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    MFSA Publishes CRD5 Updates and Supervisory Priorities for 2022

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0. In a separate communication, the Authority also published the 2022 cross-sector supervisory priorities, which are focused on financial crime compliance, corporate governance and compliance, digital finance, and sustainable finance. Moreover, it recently published the bi-annual update on the transposition of CRD5, credit risk, sustainable finance, implementation of Basel III reforms, digital finance package, and EU proposal on artificial intelligence. Also announced were the amendments to the Banking Act and its Subsidiary Legislation, which shall soon come into effect, to transpose the Capital Requirements Directive (CRD5) and the Investment Firms Directive (IFD) into the national regulatory framework. Finally, MFSA announced amendments to a number of Banking Rules as well as the introduction of a new Banking Rule, BR/24, on internal governance to transpose CRD5; these Banking Rules will come into force with immediate effect.

    MFSA is introducing BR/24 and repealing Annex 2B of BR/12,entitled “Technical Criteria on Governance Arrangements and the Treatment of Risks.” The new rule introduces requirements in line with the amendments in CRD5, also stipulating that data on loans to the directors of credit institutions and their related parties, as defined therein, should be documented and made available to MFSA. Furthermore, the EBA guidelines on internal governance and the EBA guidelines on product oversight for retail banking products have been implemented in this Rule. The key Banking Rules that are being revised include the following: 

    • BR/12 on the Supervisory Review and Evaluation Process (SREP) has been amended to reflect the amendments introduced by CRD5, with respect to the level of application of the requirements stipulated in the said Rule, specifically in relation to the elements that are assessed throughout the SREP. Among other amendments, this Rule has been revised to ensure the subsidiary undertakings that are not subject to the CRD shall comply with sector-specific rules on an individual basis. Furthermore, the amendments specify the types of subsidiaries to which the remuneration requirements do not apply on a consolidated basis and the exception to such rule.
    • BR/14 on outsourcing has been amended to clarify that the 60-day period within which MFSA is to assess an outsourcing notification may start to run from the submission of any other information that MFSA may require to process such notification. Additionally, the amendments also implement requirements, with respect to the outsourcing policy of credit institutions, emanating from the EBA guidelines on internal governance. 
    • BR/15 on capital buffers has been amended to transpose the CRD5 provisions related to the restrictions on composition of the combined buffer requirement. Moreover, the section on “Global and Other Systematically Important Institutions” (G-SIIs and O-SIIs) has been amended to define and provide the identification methodology for G-SIIs together with changes to the implementation of an O-SII buffer that is higher than 3% of the total risk exposure amount. Additionally, changes have been made to the provisions on calculation of the combined buffer requirement while a provision on the failure of credit institutions to meet the leverage ratio buffer requirement has been introduced.
    • BR/21 on remuneration policies and practices has been amended to introduce the definition of the term "gender-neutral remuneration policy" and to provide a list of staff members who are considered as having a material impact on the risk profile of a credit institution. The amendments to this Rule also relate to the principles on variable elements of remuneration and the introduction of specific exceptions thereto, to ensure proportionality in this regard.

    As per an announcement from the Central Bank of Malta (CBM), Creditinfo Malta Limited (C 30174) has been granted a five-year renewable license to operate as a credit reference agency (CRA). The function of a CRA is primarily to issue credit scores on natural and legal persons, including credit institutions.


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    Keywords: Europe, Malta, Banking, CRD5, IFD, Basel, Supervisory Priorities, Reporting, Sustainable Finance, Banking Act, Banking Rule, Internal Governance, SREP, ESG, Regulatory Capital, Capital Buffer, Framework 3.0, Regtech, Credit Scoring, Credit Risk, Lending, Creditinfo, MFSA, CBM

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