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Maltese Laws |
B 4951
BANKING ACT (CAP. 371)Depositor Compensation Scheme Regulations, 2003IN exercise of the powers conferred by article 3 and article
28A of the Banking Act, the Minister of Finance and Economic Affairs, acting on the advice of the Malta Financial Services Authority,
as the competent authority appointed for the purposes of that Act, has made the following regulations:-
Compensation Scheme Regulations, 2003.
(2) These regulations shall come into force on the 21st
November, 2003.
“branch” shall have the meaning assigned to the word in article
2 of the Act and, for the purposes of these regulations, includes a place of business which forms a legally dependent part of a credit
institution and from which some or all of the activities for which the credit institution has been authorised are conducted. All
the places of business set up in any one country by a credit institution whose head office is in Malta or in another country shall
be regarded as a single branch;
“business of banking” shall have the meaning assigned to the words in article 2 of the Act;
“Central Bank” means the Central Bank of Malta as defined by the Central Bank of Malta Act;
“competent authority” means the competent authority under the Act;
“credit institution” shall have the meaning assigned to the words in article 2 of the Act;
“deposit” shall have the meaning assigned to the word in article 2 of the Act;
Cap. 371.
Citation and date of commencement.
Interpretation. Cap. 371.
Cap. 204
B 4952
Cap. 330.
Establishment of the Depositor Compensation Scheme.
“depositor” means any individual who otherwise than in the course of or for the purposes of a business, trade or profession entrusts
a deposit to a credit institution, to the exclusion of the persons and entities listed in the First Schedule to these regulations;
“eligible deposit” shall have the meaning assigned to it by regulation 18 of these regulations;
“Financial Services Tribunal” means the tribunal established in terms of the Malta Financial Services Authority Act;
“Management Committee” means the Compensation Schemes Management Committee established under regulation 3 and 5 of the Investor
Compensation Scheme Regulations 2003;
“participant” means a credit institution participating in the
Scheme in terms of regulation 11 of these regulations;
“the Scheme” means the Depositor Compensation Scheme established under regulation 3 of these regulations;
and the words and expressions which are also used in the Act shall have the same meaning as in the Act.
Scheme.
(2) The Scheme shall be a body corporate having a distinct legal personality and shall be capable, subject to the provisions of
the Act and of these regulations, of entering into contracts of borrowing or otherwise incurring indebtedness for the purposes of
its functions, of acquiring, holding and disposing of any kind of property for the purposes of its functions, of suing or being sued
and of doing all such things and entering into all such transactions as are incidental or conducive to the exercise or performance
of its functions.
(3) The Scheme shall be managed and administered by and be under the general control of the Management Committee.
(4) The legal and judicial representation of the Scheme shall vest in the chairperson of the Management Committee:
Provided that, and without prejudice to the foregoing, the Management Committee may vest any one or more of its members or of the
officers or agents of the Scheme with legal or judicial representation.
(a) to maintain a fund or funds out of which payments shall be made to depositors and to meet such other payments or expenses as
may be paid out of the fund or funds in accordance with these regulations;
(b) to establish and maintain, after consultations with the competent authority, arrangements for the making of payments to depositors
in accordance with these regulations;
(c) to process claims for compensation by depositors as expeditiously as possible and to ensure that compensation is paid out without
undue delay; and
(d) to advise the competent authority on matters relating to compensation of depositors.
(2) The objective of the Scheme is to provide a means of protection for private depositors within the framework of these regulations.
All the members of the Management Committee shall work in the best interest of the Scheme and shall pursue and promote its objective.
(2) The Management Committee may place contributions made by participants in terms of regulation 12 of these regulations and any
other funds managed and administered by it on deposit or may invest such contributions, having regard to the need for prudence.
(3) The Management Committee may take out insurance policies, borrow or otherwise incur indebtedness on behalf of the Scheme for
the purposes of the Scheme’s functions, in any way and under any terms it may consider appropriate, provided that borrowings do
not exceed 30 per cent of the net asset value of the Scheme.
B 4953
Functions of the
Scheme.
Composition of the Management Committee.
L.N. 368 of 2003
.
Powers and duties of the Management Committee.
B 4954
Investment management and administrative support agreements.
Publication of Financial Statements.
Meetings of the
Committee.
L.N. 368 of 2003
Source and Application of funds.
(4) The Management Committee shall cause proper books of account to be kept so that the financial position of the Scheme can be
ascertained with reasonable accuracy at any time.
(5) In exercising its powers and duties, the Management Committee shall be bound to safeguard and take into account the general
interests of depositors entitled to claim under these regulations.
(2) The Management Committee shall submit to the competent authority an annual report on the discharge of its functions and on
the operation of the Scheme within three months from the financial year end of the Scheme. Such annual report shall include, inter
alia -
(a) a statement showing the payments in and payments out of the Scheme during its immediate previous financial year; and
(b) annual audited financial statements prepared in accordance with International Accounting Standards.
(3) The annual report shall be made available on the website of the competent authority.
(4) The books of accounts shall be kept at such place as the
Management Committee thinks fit.
(2) The sources of funding shall include:
(a) contributions levied from participants of the Scheme by the Management Committee;
(b) money paid as administrative fees by all participants, as may be prescribed;
(c) money received as income from the investment of the assets of the fund;
(d) money borrowed by the Management Committee for the purposes of the Scheme;
(e) money received by the Management Committee on any insurance policy it takes out; and
(f) any other money required to be paid in to the fund or funds, received or recovered by the Management Committee for the purposes
of the Scheme.
(3) There shall be paid out of the fund or funds:
(a) money determined by the Management Committee as compensation for depositors;
(b) money required for the repayment of (or interest on or charges in connection with) any money borrowed or for the payment of
premia on any insurance policies taken out, for the purposes of the Scheme;
(c) the costs incurred in administering and managing the
Scheme; and
(d) any other money paid out by the Management
Committee for the purposes of the Scheme.
(4) The Management Committee shall hold, manage and apply the fund or funds in accordance with these regulations.
(2) In the case of a participant whose head office is situated in a country outside Malta, as well as branches of a credit institution
having their head office in Malta but operating outside Malta, and where
B 4955
Participants.
B 4956
Contributions to the
Scheme.
Determination.
there is supplementary cover by a corresponding scheme in that other country, the Management Committee shall enter into a bilateral
agreement with the authority responsible for the management and administration of the scheme in that other country stipulating, inter
alia, the rules and procedures to be followed for the payment of compensation to depositors.
(3) Participation in the Scheme does not exclude the possibility that particular credit institutions may have to participate also
in another compensation or similar schemes set up under a different law and governed by another competent authority or other body,
in Malta or abroad.
(4) When a credit institution becomes a participant in the Scheme after the coming into force of these regulations, the Management
Committee shall determine all the relative obligations and conditions of the new participant as set out in the Third Schedule to
these regulations.
(2) Participants may be requested to pay to the Scheme such reasonable administrative fees as may from time to time be prescribed by the Management Committee.
13. (1) Where:(a) it appears to the competent authority that a participant is unable, for the time being, for reasons which are directly related
to its financial circumstances to meet its obligations arising from claims by its depositors and to have no early or foreseeable
prospect of being able to do so, or has otherwise suspended payment; or
(b) in respect of a credit institution which has its head office in Malta an order has been made by the Courts of Malta for its winding-up
or liquidation under the laws of Malta;
whichever is the earlier, the competent authority shall make a determination to that effect within 21 days of the occurrence of such
circumstances.
(2) The competent authority may, by way of banking directives, establish those circumstances or criteria which it may consider
in arriving at a decision as to whether it will make a determination in terms of sub-regulation (1) of this regulation.
(3) As soon as practicable after a determination is made, the competent authority shall inform the Management Committee in writing
of such determination. The Management Committee may take additional measures it deems necessary or appropriate within its powers
under these regulations.
(4) The competent authority shall, as soon as possible, inform any other compensation scheme relating to financial services activities,
as may be established under any other law and regulated by other competent authority or other body, which it believes may be effected
by such determination.
(5) In making a determination in accordance with sub- regulation (1) of this regulation, the competent authority shall have regard
to any report of officers or agents authorised by it on the state of affairs of the credit institution, and any other information
in its possession.
(2) The right of a depositor for compensation shall not be forfeited if the depositor is able to prove that he was unable to assert
his right to compensation within any prescribed time-limits as may be provided by the Management Committee.
(3) The Management Committee may, following an application for compensation being made to it by a depositor, accept or refuse to
provide compensation in accordance with these regulations.
(4) The Management Committee shall proceed to pay compensation for verified claims within three months of the date of the determination
given in terms of sub-regulation (1) of regulation 13:
Provided that the Management Committee may, in exceptional circumstances, apply to the competent authority for an extension of this
period by a further period of up to three months, and up to two further periods of up to three months each thereafter.
B 4957
Application for
Compensation.
B 4958
Verification of claims.
Cap. 373
When funds appear to be inadequate.
15. (1) The Management Committee shall make its own administrative arrangements for verifying claims. These arrangements shall include:(a) providing an application form for claimants both in
English and in Maltese;
(b) providing for the exercise of the Management Committee’s right of subrogation under regulation 22 of these regulations; and
(c) requiring claimants to give:
(i) their identity and address;
(ii) the capacity in which they claim;
(iii) evidence of the eligible deposits as defined in regulation 18 of these regulations; and
(iv) any other information as may be required by the
Management Committee.
(2) The Management Committee may refuse to make a payment for compensation until the claimant informs the Management Committee
as to the capacity in which he is the beneficial owner of the deposit and provides satisfactory documentary evidence and information
to allow the Management Committee to determine the amount of compensation payable.
(3) The Management Committee may decide to delay payment to a claimant until determination of any criminal charge brought against
the claimant, depositor, or any person entitled to or interested in respect of an eligible deposit under the provisions of the Prevention
of Money Laundering Act or a corresponding law of a country outside Malta.
(4) Where in the opinion of the Management Committee circumstances so warrant, the Management Committee may effect part payments
to claimants eligible for compensation under these regulations.
Provided that where the funds of the Scheme are insufficient to satisfy the claims in full, payments to claimants shall be made pro rata.
18. (1) For the purposes of these regulations, “eligible deposits”, in relation to a depositor with a credit institution, means the total aggregate liability of the credit institution to such depositor, including, as the case may be, any interest or premium accrued thereon in an account or accounts denominated in Maltese lira held in Malta or in a branch of a licensed credit institution other than in Malta.(2) For the avoidance of doubt, “eligible deposits” shall not include the following:
(a) an “interbank deposit”, that is a deposit with a credit institution by other credit institutions on its own behalf and
on its own account;
(b) part of the participant’s own funds within the meaning of any banking directive issued by the competent authority to regulate
own funds; and
(c) a deposit made by a person or persons listed in the First
Schedule to these regulations.
(a) any payments made to the depositor from a depositor compensation scheme elsewhere in respect of such liability;
(b) any payments made to the depositor under a policy of professional indemnity insurance held by the credit institution in respect
of such liability;
(c) the amount of any liability of the depositor to that credit institution in respect of which a right of set-off against the
said deposit existed immediately before the notice of determination
B 4959
Limit of compensation.
Eligible Deposits.
Compensation paid to be deducted from compensation payable.
B 4960
Claimants.
issued in terms of regulation 13 of these regulations or in respect of which such a right would have existed had the said deposit
been repayable on demand and such liability fallen due immediately before the issue of such a notice of determination; and
(d) any payments made under any other law, whether in
Malta or abroad, in respect of such liability. (2) Without prejudice to the aforesaid:
(a) any right of set-off shall only be possible where claims are properly documented, can be settled easily, are not subject to
dispute and were established well before the notice of determination issued in terms of regulation 13 of these regulations.
(b) any compensation in respect of an eligible deposit shall only be payable as and when the deposit becomes due.
(2) The following individuals are excluded from claiming under the Scheme:
(a) directors and managers of the relevant credit institution and members of the credit institution with personal liability, persons
holding five percent or more of the capital of such credit institution, the auditors of the credit institution and persons of the
same description with respect to a company forming part of the same group of companies as the credit institution;
(b) close relatives, that is ascendants, descendants or the spouse of the persons referred to in paragraph (a) of this sub- regulation;
(c) depositors who, in the view of the Management Committee, have any responsibility for or have taken advantage of certain facts
relating to a credit institution which gave rise to a credit institution’s financial difficulties or contributed to the deterioration
of its financial situation;
(d) depositors in respect of transactions in connection with which a criminal conviction has been obtained for money
laundering in terms of the Prevention of Money Laundering Act;
and
(e) nominees or other third parties acting on behalf or in the interest of the persons referred to in paragraphs (a) to (d) of
this regulation.
(3) The categories listed in the First Schedule to these regulations are also excluded from claiming under the Scheme.
(4) The Scheme shall provide for the payment of compensation in respect of claims arising out of a participant’s inability to
repay money owed to or belonging to depositors and held on their behalf in connection with banking business.
(5) A depositor may not claim against more than one scheme in respect of a single claim. Where a claim has been made under two or
more compensation schemes, the Management Committee shall conclusively determine under which scheme the claimant is eligible for
compensation.
(6) Claims shall be made in such form, and shall be accompanied by such documentation or information, as the Management Committee
may determine and make public from time to time.
(2) Prior to payment, depositors shall confirm in writing to the Management Committee that:
(a) they have not received any payment from any other scheme or from the credit institution concerned in respect of the same loss;
(b) they will provide any assistance the Management Committee may require to enable the Management Committee to exercise its rights
and remedies against the credit institution; and
(c) their rights and remedies against the credit institution in respect of the claims paid shall be subrogated in favour of the
Management Committee.
B 4961
Cap. 373
Claims.
Subrogation.
B 4962
Joint ownership.
Consumer
Information.
Advertisements.
Power of the Management Committee to obtain information.
23. (1) Where two or more persons are jointly entitled to an eligible deposit, each of these persons shall be treated as having a separate deposit of an amount produced by dividing the amount of the deposit to which such persons are jointly entitled by the number of persons so entitled, unless there exists specific evidence or special contractual provisions determining the particular entitlements of such persons in which case such evidence shall be taken into account in determining their entitlements.(2) Where a person is acting as trustee or nominee for one or more persons under a deed of trust or other similar agreement, the eligible deposit comprising the claim shall be deemed to belong to the beneficial owners equally, unless there exists specific evidence or special contractual provisions determining the beneficial interests of such persons in which case such evidence shall be taken into account in determining their entitlements, and provided in any event that ownership is proved to the entire satisfaction of the Management Committee.
24. The Management Committee shall ensure that the general public is adequately informed about the operation of the Scheme arrangements.25. (1) Credit institutions shall make available to current and prospective depositors adequate and clear information concerning the applicability of the Scheme together with such other particulars as may from time to time be specified by the competent authority in a manner and form specified by the competent authority:Provided that a credit institution shall not advertise or cause to be advertised the fact that deposits placed with a credit institution
are protected by or through the Scheme except with the prior written consent of the competent authority.
(2) The competent authority may from time to time, specify the information that credit institutions are to provide to depositors
regarding the Scheme and its operations, as well as the manner and form in which such information should be provided.
(2) Without prejudice to any other provision of these regulations, a participant or any director or official thereof, who fails
to comply with the Management Committee’s request for information within the period of time established by the Management Committee
in terms of sub-regulation (1) of this regulation, or who knowingly or recklessly furnishes information, or makes a statement which
is inaccurate, false or misleading in any material respect, shall be liable to an administrative penalty not exceeding Lm1,000 as
may be imposed by the competent authority by means of a notice in writing and without recourse to a court hearing.
(3) Where an administrative penalty has been imposed by the competent authority in terms of sub-regulation (2) of this regulation,
an appeal shall lie to the Financial Services Tribunal in accordance with articles 10 and 35A of the Act.
(2) The duty of confidentiality shall not be contravened in the case of:
(a) exchange of information between the Management Committee and competent authorities in other countries, or the competent authorities
for the management and administration of corresponding schemes in other countries, provided that the relevant information is necessary
for the discharge of their duties under these regulations; and
(b) any use or disclosure as may be required to enable the Management Committee and its officers or agents to perform their duties
and carry out their functions under these regulations.
B 4963
Confidentiality. Cap. 377
Failure to comply with obligations.
B 4964
Procedures to investigate complaints.
Power to issue directives.
Exemption from liability for damages.
Financial year end of the Scheme.
Audit.
Cooperation with other authorities.
(2) If these measures fail to secure compliance on the part of the credit institution, the Management Committee shall report the
matter to the competent authority for any further measures to be taken at law, including the possible restriction or withdrawal of
the credit institution’s licence.
(3) After the restriction or withdrawal of a licence, cover shall continue to be provided in respect of eligible deposits effected
up to the date of restriction or withdrawal.
(2) Such banking directives may contain such incidental, supplementary and consequential provisions as appear to the competent authority to be expedient for the purpose of these regulations.
31. The Management Committee and officers or agents of the Scheme shall not be liable in damages for anything done or omitted in the discharge of functions under these regulations unless it is shown that the act or omission was in bad faith.32. The financial year end of the Scheme shall be an accounting period of twelve months ending on the thirty-first day of December of each year.33. The accounts of the Scheme shall be audited in accordance with International Standards on Auditing by auditors appointed by the Management Committee from among persons who are qualified to be appointed as auditors of a company under the law for the time being in force in Malta.34. The competent authority and the Management Committee shall consult the relevant competent authorities and the persons responsible for compensation schemes in other countries outside Malta and seek to reach agreement with those authorities and persons about:-(a) the procedures to be followed if a participant defaults; (b) the amounts of compensation payable, after deductions
if any, under each scheme; and
(c) any other aspect which is deemed appropriate for the proper management and administration of the schemes.
(2) All appointments, decisions, contributions, claims, payments or other acts made or taken under the Deposit Guarantee Scheme Regulations, 2003 before the coming into force of these regulations shall continue in force and shall be deemed to have been made or taken under these regulations, and any reference in any law to the Management Committee shall be deemed to be a reference to the Management Committee established under regulation 3 of the Investor Compensation Scheme Regulations, 2003.
36. The Deposit Guarantee Scheme Regulations, 2003 published on 3rd January, 2003, are hereby repealed.B 4965
Transitory provisions
L.N. 368 of 2003
L.N. 7 of 2003
Repeals.
L.N. 7 of 2003
B 4966
First ScheduleExclusions(Regulations 18, 20)For the avoidance of doubt, the following are excluded from claiming under the
Scheme and shall not be deemed to be depositors for the purpose of these regulations: (1) Sole traders, companies and other commercial
partnerships;
(2) Professional and institutional depositors, including:
(a) Persons holding an investment services licence under article 6 of the
Investment Services Act;
(b) Credit institutions carrying on the business of banking under the Act;
Act;
(c) Financial Institutions as defined in article 2 of the Financial Institutions
(d) Companies authorised to carry on the business of insurance under the
Insurance Business Act;
(e) Collective investment schemes as defined in article 2 of the Investment
Services Act;
(f) Retirement funds as defined in the Special Funds (Regulation) Act; and
(g) Other categories of local and/or foreign professional and institutional investors, whether resident or non-resident in Malta,
as may be determined by the competent authority from time to time;
(3) National and international institutions, governments and administrative authorities;
(4) Local and municipal councils or authorities; and
(5) Debt securities issued by the same institution and liabilities arising out of own acceptances and promissory notes.
B 4967
All credit institutions participating in the Scheme shall make contributions to the
Scheme as follows:
(a) Initial Contribution;
(b) Supplementary Contributions; (c) Special Contributions.
The minimum amount held by the Scheme and which should be available for compensation shall be Lm1 million, established over a period
of time not exceeding five years from the coming into force of the Deposit Guarantee Scheme Regulations,
2003.
(a) An Initial Contribution shall be paid by participants within 30 calendar days from the coming into force of these regulations.
(b) The minimum amount of the Initial Contribution shall be of Lm10,000 per participant.
(c) The Management Committee may, in consultation with the competent authority, postpone part or all of the payment of the Initial
Contribution and determine a time schedule for the payment thereof.
(d) This paragraph shall not apply to participants who have paid the Initial
Contribution prior to the coming into force of these regulations.
(a) The level of Supplementary Contributions for each participant shall be calculated by applying the percentage determined by
the Management Committee on the eligible deposits held by the participant as at its most recent financial year end.
(b) The minimum amount of Lm1 million shall be contributed proportionately in accordance with the participants’ share of total
eligible deposits over a period not exceeding five years, commencing from the date on which the Deposit Guarantee Scheme Regulations,
2003 came into force.
(c) The formula applicable for participants for the yearly contribution for the first five years to attain the minimum amount of
the Scheme shall be as shown
B 4968
hereunder. For the sake of clarification, Year 1 shall be deemed to be the year in which the Deposit Guarantee Scheme Regulations,
2003 came into force.
Year Formula
1 0.1% of Eligible Deposits (as at the most recent financial year end)
————————————————————————————
5
2 (0.1% of Eligible Deposits as at financial year end of Year 1)
less (Year 1 contribution)
————————————————————————————
4
3 (0.1% of Eligible Deposits as at financial year end of Year 2)
less (Year 1 + Year 2 contributions)
————————————————————————————
3
4 (0.1% of Eligible Deposits as at financial year end of Year 3)
less (Year 1 + Year 2 + Year 3 contributions)
————————————————————————————
2
(d) As from Year 5 onwards, participants shall need to ensure that their aggregate proportional contribution amounts to 0.1% of
their respective eligible deposits as at the previous financial year end.
(e) If the amount contributed in any subsequent year (i.e. from Year 5 onwards) is less than 0.1% minimum, the participant shall
be required to make an additional Supplementary Contribution.
(f) A participant shall not be eligible for a refund if the 0.1% of eligible deposits for a particular year represent an amount
which is less than the aggregate amount contributed.
(g) Payment of Supplementary Contributions shall be made within 21 calendar days from service to each participant of a request
in writing by the Management Committee.
Provided that the Management Committee may authorize the contribution to be paid in two equal instalments; if such authorization is
granted, the first instalment shall be paid on the day indicated in this subparagraph and the second instalment shall be paid by
not later than six months thereafter.
B 4969
(a) The Management Committee may, at any time during the financial year of the Scheme, levy Special Contributions from participants
in order to meet commitments of the Scheme.
(b) The Management Committee may, at the end of its financial year during which Special Contributions have been levied, refund part
or all of such Special Contributions not utilised, or not expected to be utilised for the following 12 months, to participants pro
rata and according to the amounts of Special Contributions made. No interest shall be payable on Special Contributions refunded to
participants.
(c) Payment of Special Contributions shall be within 30 calendar days from service to each participant of a written notice specifying
the amount due.
(a) When the amount held by the Scheme (and which is available for compensation) is about to reach, or has reached, Lm3 million,
the Management Committee shall, with the approval of the competent authority, consider whether current and future circumstances merit
a revision of the Supplementary Contributions made by participants and whether participants are to cease further cash payments of
Supplementary Contributions to the Scheme.
(b) Participants shall not be required to make any Supplementary or Special Contributions, if the total of its contributions to
date (Initial, Supplementary and Special), after deducting any refund of Special Contributions, exceeds 0.3% of the total eligible
deposit liabilities.
(c) After Year 5, the difference between the “capped” level of 0.3% and the amount paid in Supplementary Contributions (as
at the date from which participants have ceased payment of Supplementary Contributions on a decision of the Management Committee),
shall be considered by the Management Committee to be funds “on call” and shall either be held as a capital reserve by the participant
or as a contingent liability.
(d) In this respect and upon further consultation with participants, the competent authority shall issue banking directives to
participants determining how such funds “on call” should be treated.
(e) In any case, participants shall ensure that such funds are made available to the Scheme within 30 calendar days from the time
when a call is made on such funds.
B 4970
A credit institution which has ceased to be a participant of the Scheme shall not be entitled to a refund of any contributions made from the date it became a participant of the Scheme except where otherwise stated in this schedule.
Third ScheduleNew participants(regulation 11(4))(1) When a credit institution becomes a participant in the Scheme after the coming into force of these regulations, the Management
Committee shall levy as soon as practicable an Initial Contribution of an amount to be determined in terms of this Schedule but which
shall be no less than the amount established in the Second Schedule to these regulations..
(2) Where a credit institution which becomes a participant has a deposit base, the amount of the Initial Contribution shall be
calculated on the total Eligible Deposit liabilities at the time it becomes a participant with such a percentage as the Management
Committee considers appropriate in order for the participant to reach the levels of compensation with the other participants, taking
into account any Initial and Supplementary Contributions up to the date when the credit institution becomes a participant.
(3) The Management Committee shall determine a time schedule for the payment of the Initial Contribution taking into consideration
the particular circumstances of the new participant.
B 4971
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