MFSA Publishes Regulatory Updates and Supervisory Priorities for 2021
MFSA published its cross-sector supervisory priorities for 2021, along with the principles-based cross-sectoral guidelines on outsourcing and technology arrangements, including addressing the management of Information and Communication Technology (ICT), security, and cloud deployment risks. In another update, MFSA announced that it will adopt the ECB recommendation (ECB/2020/62) on restrictions on dividend distribution during COVID-19 pandemic in its entirety and the recommendation will be applicable to all credit institutions licensed in terms of the Banking Act until September 30, 2021. The ECB recommendation requires credit institutions to consider refraining from, or to limit, distributing any cash dividends or share buy-backs until September 30, 2021. Finally, MFSA published a circular to credit institutions on the exercise of discretion under Article 178(2)(d) of the Capital Requirements Regulation (CRR) with regard to the threshold for assessing the materiality of credit obligations past due.
In the circular addressing credit obligations past due, MFSA announced that, from December 31, 2020, the ECB guideline (ECB/2020/32; published on June 25, 2020) on materiality threshold for assessing credit obligations past due shall apply to all credit institutions licensed in terms of the Banking Act (Chapter 371 of the Laws of Malta). The ECB guideline sets the materiality threshold that shall be applied for the purposes of point (d) of paragraph 2 of Article 178 of the CRR. The materiality threshold comprises two components: an absolute limit and a relative limit. A default shall be deemed to have occurred when both the following limits are exceeded for more than 90 consecutive days:
- A limit in terms of the sum of all amounts past due owed by the obligor, which is equal to EUR 100 for retail exposures and EUR 500 for exposures other than retail exposures
- A limit in terms of the amount of the credit obligation past due in relation to the total amount of all on-balance sheet exposures to that obligor, excluding equity exposures, equal to 1%.
The guidance on ICT risk and outsourcing arrangements informs authorized firms on the implementation of technology arrangements, ICT and security risk management, and relevant outsourcing arrangements (including cloud computing). The guideline stipulates that the approach to adoption of cloud computing resources and services should be based on sound governance and management and should take into consideration the Guiding Principles for Cloud Computing Adoption and Use, which were issued by the global non-profit IT association ISACA, as outlined in clauses 2.4.2 to 2.4. The Accountability Principle states that the internal and cloud provider responsibilities should be clearly defined such that accountabilities are managed accordingly. The guideline elaborates on different type of cloud service models and shared responsibilities for these cloud service models. MFSA notes that this guidance document should be considered as a live document due to the dynamic nature of regulatory developments, technology evolution, and related opportunities and risks. MFSA plans to conduct thematic reviews on a sectoral basis on key aspects of the guidance document, which will be cross-referenced by the respective prudential rules of the applicable sectors along with ESAs guidelines (where applicable).
- News Release on Supervisory Priorities
- Supervisory Priorities (PDF)
- News Release on Outsourcing Guidance
- Guidance on Outsourcing Arrangements (PDF)
- Circular Restricting Capital Distributions
- Circular on Threshold for Credit Obligations
Keywords: Europe, EU, Banking, Insurance, Securities, ICT Risk, Outsourcing Arrangements, Fintech, CRR, Credit Risk, Materiality Threshold, Credit Obligations, Supervisory Priorities, Dividend Distribution, COVID-19, ECB, MFSA
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticlePRA Finalizes Exit Instrument and Guidance Before Brexit
CFPB Finalizes Rule on Small Business Lending Data Collection
The Consumer Financial Protection Bureau (CFPB) published a final rule that sets out data collection requirements on small business lending, under section 1071 of the Dodd-Frank Act.
BCBS to Consult on Pillar 3 Climate Risk Disclosures by End of 2023
The Bank for International Settlements (BIS) published a summary of the recent Basel Committee (BCBS) meetings.
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
US Congress Report Examines Data Privacy and Cybersecurity Regulations
The U.S. Congressional Research Service published a report on banking, data privacy, and cybersecurity regulation.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
EU to Conduct One-Off Scenario Analysis to Assess Transition Risk
The European authorities recently made multiple announcements that impact the banking sector.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.