IMF hails Malta's remarkable resilience in the face of a major crisis
Following positive outlooks and reviews on the Maltese economy and the financial services industry by the European Commission, Standard and Poor's and Fitch, the International Monetary Fund has also carried out an in-depth review through its Article IV Consultation Procedure.
While describing the overall economy as an example of "remarkable resilience in the face of a major crisis", turning to the financial services sector, the IMF noted that despite increased risks, "in the case of Malta, these risks are contained because the large international banking segment has limited balance sheet exposures to the Maltese economy and negligible contingent claims on the deposit compensation scheme."
The IMF recommended that the authorities should, nonetheless, continue monitoring closely developments in all banks, including links between foreign parent banks and their Maltese entities. The authorities should also stand ready to take action if spill-overs from abroad become imminent or the internationally-oriented banks increase their exposure to the domestic economy. In this context, the mission supports the recent introduction of more frequent monitoring of banks' liquidity.
Despite turbulence in the euro area, the IMF reported that the performance of Maltese banks has been satisfactory. Banks report adequate capitalization, liquidity, and profitability and are well positioned to transition to the Basel III regime. In contrast to many European countries, banks' deposits and credit to the private sector continued to increase in 2012, albeit at a slower pace than in 2010-11.
The IMF added that there is room to strengthen crisis preparedness and management frameworks in line with the forthcoming reforms at the European level. This would require boosting the resources of the deposit insurance scheme and improving the legal framework for bank resolution. Recent amendments to the regulations on deposit insurance are a step in the right direction. However, more needs to be done in view of sizeable contingent liabilities (relative to the size of the economy) and potential large increase in deposits covered by the scheme as a result of the forthcoming EU directive.
In a Press Statement issued in reaction to this report, Government welcomed the conclusions, which confirmed the soundness of the financial sector. Minister Edward Scicluna noted that the conclusions came in the wake of other positive appraisals in recent days by other well-established external observers such as credit rating agencies Standard & Poor's, Fitch, Bloomberg, Namura and the European Commission: "These conclusions represent a credible endorsement of the robustness and resilience of the Maltese financial sector".
The full report is available on the IMF website.
Update of Investment Services Rulebooks
The MFSA has recently published a revised version of the Investment Services Rules for Investment Services Providers, the In-vestment Services Rules for Retail Collective Investment Schemes and the Investment Services Rules for Professional Investor Funds (hereinafter referred to as 'Investment Services Rules').
The changes have been made to incorporate new provisions on foreign currency lending, as required in terms of MFSA Rule 1 of 2012 on Foreign Currency Lending, which came into force on 1st January 2013. The Rule is modelled on the Recommendation of the European Systemic Risk Board on Lending in Foreign Currencies (ESRB/2011/1) published as Notice No. 2011/C 342/01 of the Official Journal of the European Union. MFSA Rule 1 of 2012 applies, inter alia, to investment services providers and collective investment schemes authorised in terms of the Investment Services Act [Cap. 371].
MFSA RULE 1 OF 2012
MFSA Rule 01/2012 regulates the conduct of foreign currency lending. The Rule defines 'foreign currency' as any currency other than the legal tender of the country in which the borrower is resident.
MFSA Rule 01/2012 presents two sets of obligations, namely general obligations applying to all financial institutions as defined within the Rule itself and detailed reporting obligations imposed on certain financial institutions whose levels of foreign currency lending activities are above a certain threshold in comparison with their overall lending. All investment services providers and collective investment schemes authorised in terms of the Investment Services Act, who may, in terms of their licence conditions, engage in foreign currency lending, must comply with the following general obligations:
- educate borrowers on the risks involved in foreign currency lending;
- monitor their levels of foreign currency lending and hold specific records on foreign currency loans entered into after 1st January 2013;
- incorporate foreign currency lending risk in their internal risk management systems;
- hold adequate capital to cover foreign currency lending risk;
- monitor funding and liquidity risks in connection with foreign currency lending to both hedged and un-hedged borrowers, together with their overall liquidity positions.
INVESTMENT SERVICES RULES
The Investment Services Rules referred to above have been revised to reflect the provisions of MFSA Rule 1 of 2012. Thus any collective investment scheme or investment service provider, which has engaged in any form of foreign currency lending during the period under review, is bound to file with the Authority an annual confirmation of this activity.
The Authority will be utilising the information acquired from the annual confirmations prescribed in terms of the Investment Services Rules to identify any Licence Holders engaging in 'material lending' in which case, the latter will be required to compile and submit detailed reporting templates in terms of MFSA Rule 1 of 2012.
Investment Services Licence Holders and Collective Investment Schemes are to note that the MFSA Rule 01/2012 is available for download from the MFSA website. The Authority has outlined the changes made to the different Investments Services Rules in an ad hoc circular, which is also available for download, under the Circulars Section of the MFSA website.
Consultation on the proposed implementation of the Alternative Investment Fund Managers Directive
MFSA REF: 09/2013
Background:
Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 also known as the Alternative Investment Fund Managers Directive ('AIFMD') was published in the Official Journal of the European Union on 1st July 2011.
The AIFMD regulates the activity of alternative investment fund managers and aims at creating a comprehensive and effective regulatory and supervisory framework for AIFM in the European Union. It introduces a harmonised regulatory and supervisory framework for AIFMs in the EU. By the 22nd July, 2013 Member States are required to adopt and publish the laws, regulations and administrative provisions necessary to comply with the provisions of the Directive.
The Authority is proposing to revise the Investment Services Rules for Professional Investor Funds as follows:
1) Part A: The Application Process
Part A is being revised as follows:
[a] General updating of Part A in relation to the Legal Notices cited therein.
[b] Updating of definition of 'Collective Investment Scheme' as explained above;
[c] Revision of definition of 'Experienced Investors' and clarification on 'joint holdings';
[d] Updating of Part A and Schedule A to include reference to de minimis Licence Holders;
[e] Inclusion of reference to the Competency Form as an additional Form to be submitted with the application documents. This form will be required when Licence Holders are submitting a request for approval of the Compliance Officer, the Money Laundering Reporting Officer, the Portfolio Manager, the Investment Advisor and the Risk Manager. This Form shall be submitted together with the PQ which is habitually submitted with the application form.
[f] Creation of a new Schedule D to Part A entitled 'Competency Form.
2) Part B: Revision to the Standard Licence Conditions: Parts BI, BII and BIII of the PIF.
Further details are available in the consultation document.
Feedback:
Interested parties are to send their comments in writing by not later than 6th June 2013. Any comments and feedback are to be addressed to Dr. Isabelle Agius – Regulatory Development Unit by e-mail on mailto:iagius@mfsa.com.mt
Any queries or requests for clarifications in respect of the above should be addressed to: Dr. Isabelle Agius, Regulatory Development Unit, Tel: 25485359 or by e-mail on iagius@mfsa.com.mt, Dr. Monica Nally Hennessy, Securities and Markets Supervision Unit, by e-mail on MNallyHennessy@mfsa.com.mt or Mr. Jonathan Sammut, Securities and Markets Supervision Unit on Tel: 25485452 or by e-mail on mailto:jsammut@mfsa.com.mt.
Self-Assessment Questionnaires for Fund Managers and Self-Managed Collective Investment Schemes
Reference is made to the Alternative Investment Fund Managers Directive (AIFMD) which shall come into force with effect from 22nd July 2013. It is likely that depending on the respective business models, fund managers and self-managed schemes licensed in terms of the Investment Services Act, 1994, will need to be issued with revised licences to operate as AIFMs or will need to seek classification in terms of the 'de minimis' pursuant to the provisions of the AIFMD.
As a result, the MFSA has circulated to Licence Holders the following two self-assessment questionnaires:
- Questionnaire (1): Self-Assessment for Fund Managers and Self-Managed Collective Investment Schemes Applying as De Minimis Licence Holders;
- Questionnaire (2): Self-Assessment for Fund Managers and Self-Managed Collective Investment Schemes applying for an AIFM licence.
Depending on the business model, a Licence Holder is being requested to determine:
- Whether it can be categorised as 'de minimis' AIFM and does not intend to opt to be licensed as an AIFM in terms of the AIFMD; or
- Whether it can be categorised as a 'de minimis' AIFM but intends to opt to be licensed as an AIFM in terms of the AIFMD or its activities requires it to be re-licensed as an AIFM in terms of the AIFMD.
If the Licence Holder determines that it falls within the 'de minimis' AIFM category and does not intend to opt to be licensed as a full AIFM, then it is kindly requested to complete Questionnaire 1.
If the Licence Holder determines that it falls within the 'de minimis' AIFM category but intends to opt to be licensed as an AIFM or determines that its activities warrant it to be licensed as an AIFM in terms of the AIFMD, then the Licence Holder is kindly requested to complete Questionnaire 2.
The Authority will then use the results of the respective Questionnaires to re-classify entities and will issue revised licences in terms of the AIFMD.
Licence Holders are to note that existing fund managers and self-managed schemes have a one year transitional period with effect from 22nd July 2013 so as to register either as a 'de minimis' AIFM or to apply for a full AIFM licence and satisfy the requirements of the AIFMD. Accordingly, the Authority recommends that the relevant self-assessment questionnaire forms must be duly completed and submitted thereto before 31st March 2014.
However, there may be existing Licence Holders who wish to be AIFM compliant and seek an AIFM licence upon the coming into force of the AIFMD i.e. on 22nd July 2013. These Licence Holders are requested to notify the Authority accordingly and submit the relevant self–assessment questionnaire forms duly completed at the earliest opportunity but in any case by not later than Monday, 10th June 2013. The Authority will endeavour to process such completed self-assessment questionnaires with a view to issuing revised licences as soon as or soon after the AIFMD comes into force.
Licence Holders are to note that the issuance of such revised licences will depend on a number of factors including, inter alia, the quality of documentation provided and any additional due diligence enquiries that may need to be undertaken in the case of the appointment of key staff. Accordingly, such fund managers and self-managed schemes are encouraged to complete the self-assessment questionnaire form as comprehensively as possible and submit as early as possible.
For Further Information
Any queries for clarifications in relation to the self-assessment questionnaire forms should be addressed to an official of the Authorisation Unit on 21441155 or mailto:au@mfsa.com.mt
Feedback Statement to Industry Responses regarding the proposed regulatory regime for Company Service Providers
The MFSA has on the 17th May 2012 published a feedback statement providing the Authority's views on the comments received to the consultation document regarding the introduction of a proposed regulatory regime for Company Service Providers which the MFSA had published on the 23rd November 2012.
The new regime regulating Company Service Providers will be issued under a separate Act of Parliament. It is being proposed that the draft Bill will in general reflect the draft Regulations which were issued with the Authority's consultation document referred to above, duly updated after taking into account a number of comments which resulted from this consultation process.
Company Service Providers are those natural or legal persons who, by way of business provide any of the following services to third parties:
a. Formation of companies or other legal entities;
b. The operation or management of companies, including acting as or arranging for another person to act as director or secretary of a company, a partner in a partnership or in a similar position in relation to other legal entities;
c. Provision of a registered office, a business correspondence or administrative address and other related services for a company, a partnership or any other legal entity.
Any person resident or operating in or from Malta who acts as a company service provider by way of business shall be required to apply for registration with the Authority in terms of the proposed Company Service Providers Act with the exception of the following persons who will not be required to register in terms of the proposed Act:
i. Persons in possession of a warrant, or equivalent, to carry out the profession of advocate, notary public, legal procurator or certified public accountant;
ii. Persons authorised to act as a trustee or to provide other fiduciary duties in terms of the Trust and Trustees Act.
A person in possession of another licence, authorisation or recognition in terms of the Investment Services Act or the Insurance Business Act who intends providing company services by way of business shall still be required to apply to the Authority for registration. However the Authority shall consider any due diligence process already carried out with respect to such persons.
The relative feedback statement can be accessed on the Authority's website through the following link: http://www.mfsa.com.mt/pages/announcements.aspx?id=9
Any queries regarding the proposed regime regulating Company Service Providers may be addressed to Dr. Michelle Mizzi Buontempo (mailto:mmizzibuontempo@mfsa.com.mt) and Dr. Sarah Pulis (mailto:spulis@mfsa.com.mt).
EBA recommends supervisors to conduct asset quality reviews and adjusts the next EU-wide stress test timeline
The EBA has this month agreed on recommendations to supervisors to conduct asset quality reviews on major EU banks. While banks' capital positions were significantly strengthened under the EBA's recapitalisation exercise, the objective of the asset quality exercises will be to review banks' classifications and valuations of their assets so to help dispel concerns over the deterioration of asset quality due to macroeconomic conditions in Europe.
Since appropriately reviewed balance sheets are a key input to an effective stress test, the EBA has also adjusted the timeline of the next EU-wide stress test so to conduct the exercise in 2014 once the asset quality reviews are completed. However, to ensure transparency and comparability over the years, the EBA will provide, in the second half of 2013, appropriate disclosure on the actual exposures of the EU banking sector.
The EBA underlines the importance of taking into account and supporting the work on the review of banks' assets and, in particular, of ensuring alignment in methodologies and timeline with the balance sheet assessment of the Single Supervisory Mechanism (SSM) to be conducted under the aegis of the European Central Bank.
In this respect, the set of EBA recommendations and the timeframe for the asset quality reviews and the EU-wide stress test will be published once the timeline of the SSM's balance sheet assessment is known.
Asset quality reviews remain under the responsibility of the relevant competent authorities and have already been undertaken in some jurisdictions. The EBA's recommendations will, therefore, aim at contributing to a more uniform approach in the methodology of the reviews, through a set of good practices, and to a consistent communication on the outcomes of national exercises.
Andrea Enria, Chairperson of the European Banking Authority, said: "Our recapitalisation recommendations have brought the common equity capital ratios of EU banks in line with those of major international competitors. However, concerns remain on asset quality and forbearance, which need to be addressed. This is also a necessary precondition for the credibility of the next EU-wide stress test."
MFSA Consultations
Consultation Documents
24/05/2013 - Consultation on the proposed implementation of the Alternative Investment Fund Managers Directive
31/05/2013 - Consultation on the proposals for Reinsurance Special Purpose Vehicles Regulations
Feedback Statements
European Supervisory Authorities Press Releases issued during May 2013
European Banking Authority (EBA)
16 May 2013 - EBA recommends supervisors to conduct asset quality reviews and adjusts the next EU-wide stress test timeline
17 May 2013 - Survey: Review of the European System of Financial Supervision
17 May 2013 - Call for Expression of Interest regarding the renewal of the EBA's Banking Stakeholder Group
20 May 2013 - Consultations on technical standards on the assessment and scenario for recovery plans
20 May 2013 - EBA consults on joint decisions on institution-specific prudential requirements
21 May 2013 - EBA consults on draft Technical Standards for the definition of material risk takers for remuneration purposes
21 May 2013 - EBA consults on draft Technical Standards on Passport Notifications
22 May 2013 - EBA consults on draft Technical Standards on securitisation retention rules
23 May 2013 - Consultation on Technical Standards for Own funds – Part III
23 May 2013 - EBA consults on draft technical standards on liquidity
23 May 2013 - EBA consults on draft Guidelines on capital measures for foreign currency lending
European Securities and Markets Authority (ESMA
02 April 2013 - ESMA publishes the guidelines on market making and primary dealer exemption - application deadline starts
02 May 2013 - ESMA publishes the quarterly update of the notification thresholds for sovereign issuers
23 May 2013 - ESMA publishes update to Prospectus Directive Q & A
24 May 2013 - ESMA publishes Guidelines on key concepts of the AIFMD
24 May 2013 - ESMA launches consultation on guidelines for AIFMD reporting obligations
30 May 2013 - ESMA promotes global supervisory co-operation on alternative funds
30 May 2013 - ESMA approves EIU as a credit rating agency
MFSA Licences - April 2013
LICENCES ISSUED
Banking
Financial Institutions
- Financial Institution licence issued to Em@ney plc.
Collective Investment Schemes
Professional Investor Funds targeting Qualifying Investors
- Collective Investment Scheme licence issued to Bulkara Capital SICAV plc in respect of one sub-fund.
- Collective Investment Scheme licence issued to Burren Global Arbitrage II Fund SICAV plc.
- Collective Investment Scheme licence issued to Burren Global Arbitrage II Master Fund SICAV Ltd.
- Collective Investment Scheme licence issued to Burren Global Arbitrage Opportunites Master Fund SICAV Limited.
- Collective Investment Scheme licence issued to Hedge Invest Alternative Funds SICAV plc in respect of one sub-fund.
- Collective Investment Scheme licence issued to Innocap Fund SICAV plc in respect of one sub-fund.
- Collective Investment Scheme licence issued to NBCG Fund SICAV plc in respect of one sub-fund.
- Collective Investment Scheme licence issued to Patronus Invest SICAV plc in respect of one sub-fund.
- Collective Investment Scheme licence issued to Rascasse Capital SICAV plc in respect of one sub-fund.
- Collective Investment Scheme licence issued to RBAM I Funds SICAV plc in respect of one sub-fund.
- Collective Investment Scheme licence issued to Resco Funds SICAV plc in respect of one sub-fund.
- Collective Investment Scheme licence issued to Valletta Global Multi Strategy SICAV plc in respect of one sub-fund.
Professional Investor Funds targeting Experienced Investors
- Collective Investment Scheme licence issued to Comino Umbrella Fund SICAV plc in respect of one sub-fund.
Professional Investor Funds targeting Extraordinary Investors
- Collective Investment Scheme licences issued to Falcon NR&I SICAV plc in respect of three sub-funds.
UCITS
- Collective Investment Scheme licence issued to Eiger SICAV plc in respect of one sub-fund.
Incorporated Cell
- Collective Investment Scheme licence issued to Feracs World Opportunites IC SICAV plc.
- Collective Investment Scheme licence issued to Red Sandalwood Dynamic Fund IC SICAV plc.
Trustees & Fiduciaries
- Authorisation issued to Forteq Limited to act as a trustee and to provide other fiduciary services including acting as an administrator of private foundations.
Insurance
Insurance Brokers
- Approval of Novins Cell as a cell of Ark Insurance Management PCC Ltd to carry on insurance intermediaries activities.
Pensions
Asset Managers
- Certificate of Registration issued to LCF Edmond de Rothschild Asset Management (C.I.) Limited.
Retirement Schemes
- Certificate of Registration issued to Pioneer Retirement Scheme.
- Certificate of Registration issued to Voyager Retirement Scheme.
- Certificate of Registration issued to US Voyager Retirement Scheme
- Certificate of Registration issued to The Rinella Retirement Benefit Scheme.
CANCELLED & SURRENDERED LICENCES
Collective Investment Schemes
Professional Investor Funds targeting Qualifying Investors
- Surrender of licence issued to SF Global Equity Fund SICAV plc.
- Surrender of licence issued to SF Global Equity Master Fund SICAV Limited.
- Surrender of licence issued to Neutron Fund SICAV plc in respect of one sub-fund.
- Cancellation of licences issued to Pan European Umbrella SICAV plc in respect of two sub-funds.
Professional Investor Funds targeting Experienced Investors
- Surrender of licence issued to HFH SICAV plc in respect of one sub-fund.
Investment Services
- Surrender of Category 1A licence issued to FPC Investment Consultants Limited.
Insurance
Insurance Brokers
- Surrender of licence issued to FPC Investment Consultants Limited.
CONVERTED & EXTENDED LICENCES
Investment Services
- Extension of Category 2 licence issued to Altarius Asset Management Limited to provide investment advice services to Collective Investment Schemes.
Trustees & Fiduciaries
- Extension of licence issued to FACT Services Limited to include acting as an administrator of private foundations.
Insurance
Insurance Brokers
- Approval for the conversion of Ark Insurance Management (Malta) Limited into a cell company, Ark Insurance Management PCC Ltd, in terms of the Companies Act (Cell Companies Carrying on Business of Insurance) Regulations, 2010.
Registry of Companies - New Registrations - April 2013
| Companies | Partnerships | Total |
| 433 | 8 | 441 |
MFSA Circulars
10/05/2013 - Self-Assessment Questionnaires for Fund Managers and Self-Managed Collective Investment Schemes
MFSA Notices
03/05/2013 - Suspension of Licence by Absolute AKJ Fund IC SICAV plc
06/05/2013 - Surrender of Licence by Sharp Advisory Limited
24/05/2013 - Surrender of authorisation by Integrated-Capabilities Ltd
27/05/2013 - Surrender of Licences by Alphabetos Funds SICAV plc
MFSA Listing Authority Announcements
08/05/2013 - Extension of period of Suspension of public offer - A25 Gold Producers Corp
22/05/2013 - Extension of period of Suspension of public offer - A25 Gold Producers Corp
Warnings
20/05/2013 - MFSA Warning - http://www.mfsaregulation.com
24/05/2013 - MFSA Warning - http://sb.saadgroupmt.net/
Foreign warnings received by MFSA can be viewed on the MFSA Website.
Forthcoming Events
June 5-6 - 2013 Malta Financial International Crime Forum
Education Consultative Council (ECC)
Training by members of the ECC:
To view the MFSA Newsletter, please click here.
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.
