Malta: Banking & Fintech Newsletter - September 2019


The European Central Bank ("ECB") has recently revised its supervisory expectations for the prudential provisioning of Non-Performing Loans and Exposures (NPLs/NPEs), accounting for the new requirements imposed by ICAAP's Pillar 1. Aspiring for more consistent treatment upon NPEs, such revisions, inter alia, clarify that ECB's supervisory expectations for new NPEs will be limited to NPEs arising from loans originated before 26 April 2019, whereas NPE which originate after such date shall be directly subject to Pillar 1 treatment.



The Equity Release Financial Products Regulations (Subsidiary Legislation 371.21 of the laws of Malta) came into force on the 1st of September 2019. Such regulations bear the scope of granting the elderly the faculty of enjoying their retirement within their own household whilst releasing part of the equity built over the years in such home. This is achieved via equity release credit agreements within which the creditor offers an array of credit disbursement plans in return for a pecuniary sum to be derived from the future sale of the retiree's residence, which would only take place once the consumer's dependence upon such residence would have ceased.



Two decisions by the European Central Bank were published in the Official Journal of the EU, which decisions concern the Regulation on the Single Supervisory Mechanism (SSM). While Decision 2019/1376 relates to the delegation of decision-making powers with regards to the adoption of passporting, the acquisition of qualifying holdings and the withdrawal of authorisations of credit institutions, Decision 2019/1377 specifies the heads of work units which would be qualified to carry out such decision-making within these sectors. The date of effect of both decisions is the 17 September 2019.

DECISION (EU) 2019/1376

DECISION (EU) 2019/1377


In pursuance of the support for the effective implementation of EU regulatory framework within Member States' banking sector, the European Banking Authority ("EBA") has updated its online interactive single rulebook to cater for the inclusion of the Securitisation Regulation (Regulation 2017/2402). Users can now submit any queries they may have upon the application of this Regulation, as they navigate through the EBA's technical standards and guidelines on the EBA website on an article-by-article basis. Such Q&A would clarify any difficulties encountered as well as addressing any loopholes which might be discovered within the Regulation.



The EBA has published its annual update of EU banks' funding plans and asset encumbrance of banks in the EU. Through the analysis of the plans of 160 EU banks, the EBA is forecasting an increase in debt issuances, particularly unsecured debt instruments, from 2019 to 2021 whereas the overall weighted average asset encumbrance ratio has been stabilized in comparison to the previous year. On average, total assets are projected to grow by 6.1% due to increased demand for loans by households and non-financial corporates. The EBA also committed to yearly updates of both such reports.




On the 6th September 2019, the Malta Financial Services Authority ("MFSA") issued guidance to the Virtual Financial Assets ("VFA") service providers benefitting from the transitory provisions under Article 62 of the VFA Act. The circular outlines the procedure to be followed by persons who either wish to start the VFA Services Licence application process and by persons who intend to stop the provision of VFA Services before, following the expiry of the transitory period. The MFSA specified that the application process shall begin with the submission of the Letter of Intent, setting out inter alia:

  • a comprehensive written description of the proposed structure;
  • the VFA Service/s for which licensing is to be sought identifying the persons proposed to hold key positions; and
  • a Legal Opinion that the proposed activity does not fall within the scope of traditional financial services legislation.

Upon receipt of the Letter of Intent, the MFSA shall then schedule a preliminary meeting with the applicant and its VFA Agent, after which the applicant shall have 60 days to submit an application form with any supporting documentation.



In its Circular, the MFSA lists approved courses for the purpose of fulfilling the competence requirements for MLROs in terms of Chapter 2 and Chapter 3 of the VFA Rulebook. The Authority further outlines that training providers interested in having their courses approved need to submit a request to the same Authority outlining namely the content of such course, and the certification award mechanism.


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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