Banking & Fintech Newsletter – Issue 33

GA
Ganado Advocates

Contributor

Ganado Advocates is a leading commercial law firm with a particular focus on the corporate, financial services and maritime/aviation sectors, predominantly servicing international clients doing business through Malta. The firm also promotes other areas such as tax, pensions, intellectual property, employment and litigation.
Banking & Fintech newsletter – issue 33 is now available.
Malta Finance and Banking
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EBA provides report to the EU Commission on non-bank lending

Following a Call for Advice request from the EU Commission, the EBA published its report in response to the non-bank lending request from the CfA on digital finance. The EBA addressed the lack of regulatory harmonisation over non-bank lenders (including FinTech and BigTech) providing lending and referred to the risks concerning (i) supervision; (ii) consumer protection; (iii) anti-money laundering and countering financing of terrorism (‘‘AML/CFT''); and (iv) macro and micro prudential risks.

In view of this, the EBA provided its proposals to mitigate risks by:

  1. enhancing disclosure requirements in a manner which is fair, effective and well-suited for new forms of lending;
  2. strengthening creditworthiness assessments in the interest of consumers;
  3. ensuring non-bank lenders are subject to the EU AML/CFT framework; and
  4. enhancing monitoring and reporting while considering the introduction of activity-based macro-prudential measures to cover all credit providers.

EBA updates its guidelines on equivalence of confidentiality and professional secrecy regimes of third-country authorities

Given that the EBA is also tasked with monitoring third country regulatory and supervisory frameworks, in order to establish cooperation arrangements with equivalent third countries, the EBA has updated its guidelines on the equivalence of confidentiality and professional secrecy regimes of third-country authorities by widening the scope of its assessment to include, as applicable to specific third country authorities, all relevant provisions in Capital Requirements Directive (‘‘CRD V''), the revised Payment Services Directive (‘‘PSD 2''), the Bank Recovery and Resolution Directive (‘‘BRRD'') and the Anti-Money Laundering Directive (‘‘AMLD'') (given they all provide possibility for EU authorities to sign cooperation arrangements with authorities from third countries). The EBA has also widened the purpose in order for cooperation arrangements to be supported and participation in supervisory resolution and anti-money laundering colleges facilitated.

In a separate document, the EBA issued its principles for the assessment of confidentiality and professional secrecy which reflects provisions encapsulated in CRD V, PSD 2, BRRD and AMLD.

EBA launches discussion paper on the role of environmental risks in the prudential framework

The EBA has published a discussion paper which includes an analysis on how far environmental risks are currently reflected in Pillar 1 own funds requirements. The Discussion Paper refers to the evolving environmental risks which impact credit, market and operational risk. The scope is to explore the possibility of incorporating environmental risks into the Pillar 1 prudential framework and the manner in which this should be done. Focus on a risk-based approach has been included in an attempt to support financial institutions' resilience.

The public consultation shall run until the 2nd of August 2022. For those interested, the consultation paper may be found here.

ESAs published consultation paper on sustainability disclosures for simple, transparent and standardised securitisations

The EBA, European Insurance and Occupational Pensions Authority (the “EIOPA”) and European Securities and Markets Authority (the “ESMA”), commonly known as the three European Supervisory Authorities (the “ESAs”) have published a consultation paper seeking input concerning the sustainability indicators for simple, transparent and standardised (STS) securitisations.
The objectives of the ESAs in publishing the draft regulatory technical standards include:

  1. ensuring that originators of assets financed by STS securitisations are facilitated when making disclosures on the principal adverse impacts of the assets in terms of the environmental, social and governance matters; and
  2. supplementing the single rulebook under the Securitisation Regulation which was amended by the Capital Markets Recovery Package (CMRP).

The public consultation shall run until the 2nd of July 2022. For those interested, the consultation paper may be found here.

Central Bank of Malta Directive no. 17 on Business Continuity Measures has been repealed

The temporary measures introduced in light of the Covid-19 restrictions by way of Central Bank of Malta (‘‘CBM'') Directive no.17 on Business Continuity Measures are no longer in force (as from 9th May 2022). The requirements for automated deposit processing of paper-based instruments, of deposit, and of withdrawal of cash, as well as the provisions regarding over-the-counter encashment for paper-based instruments have all been repealed.

Amendments to Central Bank of Malta Directive no. 10 on Authentication, Fitness Checking and Recirculation of Euro Banknotes and Coins

CBM Directive no. 10 on Authentication, Fitness Checking and Recirculation of Euro Banknotes and Coins has been amended so that the CBM will receive specific information in order for the CBM and the ECB to monitor the developments in the cash cycle and the compliance by cash handlers. Such amendments have been in force since 29th April 2022.

EBA's statement on access to basic financial products and services to Ukrainian refugees

The EBA issued a statement whereby it held that financial institutions and supervisors should provide Ukrainian refugees with access to at least basic financial products and services, including access and use of payment accounts in accordance with the Payment Accounts Directive (2014/92/EU). The EBA held that while the AML/CFT guidelines remain applicable, there are pragmatic measures which can be applied in order to mitigate risks of money laundering and funding of terrorism. The EBA also welcomed efforts from EU member states to provide clarifications and indications as to how their financial institutions can provide access to financial products and services to Ukrainian refugees.

ESAs issued joint committee report on risks and vulnerabilities in EU financial sector

The ESA issued its 2022 joint committee report on risks and vulnerabilities wherein it warned the EU financial sector of the importance of cyber resilience in view of cyber security risks caused by increased use of technology and digital transformation following Covid-19. The ESA held that ESG considerations are to be incorporated further in financial institutions' business strategies and governance structures. Moreover, the ESA provided that more monitoring of retail investors' risks is needed and re-iterated the importance of compliance with sanctions. The ESA warned of negative implications in the sector and that asset quality may decrease and deteriorate.

EBA publishes report on the amendment of regulatory technical standards on strong customer authentication and secure communication

The EBA has introduced amendments to its regulatory technical standards on strong customer authentication and secure communication whereby strong customer authentication is not required (provided specific conditions are met) when using an account information service provider to access payment account information. The amendments also extend the requirement to renew the strong customer authentication from every 90 days to every 180 days. The amendments should start to apply seven months after the amending regulatory technical standards have been published in the Official Journal of the EU.

EBA publishes final revised Guidelines concerning SREP and supervisory stress testing

The Guidelines on common procedures and methodologies for the supervisory review and evaluation process (‘‘SREP'') and supervisory stress testing, which will apply as of 1st January 2023, implements amendments introduced by CRD V and Capital Requirements Regulation. Some of the amendments include:

  1. the adoption of the EBA opinion on how to take into account money laundering and financing of terrorism risks in the SREP;
  2. the categorisation of institutions in accordance with the principle of proportionality; and
  3. the alignment of liquidity risk and liquidity adequacy within the current regulatory framework.

Originally published May 19, 2022

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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