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    MFSA Issues Circulars on Banking Rules, Ends Pandemic Relief Measures

    August 31, 2022

    The Malta Financial Services Authority (MFSA) published the corporate governance code for authorized entities, in addition to the three Circulars for banks. One circular involves the new Banking Rule BR/25 on financial and mixed financial holding companies while another circular addresses minor amendments to the Banking Rule BR/14 on outsourcing by credit institutions. Finally, the last circular is focused on the removal of temporary capital and liquidity relief measures related to the COVID-19 pandemic.

    As it relates to the circular on banking rule BR/25, the CRD 5 Banking Package consisted of significant amendments to the CRD 4 and the CRR 1. The amendments were transposed into local legislation and regulations in this respect. One of the salient amendments brought forward by the CRD 5, through the new Article 21a, was the introduction of the approval or exemption of financial holding companies and mixed financial holding companies that are, inter alia, part of a banking group. The legislative provisions were transposed and presently in force in Articles 11B and 29AA of the Banking Act (Chapter 371 of the Laws of Malta). The new Rule is intended to further provide clarity and detail to the industry in relation the new mechanism for the approval or exemption of a financial and a mixed financial holding company falling within the scope of Article 11B of the Act. The Authority also issued two Annexes to the new Rule. Annex I provides for the  Application Form/s and Annex II provides for the Annual Declaration Form. The new Rule and Annexes will come into force with immediate effect.

    The Circular to credit institutions on a minor amendment to BR/14 explains that the amendments in the Rule are being put forward to incorporate a paragraph from the EBA Guidelines on Outsourcing Arrangements (EBA/GL/2019/02), which are already applicable through the BR/14. The amendment will come into force with immediate effect. Additionally, the circular on the removal of pandemic relief measures confirms that all banks must operate above their Pillar 2 Guidance from January 01, 2023 and that the liquidity relief, which allowed banks in Malta to operate with an LCR below 100%, expires from August 11, 2022 (all banks in Malta currently operate above 100%).

     

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    Keywords: Europe, Malta, Banking, Banking Rule, Basel, Regulatory Capital, Pillar 2, Covid 19, LCR, Liquidity Risk, Outsourcing Arrangements, CRD5, Corporate Governance, BR14, BR25, MFSA

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