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MFSA Consultation on PSD2 Implementation

The Malta Financial Services Authority has published a consultation document on proposed amendments to the Financial Institutions Act (CAP 376) and the Banking Act (CAP 371) in preparation for implementation of the provisions of the Second Payment Services Directive (Directive 2015/2366/EU of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC).

These amendments complement the recently revised Directive No. 1 of the Central Bank of Malta on the Provision and Use of Payment Services.

Specific provisions are being proposed in relation to the inclusion of Payment Initiation Services and Account Information Services within the scope of PSD2. Apart from the requirement of having a licence, these institutions will also need to hold a professional indemnity insurance or some other comparable guarantee against their liabilities.

The Directive also introduces additional requirements that will need to be complied with when submitting an application for a payment services licence. These new measures do not only apply to new applicants but also to financial institutions licensed to provide payment services but which require assessment to verify whether they comply with the new requirements laid down in PSD2, and if not, which measures need to be taken in order to ensure their compliance. If the financial institution in question remains non-compliant with the new requirements, the MFSA could even consider withdrawing its licence.

The amendments will also help clarify that persons that obtained an authorisation or registration under PSD2 from another Member State, do not need to be in possession of a licence or a registration granted under the Financial Institutions Act in order to provide their services in or from Malta, but may do so through the right of establishment and/or the freedom to provide services.

Article 32 of PSD2 allows Member States to exempt or to allow their competent authorities to exempt payment institutions from the application of all or part of the licensing procedure and conditions, subject to certain conditions being met. The MFSA has decided not to transpose this Article into Maltese law and therefore this exemption will not apply in Malta. In line with this decision, the Financial Institutions Act shall also be amended to remove the similar waiver currently applicable for small electronic money institutions (EMIs).

The MFSA is also suggesting the insertion of a requirement on licensed and registered financial institutions to provide their customers or potential customers with a statement of the fact that they are licensed or registered by the MFSA, and to also provide their customers or potential customers with the address of the competent authority. This is also in line with the MFSA’s approach in relation to the provision of investment services.

The MFSA is further proposing to remove the concept of recognition in relation to outsourcing of operational functions; this will mean that a financial institution will no longer be required to seek the MFSA’s approval prior to outsourcing operational functions of its services. Financial institutions will however need to notify the MFSA in this regard. A similar amendment is being proposed to the Banking Act in relation to credit institutions.

It is also being proposed to insert a new article on the publication of audited financial statements in order to clearly establish a financial institution’s obligations to submit its audited financial statements or consolidated financial statements, as applicable, to the MFSA, by not later than 4 months from the closing of its financial year or as authorised in writing by the MFSA. The authority is proposing to add a requirement on financial institutions to submit the audited financial statements to the Central Bank of Malta as well.

Industry participants and interested parties are encouraged to send their feedback to the MFSA by no later than 7th February 2018.

For more information on Payment Services, Electronic Money Institutions and related areas please contact Dr Cherise Abela Grech on cabelagrech@gtgadvocates.com