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    MFSA Publishes Multiple Regulatory Updates for Credit Institutions

    November 10, 2022

    The Malta Financial Services Authority (MFSA) published circulars on the banking rule BR/27 that addresses the application of certain options and national discretions, the guidelines for Supervisory Review and Evaluation Process and stress testing for less significant institutions, the supervisory reporting requirements for reporting framework 3.2, and the banking rule BR/26 on stress testing requirements.

    Below are the key highlights of these regulatory developments:

    • MFSA published circular on new banking rule BR/27 on the application of certain options and national discretions addressed to credit institutions licensed under the Banking Act. The rule  provides for the approach that the Authority undertakes in the exercise of the options and discretions laid down in the regulations and provided for in the European Union legislative framework (the Capital Requirements Regulation and Regulation 2015/61on the liquidity coverage requirement among others), which concern the prudential supervision of credit institutions. The rule stipulates the general aspects that the Authority shall consider in determining the prudential requirements for credit institutions and provides the manner in which the Authority will assess requests and/or decisions involving the exercise of an option or discretion. The new rule shall come into force with immediate effect.
    • Another circular addresses the less significant credit institutions on the EBA guidelines on common procedures and methodologies for SREP and stress testing. These guidelines will be the basis for MFSA assessment on the risk, viability, and sustainability of credit institutions through the SREP process, taking into account the principle of proportionality based on the systemic importance of credit institutions. The circular, which will come into effect from January 01, 2023, notes that the less significant institutions are expected to operate above the Pillar 2 Guidance (P2G) as from January 01, 2023, as outlined in a recently published MFSA Circular. 
    • The next circular refers to to all credit institutions and foreign branches regarding the developments in supervisory reporting requirements, more specifically the reporting framework version 3.2. The circular outlines amendments to supervisory reporting modules, including all templates and instructions, along with their expected first applicable reference date under the reporting framework 3.2. The supervisory reporting modules on net stable funding ratio, remuneration, leverage, large exposures and concentration risk, liquidity coverage ratio, market risk, and funding plans are applicable as from reference date December 2022 whereas modules on own funds, additional liquidity monitoring metrics, asset encumbrance, G-SII reporting are applicable as from reference date June 2023. MFSA notified that until the first applicable reference date, institutions should keep using the current version 3.0 templates of respective modules. The revised templates apply to institutions on an individual and consolidated basis.
    • Finally, the circular on new banking rule BR/26 addresses the stress testing requirements of credit institutions licensed under the Banking Act. The rule specifies the stress testing requirements of credit institutions, and implements the EBA guidelines on stress testing of institutions. The rule aims to provide common organizational and methodological requirements to conduct stress testing, as part of the risk management framework of credit institutions. The risk areas to be considered by credit institutions during stress testing have been also included in the rule. The new rule shall come into force with immediate effect.

     

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    Keywords: Europe, Malta, Banking, Reporting, Finrep, Corep, Basel, CRR, SREP, Stress Testing, Supervisory Reporting, NSFR, Market Risk, Large Exposures, LCR, Own Funds, BR 26, BR 27, EBA, MFSA

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