Featured Product

    MFSA to Amend Banking Act and Rules in Coming Months to Transpose CRD5

    April 14, 2021

    MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework. The MFSA Banking Supervision function is also reviewing a number of Banking Rules to reflect any other regulatory developments at the EU level. The key Banking Rules that will be revised and possibly published during 2021 include BR/09 on non-performing loans (NPLs) and BR/12 on Supervisory Review and Evaluation Process (SREP). In addition, during 2021, it is envisaged that a new Banking Rule will be published on internal governance.

    MFSA is planning to amend BR/09 on NPLs to implement the EBA guidelines on the management of non-performing and forborne exposures (EBA/GL/2018/06). The NPL threshold currently provided for in the BR/09 will be aligned with the ratio set in EBA guidelines. Thus, banks with a gross nonperforming exposure (NPE) ratio of 5% or above, will be required to develop and operationalize an NPE strategy as part of the overall bank’s strategy to target NPE reduction over a set period of time. BR/09 will also lay down requirements in relation to the governance structure and operational setup for addressing NPEs and forborne exposures. This will be supplemented with further requirements in relation to NPE recognition, NPE impairment, and write-offs. Other important elements that will be incorporated in the BR/09 include requirements with respect to collateral valuation of immovable and movable property such as the respective governance, procedures and controls, valuation methodology, and information technology database requirements.

    BR/12 on SREP will also be revamped, primarily to cater for the implementation, where relevant, of the EBA guidelines on common procedures and methodologies for SREP and supervisory stress testing (EBA/GL/2018/03). In this respect, banks are required to ensure that they are in line with the provisions of the EBA guidelines with respect to the four different elements of SREP. In general, a bank must ensure that its

    • its business model is viable and sustainable
    • its governance structure and internal control framework is adequate to its risk profile
    • it adequately identifies the risks that it is exposed to and maintains the necessary amount of capital
    • it adequately identifies its risks in relation to liquidity and funding and ensures that it has the appropriate levels of liquidity and funding resources

    MFSA highlights that the main purpose of the new BR on internal governance will be to transpose relevant provisions of the CRD and to fully implement the EBA guidelines on internal governance (EBA/GL/2017/11). In this respect, the Rule will lay down the requirements related to the role and composition of the Boards and committees as well as highlighting the directors’ responsibility for the implementation of governance arrangements in order to ensure effective and prudent management. The Rule will set out the requirements to be fulfilled by banks and their Boards on the organizational framework and structure of the bank as well as the risk culture and the business conduct principles and corporate values. From an operational perspective, the Rule will also provide detail on the policies and procedures that need to be in place. The Rule will also provide for the establishment, role, and requirements of the risk management function, the compliance function, and the internal audit function which form part of the internal control framework.

    MFSA is also reminding banks to ensure that proper stress testing framework is in place, in line with the relevant regulatory requirement. MFSA is also asking banks to use stress testing in their internal capital adequacy assessment process (ICAAP) and the internal liquidity adequacy assessment process (ILAAP). Finally, MFSA is reminding banks to ensure that the correct treatment is applied when classifying exposures, subject to moratoria granted due to the COVID-19 crisis, in an effort to avoid any buildup of NPLs that may arise due to a misclassification or misreporting. 

     

    Related Links

    Keywords: Europe, Malta, Banking, COVID-19, CRD5, Basel, NPLs, Banking Rule, Banking Act, Internal Governance, SREP, Stress Testing, Credit Risk, Forborne Exposures, ESG, ICAAP, ILAAP, EBA, MFSA

    Featured Experts
    Related Articles
    News

    EBA Updates Filing Rules for Supervisory Reporting

    The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.

    October 19, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Procedures for Collection of AnaCredit Data

    The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.

    October 19, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Procedures for Collection of AnaCredit Data

    The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.

    October 19, 2021 WebPage Regulatory News
    News

    EBA Publishes Standards on Disclosure of Investment Policy Under IFR

    The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).

    October 19, 2021 WebPage Regulatory News
    News

    APRA Finalizes Guidance for New Prudential Standard on Remuneration

    The Australian Prudential Regulation Authority (APRA) published the prudential practice guide CPG 511 to assist banks, insurers, and superannuation licensees in meeting requirements of CPS 511, the new prudential standard on remuneration.

    October 18, 2021 WebPage Regulatory News
    News

    OCC Updated LIBOR Self-Assessment Tool for Banks

    The Office of the Comptroller of the Currency (OCC) published a bulletin that provides an updated self-assessment tool for banks to evaluate their preparedness for cessation of the London Interbank Offered Rate (LIBOR).

    October 18, 2021 WebPage Regulatory News
    News

    TCFD Updates Guidance for Financial Disclosures on Climate Risk

    The Financial Stability Board (FSB) published a report that examines the progress made toward disclosures aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

    October 14, 2021 WebPage Regulatory News
    News

    BCBS Report Examines Progress on Adoption of Basel III Framework

    The Basel Committee on Banking Supervision (BCBS) published the progress report on adoption of the Basel III regulatory framework in member jurisdictions.

    October 14, 2021 WebPage Regulatory News
    News

    ACPR Implements Updates Related to DPM Version 3.1

    The French Prudential Supervisory Authority (ACPR) has implemented, in its information system, updates linked to the Data Point Model (DPM) version 3.1.

    October 14, 2021 WebPage Regulatory News
    News

    EBA Note Examines Transition Risks of Benchmark Rates

    The European Banking Authority (EBA) published a thematic note that aims to identify and raise awareness of the transition risks of benchmark rates, as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA) are close to being phased out.

    October 14, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7571