CBM has revised the Directive No. 11 on macro-prudential policy to transpose elements of the revised Capital Requirements Directive (CRD5). This Directive lays down the objective of macro-prudential policy and the way CBM intends to implement the policy. The revised Directive No. 11 came into force from December 28, 2020. CBM also published a notice on the outcome of public consultation regarding the proposed amendments to the Directive No. 11. CBM did not receive any feedback to the proposed revisions to Directive No. 11. This Directive implements ESRB recommendations on macro-prudential mandate and intermediate objectives and instruments, along with the implementation of mandates in CRD5 and CRR2.
Directive No. 11 shall apply to credit institutions and systemic investment firms as defined in the Investment Firm Directive and the Investment Firm Regulation. To fulfil the ultimate objective of macro-prudential policy and increase the resilience of the financial system, CBM shall develop, issue, and apply macro-prudential instruments as appropriate. Among others, CBM
- may introduce a systemic risk buffer of Common Equity Tier 1 capital for the financial sector or one or more subsets of that sector on all, or a subset of exposures as referred to in paragraph 18 of this Directive, to prevent and mitigate macro-prudential or systemic risks not covered by CRR and by Article 130 of the CRD5 and paragraphs 33 to 49 of this Directive.
- shall, acting jointly with the competent authority, identify, on a consolidated basis, global systemically important institutions (G-SIIs), and, on individual, sub-consolidated, or consolidated basis, as applicable, other systemically important institutions (O-SIIs), which have been authorized in Malta.
- shall set the countercyclical buffer rate, expressed as a percentage of the total risk exposure amount, calculated in accordance with Article 92(3) of the CRR of institutions that have credit exposures in Malta and the buffer shall be between 0% and 2.5%, calibrated in steps of 0.25 percentage points or multiples of 0.25 percentage points.
In accordance with the ESRB Recommendation on intermediate objectives and instruments, CBM shall periodically assess whether the macro-prudential instruments under its direct control or recommendation powers are sufficient to effectively and efficiently pursue the ultimate objective of macro-prudential policy as established in the ESRB Recommendation on macro-prudential mandate, along with the intermediate objectives as defined in paragraphs 10 and 11 of the Directive. If the assessment indicates that the available instruments are not sufficient, CBM shall include additional macro-prudential instruments. CBM shall duly inform ESRB in case of any change in the set of intermediate objectives and macro-prudential instruments.
Effective Date: December 28, 2020
Keywords: Europe, Malta, Banking, Securities, CRD5, CRR2, Macro-Prudential Policy, Systemic Risk, IFD, IFR, CBM
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
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