Banking Package

Transposition and Implementation of the Banking Package

The Malta Financial Services Authority (the “Authority”) is working on the transposition and implementation of the provisions of the Capital Requirements Regulation III (the ‘CRRIII’) and the Capital Requirements Directive VI (the ‘CRDVI’).

Since the latest publication of the Regulatory Update, a public consultation was carried out with the industry, whereby the Authority provided an overview of how the transposition and implementation of the Banking Package are being carried out, and the Authority’s policy stances with respect to the Member State options and discretions present in both the CRDVI and CRRIII texts. The Authority evaluated all the comments received and published a Feedback Statement with all the required clarifications to the stakeholders.

The Authority will keep stakeholders informed of all developments regarding the Banking Package. Meanwhile, credit institutions and third county branches are reminded of the importance to participate in public consultations that are carried out by the European Banking Authority (the ‘EBA’) for the development of regulatory products as part of the implementation of the Banking Package at EU level.

New Regulations in the Official Journal of the EU

The following Regulations have been published in the Official Journal of the EU:

• On 25 June 2025, Regulation (EU) 2025/1215 amending the CRR with respect to the requirements for securities financing transactions (SFT) under the net stable funding ratio (NSFR). In light of the potential detriment emanating from the spill over effects of the liquidity of sovereign debt markets and the impact on sovereign bond markets, the EU Commissions has decided against the original intention to raise the stable funding factors for SFTs. In the EU Commission’s view, such increase would have risked creating additional pressures on the funding costs for Member States and could affect the mechanisms related to monetary policy transmission.  As a result, considering the treatment applied by other jurisdictions and level playing field matters, the Commission has decided to keep the current stable funding factors for SFTs as permanent.  Notwithstanding, the Regulation mandates the EBA to report to the Commission every five years on the appropriateness of these requirements.

• Changes related to the update of the European Central Bank’s policies on the exercise of options and discretions present in the Banking Package: Regulation (EU) No 2025/1520 of the European Central Bank (the ‘ECB’) amending Regulation (EU) 2016/445 on the exercise of options and discretions available in Union law (ECB/2016/4) (ECB/2025/24).  The Regulation applies to those credit institutions classified as significant under the ECB methodology. Similar changes were carried out to Guideline (EU) No 2025/1521 which amends Guideline (EU) 2017/697 on the exercise of options and discretions available in Union law by national competent authorities specifically in relation to less significant institutions (ECB/2017/9) (ECB/2025/25). The transitional arrangement concerning the use of External Credit Assessment Institutions (ECAIs) by credit institutions, allowed until 1 January 2027 in the aforementioned regulation, is expected to be reflected in local legislation. To note that changes by the ECB have also been carried out to the
  ECB Guide and the ECB Recommendation via  Recommendation ECB/2025/26. These changes underscore further specifications in relation to the exercise of options and discretions in relation to significant and less significant institutions, respectively.

• On 19 September 2025, Commission Delegated Regulation (EU) 2025/1496 amending Regulation (EU) No 575/2013 (the ‘CRR’) regarding the date of application of the own funds requirements for market risk, thereby postponing the requirements of the Fundamental Review of the Trading Book (FRTB) by one (1) year to 1 January 2027. This is the second time that such requirements are being postponed and is aimed at preserving a global playing field in view of the delays to the implementation of FRTB standards in other jurisdictions.

Amendments to the Banking Legislative Framework

Act No. XI of 2025, published on 16 May 2025, introduces changes to the Banking Act (Cap. 371 of the Laws of Malta), primarily for the purpose of transposing Directive (EU) 2022/2556 regarding digital operational resilience for the financial sector (the ‘DORA amending Directive’). The Banking Act was further amended with the publication of Act No. XXIX of 2025, published on 5 August 2025, specifying that the exchange of information can take place with authorities of other Member States responsible for the supervision of both credit institutions and investment firms.

Meanwhile, Legal Notices L.N. 153 of 2025 and L.N. 158 of 2025, published on 29 July 2025, introduced changes to the Supervisory Consolidation (Credit Institutions) Regulations (S.L. 371.22) and the Credit Institutions (Fees) Regulations (S.L. 371.10), respectively. The former amendment expanded the scope of applicable provisions on participation in supervisory colleges and related confidentiality requirements, while the latter updated the fee methodology and structure applicable to credit institutions and branches in Malta of credit institutions established outside of Malta, reflecting changes in the regulatory landscape and the need for a more streamlined approach to the fee assessment. The revision forms part of an MFSA-driven initiative and aims to ensure that fees are based on a proportionate approach.

Amendments to the Credit Servicers and Credit Purchasers Act

Act No. XI of 2025 referred to above also updated the Credit Servicers and Credit Purchasers Act (Cap. 645 of the Laws of Malta). These revisions aim to improve the regulatory oversight of credit servicers and credit purchasers and implement the use of data templates referred to in Directive (EU) 2021/2167 (the ‘NPL Directive’) for the purpose of providing information to credit purchasers, thereby ensuring better protection for consumers and greater transparency in the management of non-performing loans.

Updates to Banking Rules

On 16 May 2025 the Authority published amendments to Banking Rules BR/14 on outsourcing and BR/24 on internal governance, as follows:

• Banking Rule BR/14 has been amended to remove references to the MFSA’s “Guidance on Technology Arrangements, ICT and Security Risk Management, and Outsourcing Arrangements” which no longer applies to credit institutions. Furthermore, a new paragraph was added to clarify how the outsourcing requirements interact with Regulation (EU) 2022/2554 on digital operational resilience (the ‘DORA Regulation’). In addition, reference to the EBA Guidelines on ICT and security risk management (EBA/GL/2019/02) was deleted. These changes align BR/14 with the developments in the EU and local framework, thereby reducing areas of overlap and ensuring that institutions apply the correct, up-to-date standards.

• Banking Rule BR/24 was updated to include references to the latest EBA Guidelines on ICT and security risk management (EBA/GL/2025/02). Although the scope of the mentioned Guidelines has been narrowed down following the entry into force of the DORA Regulation, the area of payment service user relationship management remains relevant and therefore reference to such Guidelines has been retained.

On 5 August 2025, the Authority repealed Banking Rule BR/05 on liquidity requirements, and BR/29 Annex I on exposures associated with high risk, due to the following reasons:

• Banking Rule BR/05 has been repealed as the liquidity requirements for credit institutions are now fully harmonised under the EU Capital Requirements Regulation (the ‘CRR’) and its delegated and implementing acts, such as the Liquidity Coverage Requirement under Delegated Regulation (EU) 2015/61. Local reporting obligations are now those laid down in the CRR and Commission Implementing Regulation (EU) 2024/3117. The repeal eliminates duplication and ensures that institutions can look directly to the EU regime for liquidity rules.

• Banking Rule BR/29 Annex I has been repealed following the EBA’s repeal of its Guidelines on high-risk exposures as the relevant provisions are now covered by the CRR (as amended by the CRRIII). The removal of the Annex provides for legal clarity by relying solely on the EU framework.

Circulars Issued and Published by the MFSA

A number of Circulars applicable to credit institutions were published by the Authority, accessible on the dedicated MFSA webpage. Institutions are expected to keep note of and address any MFSA Circulars and publications applicable to them.