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Act No. Ii Of 2011 Entitled The Banking (Amendment) Act (Act No.Ii Of 2011)

ACT No. II of 2011

AN ACT to amend the Banking Act, Cap. 371.

8th March, 2011
BE IT ENACTED by the President, by and with the advice and consent of the House of Representatives, in this present Parliament assembled, and by the authority of the same, as follows:-

1. (1) The short title of this Act is the Banking (Amendment) Act, 2011 and this Act shall be read and construed as one with the Banking Act, hereinafter referred to as "the principal Act".

Short title and commencement

Cap. 371.

(2) The provisions of this Act shall come into force on such date as the Minister responsible for finance may, by notice in the Gazette, establish and different dates may be so established for different provisions and different purposes thereof.

2. Article 2 of the principal Act shall be amended as follows: (a) in subarticle (1) thereof:

(i) for the definition " "bank" or "credit institution" ", there shall be substituted the following new definition:
" "bank" or "credit institution" means an undertaking, the business of which is to receive deposits or other repayable funds from the public and to grant credits for its own account;";
(ii) immediately after the definition "Capital

Amendment of article 2 of the principal Act.

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Adequacy Directive" there shall be inserted the following new definition:
" "Capital Requirements Directive" means Council Directive 2006/48/EC of 14 June 2006, relating to the taking up and pursuit of the business of credit institutions (recast), as may be amended or updated from time to time, and includes any implementing measures that have been issued or may be issued thereunder;";
(iii) immediately after the definition "connected persons" there shall be inserted the following new definition:
" "consolidating supervisor" means the competent authority or the overseas regulatory authority, as the case may be, responsible for the exercise of supervision on a consolidated basis of EU parent credit institutions and credit institutions controlled by EU parent financial holding companies;";
(iv) the definitions "Directive", "electronic money", "electronic money institution" and "Electronic Money Rule" shall be deleted;
(v) immediately after the definition "EEA State" there shall be inserted the following new definition:
" "EU parent credit institution" means a parent credit institution in a Member State which is not a subsidiary of another credit institution authorised in any Member State, or of a financial holding company set up in any Member State:
For the purpose of this definition, "parent credit institution in a Member State" means a credit institution which has a credit institution or a financial institution as a subsidiary or which holds a participation in such an institution, and which is not itself a subsidiary of another credit institution authorised in the same Member State, or of a financial holding company set up in the same Member State;";
(vi) immediately after the new definition "EU parent credit institution" there shall be inserted the following new definition:
" "EU parent financial holding company" means a parent financial holding company in a Member
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State which is not a subsidiary of a credit institution authorised in any Member State or of another financial holding company set up in any Member State:
For the purpose of this definition, "parent financial holding company in a Member State" means a financial holding company which is not itself a subsidiary of a credit institution authorised in the same Member State, or of a financial holding company set up in the same Member State;"; and
(vii) immediately after the definition "holding company" there shall be inserted the following new definitions:
" "home Member State" means the Member State in which a credit institution has been authorised in accordance with article 6 to 9 and 11 to 14 of the Capital Requirements Directive;
"host Member State" means the Member State in which a credit institution has a branch or in which it provides services;";
(b) in subarticle (2) thereof:
(i) in the first proviso, for the words "made thereunder:", there shall be substituted the words "made thereunder.”; and
(ii) the second proviso shall be deleted; (c) subarticle (3) thereof shall be deleted;
(d) subarticle (4) thereof shall be renumbered as subarticle (3);
(e) in subarticle (3) thereof, as renumbered, the words "to the exclusion of an electronic money institution," shall be deleted;
(f) subarticle (5) thereof shall be deleted;
(g) subarticles (6) and (7) thereof shall be renumbered as subarticles (4) and (5) respectively; and
(h) in subarticle (4) thereof, as renumbered, for the words "the Directive", there shall be substituted the words "the Capital Requirements Directive".

3. In paragraph (a) of subarticle (2) of article 3 of the principal Act, for the words "the requirements of Directive 2006/48/ EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit

Amendment of article 3 of the principal Act.

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Amendment of article 4 of the principal Act.

Addition of new article 4A to the principal Act.

institutions and the requirements of Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions.", there shall be substituted the words "the requirements of the Capital Requirements Directive and the Capital Adequacy Directive.".

4. Article 4 of the principal Act shall be amended as follows:

(a) in subarticle (1) thereof, for the words "to carry out the functions prescribed by this Act and any regulations, Banking Rules, or Electronic Money Rules made thereunder and to ensure that credit institutions carrying on business in Malta comply with this Act, and any regulations, directives, Banking Rules and Electronic Money Rules issued thereunder", there shall be substituted the words "to carry out the functions prescribed by this Act and any regulations or Banking Rules made thereunder and to ensure that credit institutions carrying on business in Malta comply with this Act, and any regulations, directives and Banking Rules issued thereunder";
(b) in subarticle (2) thereof, wherever they occur, the words "and Electronic Money Rules" shall be deleted;
(c) for subarticle (3) thereof, there shall be substituted the following:
"(3) Banking Rules shall be binding on licence holders and others as may be specified therein.";
(d) in subarticle (4) thereof, the words "and Electronic
Money Rules" shall be deleted; and
(e) in subarticle (5) thereof, the words "and Electronic
Money Rules" shall be deleted.

5. Immediately after article 4 of the principal Act, there shall be added the following new article:

"Supervisory practices.
4A. (1) The competent authority, in the exercise of its duties, shall take into account the convergence in respect of supervisory tools and supervisory practices in the application of this Act, and of the regulations and rules made thereunder.
(2) For the purpose of subarticle (1):
(a) the competent authority shall participate in the activities of the Committee of European Banking Supervisors;
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(b) the competent authority shall follow the guidelines, recommendations, standards and other measures agreed by the Committee of European Banking Supervisors and shall state the reasons if they do not do so; and
(c) national mandates conferred on the competent authority shall not inhibit the performance of its duties under this Act or as a member of the Committee of European Banking Supervisors.".

6. Article 5 of the principal Act shall be amended as follows:

(a) in subarticle (1) thereof, the words "or of issuing electronic money" shall be deleted;
(b) in subarticle (3) thereof, the words "or of issuing electronic money" shall be deleted;
(c) subarticles (5) and (6) thereof shall be deleted; and
(d) subarticle (7) thereof shall be renumbered as subarticle (5).

7. Article 6 of the principal Act shall be amended as follows:

(a) in subarticle (1) thereof, the words "or of issuing electronic money" shall be deleted; and
(b) in subarticle (2) thereof, for the words "as may be prescribed from time to time by Banking Rule and, or, Electronic Money Rule and", there shall be substituted the words "as may be prescribed from time to time by a Banking Rule and".

8. Article 7 of the principal Act shall be amended as follows:

(a) in paragraph (a) of subarticle (1) thereof, for the words "(a) its initial capital amounts to not less than five million euro (5,000,000.00) or in the case of an electronic money institution, of one million euro (1,000,000.00):", there shall be substituted the words "(a) its initial capital amounts to not less than five million euro (5,000,000.00):"; and
(b) in subarticle (8) thereof, the words "and Electronic
Money Rules" shall be deleted.

9. Article 7A of the principal Act shall be deleted.

10. Article 9 of the principal Act shall be amended as follows: (a) in paragraphs (a) and (c) of subarticle (2) thereof,

the words "or Electronic Money Rules" shall be deleted; and

Amendment of article 5 of the principal Act.

Amendment of article 6 of the principal Act.

Amendment of article 7 of the principal Act.

Deletion of article 7A of the principal Act.

Amendment of article 9 of the principal Act.

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Amendment of article 11 of the principal Act.

(b) in subarticle (3) thereof, the words "and Electronic
Money Rules" shall be deleted.

11. Article 11 of the principal Act shall be amended as follows:

Addition of

new article 11A

to the principal

Act.

(a) subarticle (3) thereof shall be renumbered as subarticle (4); and
(b) immediately after subarticle (2) thereof, there shall be inserted the following new subarticle:
"(3) A credit institution licensed in Malta shall be prohibited from opening a branch, subsidiary or representative office in a third country where the secrecy laws or other regulations of that country prohibit the information flows deemed necessary for adequate consolidated supervision.".

12. Immediately after article 11 of the principal Act, there shall be inserted the following new article:

"Opening of branches having their head office outside the European Union.
11A. (1) The competent authority may not apply provisions which result in more favourable treatment to a branch of a credit institution having its head office outside the European Community than that accorded to branches of credit institutions having their head office within the European Community.
(2) The competent authority shall notify the European Commission and the European Banking Committee of all authorisations for branches granted to credit institutions having their head office outside the European Community.".

Amendment of article 12 of the principal Act.

13. Article 12 of the principal Act shall be amended as follows:

(a) in subarticle (1) thereof, for the words "a credit institution, to the exclusion of electronic money institution, with a current licence", there shall be substituted the words "a credit institution with a current licence"; and
(b) in subarticle (3) thereof, for the words "Every credit institution, other than an electronic money institution, shall", there shall be substituted the words "Every credit institution shall".
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14. In sub-paragraph (i) of paragraph (b) of subarticle (6) of article 13A of the principal Act, for the words "the Directive;", there shall be substituted the words "the Capital Requirements Directive;".

15. Article 15 of the principal Act shall be amended as follows:

(a) in subarticle (1) thereof, for the words "A credit institution, to the exclusion of an electronic money institution shall not -", there shall be substituted the words "A credit institution shall not -"; and
(b) subarticle (3) thereof shall be deleted.

16. In subarticle (1) of article 17 of the principal Act, for the words "A credit institution, to the exclusion of an electronic money institution, shall -", there shall be substituted the words "A credit institution shall -".

17. In subarticle (1) of article 17A of the principal Act, for the words "Every credit institution, to the exclusion of an electronic money institution, shall", there shall be substituted the words "Every credit institution shall".

18. Article 17B of the principal Act shall be amended as follows:

(a) in subarticle (1) thereof, for the words "and adequate internal control mechanisms including sound administrative and accounting procedures.", there shall be substituted the words "and adequate internal control mechanisms including sound administrative and accounting procedures, and remuneration policies and practices that are consistent with and promote sound and effective risk management."; and
(b) in subarticle (2) thereof, the words "or Electronic
Money Rule" shall be deleted.

19. In article 17C of the principal Act, for the words "All credit institutions, to the exclusion of an electronic money institutions, shall" there shall be substituted the words "All credit institutions shall".

20. Subarticle (1) of article 17D of the principal Act shall be amended as follows:

(a) in subarticle (1) thereof, for the words "or Banking Rules and Electronic Money Rules made thereunder and the technical criteria set out in Annex XI of the Directive,", there shall be substituted the words "or Banking Rules made thereunder and the technical criteria set out in Annex XI of the Capital Requirements Directive,"; and
(b) in subarticle (2) thereof, the words "and Electronic
Money Rules" shall be deleted.

Amendment of article 13A of the principal Act.

Amendment of article 15 of the principal Act.

Amendment of article 17 of the principal Act.

Amendment of article 17A of the principal Act.

Amendment of article 17B of the principal Act.

Amendment of article 17C of the principal Act.

Amendment of article 17D of the principal Act.

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Amendment of article 19 of the principal Act.

Amendment of article 19A of the principal Act.

Amendment of article 20 of the principal Act.

Amendment of article 22 of the principal Act.

Amendment of article 23 of the principal Act.

Amendment of article 25 of the principal Act.

21. In paragraph (c) of subarticle (1) of article 19 of the principal Act, the words "and Electronic Money Rules" shall be deleted.

22. In subarticle (2) of article 19A of the principal Act, for the words "a Banking and, or Electronic Money Rule as the case may be,", there shall be substituted the words "a Banking Rule".

23. In paragraph (c) of subarticle (3) of article 20 of the principal Act, the words "and Electronic Money Rules" shall be deleted.

24. In subarticle (5) of article 22 of the principal Act, wherever they appear, the words "and Electronic Money Rules" shall be deleted.

25. In subarticle (1) of article 23 of the principal Act, the words "and Electronic Money Rules" shall be deleted.

26. Article 25 of the principal Act shall be amended as follows:

(a) in subarticle (3) thereof, for the words "as defined in Articles 47 and 48(1) of the Directive,", there shall be substituted the words “as defined in Articles 47 and 48(1) of the Capital Requirements Directive,"; and
(b) for subarticle (6) thereof, there shall be substituted the following:
"(6) The competent authority shall further, upon a request in writing, disclose to the Central Bank, central banks of the European system of the central banks, other overseas central banks, other bodies with a similar function in their capacity as monetary authorities when this information is relevant for the exercise of their respective statutory tasks, including the conduct of monetary policy and related liquidity provision, oversight of payments, clearing and settlement systems and the safeguarding of the stability of the financial system. The competent authority shall also, upon a request in writing and where appropriate, disclose to other authorities responsible for overseeing payment systems, any information in the possession of or accessible to the competent authority, which is required for the discharge of the duties of the Central Bank and the other authorities mentioned above, under the law:
Provided that in an emergency situation as referred to in article 25B(5), the competent authority shall communicate information to the central banks of the European system of central banks and the Central Bank when this information is relevant for the exercise of their
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statutory tasks, including the conduct of monetary policy and related liquidity provision, the oversight of payments, clearing and settlement systems, and safeguarding the stability of the financial system:
Provided further that where the information is subject to professional secrecy, the competent authority may authorise the disclosure of certain information to other government departments of other Member States’ central government administrations responsible for legislation on the supervision of credit institutions solely where necessary for reasons of prudential control.".

27. Article 25A of the principal Act shall be amended as follows:

(a) in subarticle (1) thereof, for the words "functions under the Directive.", there shall be substituted the words "functions under the Capital Requirements Directive.";
(b) in paragraph (v) of subarticle (2) thereof, for the words "in terms of Article 136(1) of the Directive", there shall be substituted the words "in terms of article 16A";
(c) in paragraph (b) of subarticle (4) thereof, for the words "in terms of Article 136(1) of the Directive", there shall be substituted the words "in terms of article 16A";
(d) in subarticle (6) thereof, for the words "in accordance with the Directive.", there shall be substituted the words "in accordance with the Capital Requirements Directive.";
(e) subarticle (7) thereof shall be deleted;
(f) subarticle (8) thereof shall be renumbered as subarticle (7);
(g) in subarticle (7) thereof, as renumbered, for the words "pursuant to Articles 125 and 126 of the Directive,", there shall be substituted the words "pursuant to Articles 125 and 126 of the Capital Requirements Directive,";
(h) subarticle (9) thereof shall be deleted;
(i) subarticle (10) thereof shall be renumbered as subarticle (8); and
(j) immediately after subarticle (8) thereof, as renumbered, there shall be inserted the following new subarticles:

Amendment of article 25A of the principal Act.

"(9) Where the competent authority is the home supervisor of a parent credit institution it shall communicate to the overseas regulatory authorities of the
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host Member State, where a significant branch is established, the information referred to in subarticle (2)(iv) and (v) and carry out the tasks referred to in article
25B(1)(c) in cooperation with the overseas regulatory
authorities of the host Member State.
(10) (a) The competent authority, in its role as consolidating supervisor, shall establish colleges of supervisors, as prescribed in a Banking Rule, to facilitate the exercise of the tasks referred to in Articles 129 and
130(1) of the Capital Requirements Directive and subject to the confidentiality requirements of this Act, and compatibility with European Community law, and shall ensure appropriate coordination and cooperation with relevant third country overseas regulatory authorities where appropriate.
(b) The competent authority, in its role as consolidating supervisor, shall ensure that there is close co-operation between all the overseas regulatory authorities participating in the colleges of supervisors. The confidentiality requirements prescribed in this Act shall not prevent the exchange of confidential information within colleges of supervisors. The establishment and functioning of colleges of supervisors shall not affect the rights and responsibilities of the competent authority under this Act.
(11) Where the competent authority is not a consolidating supervisor and where the competent authority is the supervisor of a credit institution with significant branches in other Member States, it shall establish and chair a college of supervisors to facilitate the cooperation in terms of this article and article 25. The establishment and functioning of the college shall be based on written arrangements determined after consultation with the overseas regulatory authorities concerned. The competent authority shall decide which overseas regulatory authorities participate in a meeting or in an activity of the college.
(12) The competent authority shall, in the exercise of its general duties, duly consider the potential impact of its decisions on the stability of the financial system in all other Member States concerned and, in particular, in emergency situations, based on the information available at the relevant time.".
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28. Article 25B of the principal Act shall be renumbered as article 25C thereof.

29. Immediately after article 25A of the principal Act, there shall be inserted the following new article:

Renumbering of article 25B of the principal Act.

Addition of new article 25B of the principal Act.

"Competent

authority as consolidating supervisor.

25B. (1) In addition to the obligations
imposed by the provisions of this Act, where the competent authority is responsible for the exercise of supervision on a consolidated basis of EU parent credit institutions and credit institutions controlled by EU parent financial holding companies, it shall carry out the following functions:
(a) co-ordination of the gathering and dissemination of relevant or essential information in going concern situations and emergency situations;
(b) planning and co-ordination of supervisory activities in going concern situations, including the activities referred to in articles 16A, 17C and 17D and in a Banking Rule, in cooperation with the overseas regulatory authorities involved;
(c) planning and co-ordination of supervisory activities in co-operation with the overseas regulatory authorities involved, and if necessary with the Central Bank and with other central banks in other Member States, in preparation for and during emergency situations, including adverse developments in credit institutions or in
financial markets using, where possible, existing defined channels of communication for facilitating crisis management.
(2) The planning and coordination of supervisory activities referred to in subarticle (1)(c) includes exceptional measures referred to in article 25A(5), the preparation of joint assessments, the implementation of contingency plans and communication to the public.
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(3) Where the competent authority is the consolidating supervisor, the overseas regulatory authority of the host Member State may make a request to the competent authority, for a branch of the credit institution to be considered as significant. The competent authority shall issue a Banking Rule determining the reasons for considering the branch as significant.
(4) The competent authority in its role as consolidating supervisor shall, subject to article 25, alert as soon as it is practicable the authority referred to in subarticle (7) and shall communicate all information that is essential for the pursuance of their tasks, where an emergency situation, including adverse developments in financial markets, arises, which potentially jeopardises the market liquidity and the stability of the financial system in any of the Member States where entities of a group have been authorised or where significant branches are established.
(5) If the competent authority becomes aware of an emergency situation, it shall alert as soon as it is practicable the overseas regulatory authorities referred to in Articles
125 and 126 of the Capital Requirements
Directive.
(6) Where possible, the competent authority and the central banks of the European system of central banks shall use existing defined channels of communication.
(7) If the competent authority as home supervisor of a parent credit institution becomes aware of an emergency situation within a credit institution as referred to in subarticle (4), it shall alert as soon as practicable the central banks of the European system of central banks when this information is relevant for the exercise of their statutory tasks including the conduct of monetary policy and related liquidity provision, the oversight of payments, clearing and settlement systems, and safeguarding the stability of the
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financial system and, as the case may be, those other government departments responsible for legislation on the supervision of credit institutions. Such disclosures may only be made where necessary for reasons of prudential control.".

30. In subarticle (1) of article 25C, as renumbered, of the principal Act, for the words "In specific cases the competent authority", there shall be substituted the words "In specific cases referred to in the provisions of this Act and Banking Rules implementing the Capital Requirements Directive, the competent authority".

31. In subarticle (1) of article 26 of the principal Act, the words "and Electronic Money Rules" shall be deleted.

32. In article 28 of the principal Act, the words "and Electronic

Money Rules" shall be deleted.

33. Article 34 of the principal Act shall be amended as follows:

(a) in subarticle (2) thereof, the words "and Electronic
Money Rules", wherever they appear, shall be deleted;
(b) subarticle (3) thereof shall be substituted by the following:

Amendment of article 25C, as renumbered, of the principal Act.

Amendment of article 26 of the principal Act.

Amendment of article 28 of the principal Act.

Amendment of article 34 of the principal Act.

"(3) Where an officer of a credit institution has reason to believe that a transaction or a proposed transaction could involve money laundering, he shall act in compliance with the reporting and other obligations set out in the regulations made under article 12 of the Prevention of Money Laundering Act and any procedures and guidance issued thereunder, and such disclosure shall not constitute a breach of confidentiality."; and
(c) in subarticle (5) thereof, for the words "which either carry out the issuing of electronic money or any of the activities referred to in the Schedule to the Financial Institutions Act,", there shall be substituted the words "which carry out any of the activities referred to in Schedule I to the Financial Institutions Act,".

34. Subarticle (3) of Article 35 of the principal Act shall be amended as follows:

(a) in paragraph (b) thereof, for the words "provisions of any Banking Rule, Electronic Money Rule, regulation", there shall be substituted the words "provisions of any Banking Rule,

Amendment of article 35 of the principal Act.

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Amendment of the Schedule to the principal Act.

regulation";
(b) in paragraph (e) thereof, the words "and Electronic
Money Rules" shall be deleted; and
(c) in paragraph (f) thereof, the words "and Electronic
Money Rules" shall be deleted.

35. The Schedule to the principal Act shall be amended as follows:

(a) for the words "12. Safe custody services.", there shall be substituted the words "12. Safe custody services;"; and
(b) immediately after activity 12 there shall be inserted a new activity as follows:
"13. Issuing electronic money.".
Passed by the House of Representatives at Sitting No. 320 of the
1st March, 2011.
MICHAEL FRENDO

Speaker

PAULINE ABELA

Clerk to the House of Representatives