Insights

In this issue:

• MFSA extends regulatory reporting deadline for exceptional cases
• Moratorium period extended by a further six months
• MFSA issues new shareholder policy for credit institutions and insurance companies
• CRR rules relaxed in effort to encourage banks to lend to companies and households
• Companies Act (Public Companies – Annual General Meetings Regulations) 2020
• European Commission issues report on the effect of the Interchange Fees Regulation
• MFSA updates its Q&As on the European Market Infrastructure Regulation
• SFTR Reporting Regime off to a great start

MFSA extends regulatory reporting deadline for exceptional cases

The MFSA has taken the decision to grant market participants an extension to the regulatory submission deadlines, beyond the one already given, in light of the effects which this pandemic has brought on the industry.

The Authority asserted that it will not be issuing a blanket extension to all participants, but will instead grant this allowance at its own discreation and on a case by case basis (and only for exceptional circumstances) with respect to any submissions/publications falling due by June 2020.

Requests for delays will only be accepted if it is adequately shown to the MFSA’s satisfaction that such delay is a direct consequence of COVID-19. Where appropriate, the Authority may investigate requests for delays according to guidance as issued by the European Supervisory Authorities or the European Central Bank.

Moratorium period extended by a further six months

By virtue of Legal Notice 278 of 2020, the Minister responsible for public health, together with the relevant authorities and entities has extended the moratorium period granted in April 2020 by a further six (6) months, in an effort to continue helping borrowers that have been negatively affected by the COVID-19 pandemic.

Such period shall start running on the lapse of the original six (6) month period that was originally granted back in April 2020. Interested borrowers have until 30 September 2020 to submit an application for extension of the moratorium. Only borrowers that were granted a moratorium between 1 March 2020 and 30 June 2020 may avail themselves from such extension.

Interested applicants should also be aware of the Central Bank Directive No.18 ‘On Moratoria in Exceptional Circumstances – Extension to the Application Deadline and Duration of the Moratorium’, as issued by the Central Bank of Malta. Such directive contains additional information and clarifications about the moratorium.

MFSA issues new shareholder policy for credit institutions and insurance companies

The MFSA has issued a new shareholder policy, in line with its commitment in addressing poor internal governance practices. The new policy as issued on 24 June 2020, sheds light on the MFSA’s assessment process of shareholder structures of credit institutions and insurance companies. With respect to the assessment of shareholding structures of banks and insurance entities, the Authority believes that having diversification elements in the shareholding framework of an entity would augment and enhance the overall governance structure, soundness and resilience of the same institution.

Therefore, prospective applicants are to be informed that the MFSA has no risk appetite for limited shareholding structures that may adversely impact the overall governance, financial soundness and resilience of a licence holder. The Authority recommends that the proposed shareholder structure is sufficiently diversified and balanced, in an effort to ensure that any potential shareholder dominance is limited.

CRR rules relaxed in effort to encourage banks to lend to companies and households

On 19 June 2020, the European Commission adopted a set of quick-fix measures aimed at amending Regulation No. 575/201 (“Capital Requirement Regulation”) to maximise the capacity of banks to lend money and provide households and businesses with any necessary support. While banks have been granted temporary relief from capital, liquidity and operational requirements allowing them to be of more help to businesses and households, it is crucial that the banking institutions continue to measure their risk effectively and accurately as to avoid jeopardising the resilience of the European banking sector.

Amongst others, the measures that the plenary has endorsed are the following:

a) A deferred application of leverage buffer ratio, which is being pushed forward by one year to January 2023;

b) The ability of pensioners or employees to get a loan under more favourable prudential conditions, provided that they are employed on a permanent contract.

Companies Act (Public companies – Annual general meetings regulation) 2020

By virtue of Legal Notice 288 of 2020, the Companies Act (Public Companies – Annual General Meetings Regulations), (the “Regulations”) have been published. In light of the difficulties brought about by the pandemic, the Regulations seek to address the timing dilemma being faced by companies with respect to their annual general meetings. The Regulations make reference to Article 128 of the Companies Act (Chapter 386 of the laws of Malta) which provision stipulates that the period between one annual general meeting and the next could not be more than fifteen (15) months. Regulation 4 of the Regulations seek to extend this statutory period by five (5) months.

Furthermore, the Regulations contain a set of rules which are to apply in the instances where general meetings are conveyed remotely. Amongst such rules, the Regulations dictate that the shareholders will be able to appoint the Chairman of the meeting as their proxy, indicating on the proxy form the manner in which he/she must vote on each resolution put to the meeting.

Furthermore, shareholders are to be given sufficient time to ask questions, and they can submit such questions in writing, up to forty-eight (48) hours prior to the meeting. Such questions are to be answered within forty-eight hours following the termination of the meeting.

The Regulations also provides that the laying before and approval by the company in the general meeting of the company’s accounts is to be extended by five (5) months.

Should a company wish to avail itself of the abovementioned extension, it must deliver to the Registrar the notice attached to such Regulation.

European Commission issues report on the effect of the interchange fees regulation

The European Commission has published its report on Regulation (EU) 2015/751 (the “Interchange Fees Regulation” or “IFR”), designed to assess its impact so far. The IFR was implemented with the aim of creating a single market for card payments as well as the prevention of competition restrictions. The Report concludes that the IFR has achieved its main aims as there has been a significant decrease in interchangeable fees for consumer cards, which has consequently resulted in reduced merchants’ charges for card payments. This has ultimately resulted in benefits to consumers either directly (in the form of lower consumer prices) or indirectly (in the form of improved services to consumers). Furthermore, as a result of the IFR, market integration has improved.

In its report, the European Commission also pointed out that further monitoring is needed to be in a better position to fully assess the impact of such regulation.

MFSA updates its Q&As on the European market infrastructure regulation 

The MFSA has issued an updated version of the ESMA’s Q&A Document on practical questions relating to data reporting issues under Regulation No. 648/2012 (the “European Market Infrastructure Regulation” or “EMIR”).

The aim of the Q&A document is to provide a harmonised approach as to the manner in which the EMIR is to be applied and well as to serve as a convergence tool used to promote common supervisory approaches across the Member States.

The updated Q&A is particularly targeted towards entities who enter into derivative contracts which fall within the scope of Article 2 of the EMIR. Question 11(b) now states that when counterparties are determining what constitutes as “working day” in the context of the reporting deadline for the EMIR, they should follow their local time and the relevant calendar of their Member State. This should apply even if a conflict arises between the two parties.

SFTR reporting regime off to a great start

On 13 July 2020, the ESMA issued a statement informing market participants that reporting by financial and non-financial counterparties under the Regulation No. 2015/2365 (the “Securities Financing Transactions Regulation” or “SFTR”) has as yet worked effortlessly.

So far no major hiccups have been identified within the system and all four trade repositories, namely, DTCC Derivatives Repository plc, UnaVista TRADEcho B.V., Krajowy Depozyt Papierów Wartościowych S.A. and REGIS-TR S.A., have managed to successfully start receiving and reporting STF data.

The ESMA will continue to monitor and supervise the situation, ready to address any issues that may crop up along the way.