shall have the same meaning as that assigned

to it in point (28) or (29) of Article 4(1) of the CRR;

"parent mixed financial holding company" shall have the same

meaning as that assigned to it in point (32) or (33) of Article 4(1) of

the CRR;

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

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

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

2012 of the European Parliament and of the Council of 4 July 2012 on

OTC derivatives, central counterparties and trade repositories, as

amended from time to time, and includes any binding legal

instruments, guidelines and other measures that have been or may be

issued thereunder;

"Tier 1 capital" shall have the same meaning as that assigned to

it in Article 25 of the CRR;

"Tier 1 capital ratio" shall be calculated in accordance with point

(b) of Article 92(2) of the CRR;

"Tier 2 capital" shall have the same meaning as that assigned to

it in Article 71 of the CRR;

"Tier 2 items" shall consist of the items indicated in Article 62 of

the CRR.

(2) Words and expressions used in these regulations which are

also used in the Act but which are not defined herein, shall have the

same meaning as in the Act.

The competent authority may allow shares constituting

an equivalent indirect holding of real estate to be treated as a direct

holding of real estate in accordance with Article 4(2) of the CRR,

provided that, such indirect holding, when pledged as collateral, shall

provide an equivalent protection to creditors.

(1)

The competent authority may

waive

the

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

(a)

where both the subsidiary and the credit

institution are licensed by the competent authority, the

competent authority may grant the waiver to the subsidiary

where it is included in the supervision on a consolidated basis

of the credit institution which is the parent undertaking, and all

the conditions laid down in Article 7(1) of the CRR are

fulfilled, in order to ensure that the own funds are distributed

adequately between the parent undertaking and the subsidiary;

and

(b)

where a parent institution in Malta is licensed and

supervised by the competent authority and is included in the

supervision on a consolidated basis, the competent authority

may grant the waiver to the parent institution in Malta where all

the conditions laid down in Article 7(3) of the CRR are fulfilled

to ensure that own funds are distributed adequately among the

parent undertaking and the subsidiaries.

(2)

The competent authority may, in a Banking Rule, lay

down the conditions upon which the waivers referred to above may be

granted.

(1)

The competent authority shall waive in full or in

part, the application of Part Six of the CRR to a credit institution and

to all or some of its subsidiaries when these are established in the

European Union or in Malta and supervise them as a single liquidity

sub-group as long as the conditions referred to in Article 8 of the CRR

are fulfilled.

(2)

The competent authority may, in a Banking Rule, lay

down the conditions upon which the waiver referred to above may be

granted.

In the case of participations or capital ties other than

those referred to in paragraphs 1 and 4 of Article 18 of the CRR, the

competent authority may supervise such participation or capital ties on

a consolidated basis, in particular by requiring or permitting the use of

the equity method. In such case, this method shall not constitute

inclusion of the undertakings concerned in supervision on a

consolidated basis.

The competent authority may decide to supervise on a

consolidated basis, credit institutions referred to in Article 18(6) of the

CRR in accordance with the Supervisory Consolidation (Credit

Institutions) Regulations.

Where a credit institution has a subsidiary which is an

undertaking other than an institution, a financial institution or an

ancillary services undertaking or holds a participation in such an

undertaking, it shall apply to that subsidiary or participation the equity

method. In such case, this method shall not constitute inclusion of the

undertakings concerned in supervision on a consolidated basis

Provided that the competent authority may allow or require a

credit institution to apply a different method to such subsidiaries or

participations, including the method required by the applicable

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

18(7) of the CRR.

For the purposes of calculating own funds on an individual

basis, a sub-consolidated basis and a consolidated basis, as an

alternative to the deduction of holdings of own funds instruments

of a financial sector entity in which the parent institution, parent

financial holding company or parent mixed financial holding

company or credit institution has a significant investment, the

competent authority shall permit credit institutions to apply method

1, 2 or 3 of Annex I to Directive 2002/87/EC subject to the

conditions laid down in Article 49(1) of the CRR. The method

chosen shall be applied in a consistent manner over time.

For the purposes of calculating own funds on an

individual basis and a sub-consolidated basis, in terms of Article 49(2)

of the CRR, where a credit institution is subject to supervision on a

consolidated basis in accordance with Chapter 2 of Title II of Part One

of the CRR, the competent authority may require the credit institution

to deduct holdings of own funds instruments issued by financial sector

entities included in the scope of consolidated supervision

Provided that this shall only be required in specific cases,

in particular in the case of structural separation of banking activities

and resolution planning.

(1)

The competent authority may grant the general

prior permission referred to in the second sub-paragraph of Article

78(1) of the CRR for a credit institution to reduce its own funds where

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

Commission Delegated Regulation (EU) 241/2014 of 7 January 2014

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

Parliament and of the Council with regard to regulatory technical

standards for Own Funds requirements for institutions, are fulfilled.

(2)

The competent authority may, in a Banking Rule, lay

down the conditions upon which the margin referred to in the second

sub-paragraph of Article 78(1) of the CRR shall be determined.

In accordance with Article 78(4) of the CRR, the

competent authority may grant permission for credit institutions to

call, redeem, repay or repurchase Additional Tier 1 or Tier 2

instruments during the five years following their date of issuance

under

(a)

the conditions laid down in points (c) and (e) of

Article 78(4) of the CRR;

(b)

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

of Article 78(4) of the CRR

Provided that the conditions laid down in Article 78(1) of

the CRR are met.

The competent authority shall grant a temporary waiver for

the deduction of own funds instruments or eligible liabilities for the

purpose of facilitating a financial assistance operation in accordance

with the conditions specified in Article 79(1) of the CRR and in

Article 33 of Commission Delegated Regulation (EU) No 241/2014.

The competent authority shall apply the requirements laid

down in point (a) of Article 89(3) of the CRR to qualifying

holdings of credit institutions referred to in Article 89(1) and (2) of

the CRR.

For the purposes of Article 116(4) of the CRR, the

competent authority shall, in a Banking Rule, provide a list of the

public sector entities established in Malta for which exposures to

such entities shall be considered by credit institutions as exposures

to the Government of Malta.

In terms of Article 4(2) of the Act, the competent authority

shall, at least annually and jointly with the Central Bank, assess

whether the risk weights referred to in Article 125(2) or 126(2) of

the CRR adequately reflect the actual risks related to exposures to

one or more property segments fully secured by mortgages on

residential property or on commercial immovable property located

in Malta in accordance with Article 124 of the CRR. Where such

risk weight is deemed not appropriate, the competent authority,

jointly with the Central Bank, may adjust the risk weights in

accordance with the following ranges

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

residential property;

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

commercial immovable property.

For the purposes of Article 125(2)(d) of the CRR, the part of

the loan to which the 35% risk weight is assigned, unless otherwise

determined in accordance with regulation 4B, shall not exceed 70% of

the market value of the property in question, as long as the conditions

laid down in Article 125 of the CRR are met.

In terms of Article 4(2) of the Act, the competent authority

shall, at least annually, and jointly with the Central Bank, assess

whether the minimum Loss Given Default (LGD), as referred to in

paragraph 4 of Article 164 of the CRR, are appropriate for

ex posures secured b y m ortg ag es o n resident ial propert y or

commercial immovable property located in Malta. Where the

competent authority, jointly with the Central Bank, conclude that

such minimum LGD values are not adequate and could adversely

affect Malta’s current or future financial stability, the competent

authority, jointly with the Central Bank, may set higher minimum

LGD values for those exposures located in Malta. Such higher

minimum LGD values may also be applied at the level of one or

more property segments of such exposures.

For the purposes of calculating the exposure value in terms

of Article 284 of the CRR, the competent authority may require

credit institutions to use a higher alpha (α) or grant them the

permission to use their own estimates of α in accordance with the

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

For the purposes of Article 396(1) of the CRR, the competent

authority may, in exceptional cases, where exposures exceed the limit

set out in Article 395(1), allow a credit institution a limited period of

time within which to comply with such limit.

(1) The competent authority shall fully exempt the

exposures listed in Article 400(2) of the CRR from the application

of Article 395(1) of the CRR where the conditions listed in Article

400(3) of the CRR, and as may be further specified in a Banking Rule,

are met.

(2) By way of derogation from Article 400(2) and (3) of the

CRR and in line with Article 493(3) of the CRR, for a transitional

period until the entry into force of any legal act following the

review in accordance with Article 507 of the CRR, but not after 31

December 2028, the exposures listed in Article 493(3) of the CRR

shall be fully exempt from the application of Article 395(1) of the

CRR.

For the purposes of Article 414 of the CRR, the competent

authority may allow a credit institution that does not meet, or does

not expect to meet, the requirements set out in Article 412 or

413(1) of the CRR, including during times of stress, to report the

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

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

act referred to in Article 460(1) of the CRR, at a lower reporting

frequency and apply a longer reporting delay, depending on the

situation of the credit institution.

For the purposes of restricting currency mismatches, the

competent authority shall set limits on the proportion of required

stable funding in a particular currency that can be met by available

st able fu nd ing t hat is not de nom in ated in t hat curre ncy, in

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

CRR

Provided that such restriction may only be applied for a

currency that is subject to separate reporting in accordance with

Article 415(2) of the CRR.

(1) The competent authority may grant approval to a

credit institution to treat an asset and a liability as interdependent

where all of the conditions that are laid down in Article 428f of the

CRR are fulfilled.

(2) The competent authority may issue a Banking Rule laying

down the requirements on the information that shall be submitted

by the credit institution on such assets and liabilities.

(1) The competent authority may, in accordance with

Article 428h of the CRR, allow a credit institution to apply a higher

available stable funding factor or a lower required stable funding

factor to assets, liabilities and committed credit or liquidity

facilities which meet all of the conditions laid down in the said

Article 428h.

(2) The competent authority may issue a Banking Rule laying

down the information that shall be submitted by such credit

institution when it applies for preferential treatment and the

conditions that shall be met.

For off-balance sheet exposures not referred to in Chapter

4 of Title IV of Part Six of the CRR, the competent authority shall,

in accordance with Article 428p(10) of the CRR, apply required

st able f un ding fact ors t hat correspond to the out flo w r ates

applicable to related products and services referred to in Article 23

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

requirement.

Credit institutions that are not able to freely dispose of

assets which have been segregated in accordance with Article 11(3)

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

encumbered for a period corresponding to the term of the liabilities

to the credit institutions’ customers to whom that segregation

requirement relates.

The competent authority may, in terms of Article 428ai of

the CRR, allow a small and non-complex institution, as defined in

point (145) of Article 4(1) of the CRR, to calculate the ratio

between the credit institution’s available and required stable

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

the CRR, expressed as a percentage.

Where a credit institution has been granted permission in

accordance with regulation 6G, it shall, for the purposes of off-

balance sheet exposures not referred to in Chapter 4 of Title IV of

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

apply the required stable funding factors that correspond to the

outflow rates applicable to related products and services referred to

in Article 23 of the Delegated Regulation (EU) 2015/61 in the

liquidity coverage requirement.

Where a credit institution has been granted permission in

accordance with regulation 6G, it shall, where it is not able to freely

dispose of assets which have been segregated in accordance with

Article 11(3) of Regulation (EU) No 648/2012, consider such assets as

encumbered for a period corresponding to the term of the liabilities to

the credit institutions’ customers to whom that segregation

requirement relates, in accordance with Article 428ar(2) of the CRR.

The competent authority shall apply an outflow rate of 5%

for trade finance off-balance sheet related products as referred to in

Article 429 and Annex I of the CRR.

The competent authority shall, in order to facilitate the

implementation of monetary policies in terms of Article 429a(5) of

the CRR, and in consultation with the Central Bank, publicly

determine whether exceptional circumstances exist under which

exposures listed in point (n) of paragraph 1 of Article 429a of the

CRR may be excluded from the total exposure measure referred to

in such paragraph.

Where the competent authority determines that the

reporting templates specified in the implementing technical

standards referred to in Article 430 of the CRR contain duplicative

data points as defined in such article, the competent authority may

waive the reporting requirements for such data points in accordance

with Article 430(11) of the CRR.

(1) For the purposes of Article 439 of the CRR, the

competent authority may, where the Central Bank provides

liquidity assistance in the form of collateral swap transaction, and

where the competent authority considers that the disclosure of such

information could reveal that emergency liquidity assistance has

been provided, exempt credit institutions from abiding by the

requirements laid down in points (d) and (e) of Article 439 of the

CRR.

(2) The competent authority may issue a Banking Rule to set out

the appropriate thresholds and the objective criteria.

The own funds requirements that shall apply during the

period from 1 January 2014 to 31 December 2014 shall be

(a) a Common Equity Tier 1 capital ratio of 4.5%;

(b) a Tier 1 capital ratio of 6%.

The applicable percentage for the purposes of Article

467(1) of the CRR shall be

(a) 100% during the period from 1 January 2014 to 31

December 2014;

(b) 100% during the period from 1 January 2015 to 31

December 2015;

(c) 100% during the period from 1 January 2016 to 31

December 2016; and

(d) 100% for the period from 1 January 2017 to 31

December 2017.

(1) The applicable percentage for the purposes of Article

468(1) of the CRR shall be

(a) 60% during the period from 1 January 2015 to 31

December 2015;

(b) 40% during the period from 1 January 2016 to 31

December 2016; and

(c) 20% for the period from 1 January 2017 to 31

December 2017.

(2) The applicable percentage for the purposes of Article

468(4) of the CRR shall be

(a) 20% for the period from 1 January 2014 to 31

December 2014;

(b) 40% for the period from 1 January 2015 to 31

December 2015;

(c) 60% for the period from 1 January 2016 to 31

December 2016; and

(d) 80% for the period from 1 January 2017 to 31

December 2017.

(1) The applicable percentage for the purposes of Article

469(1)(a) of the CRR as it applies to the items referred to in points

(a)-(b) of Article 36(1) of the CRR shall be

(a) 100% during the period from 1 January 2014 to 31

December 2014;

(b) 100% during the period from 1 January 2015 to 31

December 2015;

(c) 100% during the period from 1 January 2016 to 31

December 2016; and

(d) 100% for the period from 1 January 2017 to 31

December 2017.

(2) The applicable percentage for the purposes of Article

469(1)(a) of the CRR as it applies to the items referred to in points

(c)-(h) of Article 36(1) of the CRR excluding deferred tax assets

that rely on future profitability and arise from temporary

differences shall be

(a) 20% during the period from 1 January 2014 to 31

December 2014;

(b) 40% during the period from 1 January 2015 to 31

December 2015;

(c) 60% during the period from 1 January 2016 to 31

December 2016; and

(d) 80% for the period from 1 January 2017 to 31

December 2017.

(3) The applicable percentage for the purposes of Article

469(1)(c) of the CRR shall be

(a) 20% during the period from 1 January 2014 to 31

December 2014;

(b) 40% during the period from 1 January 2015 to 31

December 2015;

(c) 60% during the period from 1 January 2016 to 31

December 2016; and

(d) 80% for the period from 1 January 2017 to 31

December 2017.

(4) By way of derogation from sub-regulation (3) above, for the

items referred to in point (c) of Article 36(1) of the CRR that

existed prior to 1 January 2014, the applicable percentage for the

purpose of Article 469(1)(c) of the CRR shall be

CRR (IMPLEMENTING AND TRANSITIONAL PROVISIONS)

(a) 0% during the period from 1 January 2014 to 31

December 2014;

(b) 10% during the period from 1 January 2015 to 31

December 2015;

(c) 20% during the period from 1 January 2016 to 31

December 2016;

(d) 30% during the period from 1 January 2017 to 31

December 2017;

(e) 40% during the period from 1 January 2018 to 31

December 2018;

(f)

50% during the period from 1 January 2019 to 31

December 2019;

(g) 60% during the period from 1 January 2020 to 31

December 2020;

(h) 70% during the period from 1 January 2021 to 31

December 2021;

(i)

80% during the period from 1 January 2022 to 31

December 2022;

(j)

90% during the period from 1 January 2023 to 31

December 2023.

Repealed by Legal Notice 132 of 2022.

The competent authority shall permit credit institutions to

add to their Common Equity Tier 1 capital the applicable amount in

accordance with Article 473(2) and (3) of the CRR, as applicable,

multiplied by the factor applied in accordance with Article 473(4)

of the CRR.

The applicable percentage for the purposes of Article

474(a) of the CRR shall be

(a) 20% during the period from 1 January 2014 to 31

December 2014;

(b) 40% during the period from 1 January 2015 to 31

December 2015;

(c) 60% during the period from 1 January 2016 to 31

December 2016; and

(d) 80% for the period from 1 January 2017 to 31

December 2017.

The applicable percentage for the purposes of Article

476(a) of the CRR shall be

(a) 20% during the period from 1 January 2014 to 31

December 2014;

(b) 40% during the period from 1 January 2015 to 31

December 2015;

(c) 60% during the period from 1 January 2016 to 31

December 2016; and

(d) 80% for the period from 1 January 2017 to 31

December 2017.

The applicable percentage for the purposes of Article

479(2) of the CRR shall be

(a) 80% for the period from 1 January 2014 to 31

December 2014;

(b) 60% for the period from 1 January 2015 to 31

December 2015;

(c) 40% for the period from 1 January 2016 to 31

December 2016; and

(d) 20% for the period from 1 January 2017 to 31

December 2017.

The applicable factor for the purpose of Article 480(1) of

the CRR shall be

(a) 0,2 in the period from 1 January 2014 to 31 December

2014;

(b) 0,4 in the period from 1 January 2015 to 31 December

2015;

(c) 0,6 in the period from 1 January 2016 to 31 December

2016; and

(d) 0,8 in the period from 1 January 2017 to 31 December

2017.

(1) The applicable percentage for the purposes of Article

481(1) of the CRR for the inclusion of unrealised gains measured at

fair value in Tier 2 capital shall be

(a) 80% for the period from 1 January 2014 to 31

December 2014;

(b) 60% for the period from 1 January 2015 to 31

December 2015;

(c) 40% for the period from 1 January 2016 to 31

December 2016; and

(d) 20% for the period from 1 January 2017 to 31

December 2017.

(2) The applicable percentage for the purposes of Article

481(2) of the CRR for the period from 1 January 2014 to 31

December 2014 shall be 50%.

The applicable percentage for the purposes of Article

486(2), (3) and (4) of the CRR shall be

(a) 80% during the period from 1 January 2014 to 31

December 2014;

(b) 70% during the period from 1 January 2015 to 31

December 2015;

CRR (IMPLEMENTING AND TRANSITIONAL PROVISIONS)

(c) 60% during the period from 1 January 2016 to 31

December 2016;

(d) 50% during the period from 1 January 2017 to 31

December 2017;

(e) 40% during the period from 1 January 2018 to 31

December 2018;

(f)

30% during the period from 1 January 2019 to 31

December 2019;

(g) 20% during the period from 1 January 2020 to 31

December 2020;

(h) 10% during the period from 1 January 2021 to 31

December 2021.