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Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 20,368, 17 ta’ Marzu, 2020
Taqsima  B
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L.N. 71 of 2020
FINANCIAL INSTITUTIONS ACT
(CAP. 376)
Financial Institutions Act (Safeguarding of Funds) (Amendment) 
Regulations, 2020 
IN EXERCISE of the powers conferred by article 12(1)(c), (d)
and (h) of the Financial Insti tutions Act, the Minister responsible for
the regulation of financial services, acting on the advice of t he Malta
Financial Services Authority, has made the following regulation s:-
Citation and 
scope. 
S.L. 376.04.1. (1) The title of these regulations is the Financial
Institutions Act (Safeguarding of Funds) (Amendment) Regulation s,
2020 and they shall be read and construed as one with the Financial
Institutions Act (Safeguarding of Funds) Regulations, hereinaft er
referred to as "the principal regulations".
(2) The purpose of these regulations is to transpose Article 10
of Directive (EU) 2015/2366 of the European Parliament and of the
Council of 25 November 2015 on payment services in the internalmarket, amending Directives 2002/65/EC, 2009/110/EC and 2013/36 /
EU and Regulation (EU) No 1093/2010, and repealing Directive 20 07/
64/EC, and to provide for ancillary matters related thereto.
Amends 
regulation 1 of 
the principal regulations.2. Regulation 1 of the principal regulations shall be
substituted by the following:
"1. The title of these regulations is the Financial
Institutions Act (Safeguard ing of Funds) Regulations.". 
Amends regulation 2 of 
the principal 
regulations.3. Regulation 2 of the principal regulations shall be amended
as follows:
(a) the marginal note thereof shall be substituted by the
following:
"Interpretation.";
(b) sub-regulation (1) thereof shall be deleted;
(c) sub-regulation (2) thereof shall be amended as
follows:
(i) immediately before th e definition "business
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day", there shall be added the following new definition:
" "the Act" means the Financial Institutions
Act;";
(ii) in the definition "business day", the words
"payment services provider or electronic money issuer of
the payer or the payment services provider or electronicmoney issuer of the payee",  shall be substituted by the
words "payment service provider or electronic money
issuer of the payer or the payment service provider or
electronic money issuer of the payee";
(iii) immediately after the definition "business day",
there shall be added the following new definitions:
" "electronic money institution" means a
financial institution issuing electronic money in terms
of the Third Schedule to the Act;
"financial institution" means a payment
institution as defined in these regulations and, or anelectronic money institution;";
(iv) immediately after the definition "funds", there
shall be added the following new definition:
" "payment institution" means a financial
institution providing payment services as referred toin paragraphs 2(a) to (f)  of the Second Schedule to
the Act;";
(v) the definition "Payment Services Directive"
shall be substituted by the following:
" "Payment Services Directive" means
Directive (EU) 2015/2366 of the EuropeanParliament and of the Council of 25 November 2015on payment services in the internal market, amending
Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, andrepealing Directive 2007/64/EC, as may be amended
from time to time and in cludes any implementing
measures, implementing technical standards,
regulatory technical standa rds and similar measures
that have been or may be issued thereunder;";
(vi) immediately after the definition "Payment
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Services Directive" as amended, there shall be added the
following new definition:
" "the Commission Delegated Regulation"
means the Commission De legated Regulation (EU)
2015/61 of 10 October 2014 to supplement
Regulation (EU) No 575/2013 of the EuropeanParliament and the Council with regard to liquidity
coverage requirement for credit institutions, as
amended from time to time;"; 
(d) sub-regulation (3) thereof shall be deleted; and
(e) immediately after sub-regulation (3) thereof, as
deleted, there shall be added the following new sub-regulation:
"(4) Words and expressions used in these regulations
which are also used in the Act, but which are not definedherein, shall have the same meaning as in the Act.".
Amends 
regulation 3 of 
the principal regulations.4. Regulation 3 of the principal regulations shall be amended
as follows:
(a) sub-regulation (1) thereof shall be substituted by the
following:
"(1)  A financial institution in receipt of funds from
a payment service user, or through another payment service
provider for the execution of payment transactions, or from
an electronic money holder in exchange for electronicmoney that has been issued, shall hold such funds solely for
and on behalf of and in the interest of that payment service
user or electronic money holder.";
(b)  sub-regulation (2) thereof shall be amended as
follows: 
(i)  the words "Notwithstanding anything stated in
article 1894 of the Civil Code or in the agreement", shall besubstituted by the words "Notwithstanding the provisionsof article 1894 of the Civil Code or any other law, or the
agreement"; and
(ii)  the words "the payment services user or
electronic money holder or t he fact that the payment
services user’s funds", shall be substituted by the words
"the payment service user or electronic money holder, orthe fact that the payment service user’s funds"; and 
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(c)  sub-regulation (3) thereof shall be amended as
follows: 
(i)  the words "Without prejudice to any relevant
provisions of the Act,", shall be substituted by the words
"Notwithstanding the provisions of any other law,"; 
(ii)  the words "payment services user", and
wherever they appear in the principal regulations, shall besubstituted by the words "payment service user"; and
(iii)  the words "nor shall it create any form of loan",
shall be substituted by the words "nor shall it create any
form of loan or any other similar credit facility".
Amends 
regulation 4 of the principal 
regulations.5. Regulation 4 of the principal regulations shall be amended
as follows:
(a) in the marginal note thereof, the word "user" shall be
substituted by the words "user or electronic money holder"; and
(b) in sub-regulation (1) thereof, the words "A payment
service user", as amended, shall be substituted by the words
"Notwithstanding the provisions of any other law, a payment
service user".
Amends 
regulation 5 of the principal 
regulations. 6. Regulation 5 of the principal regulations shall be amended
as follows:
(a)  sub-regulation (1) thereof shall be amended as
follows: 
(i)  the words "The creditors", shall be substituted
by the words "Notwithstanding  the provisions of any other
law, the creditors"; and
(ii)  the words "for and on behalf" shall be
substituted by the words "for and on behalf of"; and
(b)  sub-regulation (3) thereof shall be amended as
follows:
(i)  the words "In the event that any funds held
under the control of the financial institutions", shall be
substituted by the words "Notwithstanding the provisions
of any other law, in the event that any funds held by thefinancial institution for and on behalf of and in the interest
of any payment service user or electronic money holder";
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and
(ii)  the words "on whose behalf", shall be
substituted by the words "on whose behalf and in the
interest of whom".
Amends 
regulation 7 of 
the principal 
regulations.7. Regulation 7 of the principal regulations shall be amended
as follows:
(a) sub-regulation (1) thereof shall be substituted by the
following:
"(1) A payment institution shall, for the purpose of
article 10B of the Act, safeguard all funds in either of the
following ways:
(a) funds shall not be commingled at any time
with the funds of any natural or legal person otherthan payment service users on whose behalf the fundsare held, provided that, where the funds of payment
service users are held in a common account, the funds
belonging to each payment service user shall beidentifiable at all times. Where funds are still held by
the payment institution and not yet delivered to the
payee or transferred to another payment serviceprovider by the end of the business day following the
day when the funds have been received, they shall be
deposited in a separate account in a credit institutionor invested in secure liquid low-risk assets, as defined
in sub-regulation (1A). Funds shall be insulated in
accordance with these regulations in the interest ofthe payment service users against the claims of other
creditors of the payment institution, in particular in
the event of insolvency; or
(b) funds shall be covered by an insurance
policy or some other comparable guarantee from aninsurance company or a credit institution, which does
not belong to the same group as the payment
institution itself for an amount equivalent to thatwhich would have been segregated in the absence of
the insurance policy or other comparable guarantee,
payable in the event that the payment institution isunable to meet its financial obligations.";
(b) immediately after sub-regulation (1) thereof, as
amended, there shall be added the following new sub-
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regulations:
"(1A) For the purpose of this regulation:
(a) secure, low-risk assets are: 
(i) asset items falling into one of the
categories set out in Table 1 of Article 336(1) of
the CRR for which the specific risk capitalcharge is no higher than 1.6% but excluding
other qualifying items as defined in Article
336(4) of the CRR; or 
(ii) units in an undertaking for
collective investment in transferable securities(UCITS) which invests solely in assets referred
to in sub-paragraph (i): 
Provided that in exceptional
circumstances and with adequate justification,the competent authority may, based on an
evaluation of security, maturity, value or otherrisk elements of the assets referred in sub-
paragraphs (i) and (ii), determine which of
those assets do not consti tute secure, low-risk
assets for the purpose of sub-regulation (1). 
(b) secure, low-risk asse ts shall be deemed to
be liquid if they fall within the criteria set out in aFinancial Institutions Rule.
(1B) Where a payment institution is required to
safeguard funds pursuant to article 10B of the Act and a
portion of those funds is to be used for future transactions,
with the remaining amount to be used for non-payment
services, that portion to be used for future transactions shallalso be subject to the requirements of the said article.
Where that portion is variable or not known in advance, the
payment institution shall safe guard a representative portion
assumed to be used for payment services, provided that
such a representative portion can be reasonably estimated
on the basis of historical dat a to the satisfaction of the
competent authority.
(1C) An electronic money institution shall safeguard
funds which have been received in exchange for electronic
money that has been issued in accordance with sub-
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regulations (1), (1A) and (1B):
Provided that funds received in the form of
payment by payment instrument need not be safeguarded
until they are credited to the electronic money institution’s
payment account or are otherwise made available to the
electronic money institution in accordance with theexecution time requirements laid down in the Payment
Services Directive, where applicable. In any event, such
funds shall be safeguarded by not later that five business
days after the issuance of electronic money.
(1D) Sub-regulations (1) to (1B) shall also apply to
electronic money institutions undertaking the activitieslisted in paragraph 2(a) to (f) of the Second Schedule to the
Act that are not linked to the activity of issuing electronicmoney."; and 
(c) in sub-regulation (2) thereof, the words "such other
functions", shall be substituted by the words "any otherfunctions".
Amends 
regulation 8 of 
the principal regulations.8. Regulation 8 of the principal regulations shall be amended
as follows:
(a)  sub-regulation (1) thereof shall be amended as
follows: 
(i)  the words "payment services users or electronic
money holders shall be liable for any loss or prejudice
suffered by the payment services users due to the financial
institution’s fraud, wilful default or negligence", shall besubstituted by the words "payment service users or
electronic money holders shall be liable for any loss or
prejudice suffered by the payment service users or
electronic money holders due to the financial institution’s
fraud, wilful default, misconduct or negligence"; and
(ii)  the words "entered into with the payment
services users", shall be substituted by the words "entered
into with the payment service users"; and 
(b) in sub-regulation (2) ther eof, the words "financial
institution to whom functions, duties or funds may be delegatedor entrusted", shall be substituted by the words "financialinstitutions to whom functions or duties may be delegated or to
whom funds are entrusted".
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Amends 
regulation 9 of 
the principal regulations.9. Regulation 9 of the principal regulations shall be amended
as follows:
(a)  sub-regulation (1) thereof shall be amended as
follows: 
(i)  the words "delegates or entrusts functions or
duties", shall be substituted by the words "delegates
functions or duties or entrusts funds"; and
(ii)  the words "by the payment services users or
electronic money holders as a r esult of the acts, omissions
or insolvency of the financial institution.", shall be
substituted by the words "by the payment service users orelectronic money holders as a r esult of the acts, omissions
or insolvency of such person."; and 
(b) sub-regulation (2) thereof shall be substituted by the
following:
"(2) Where the financial institution delegates
functions or duties or entrusts funds to a person which isnot a group company, without prejudice to the liability of
such person, the financial institution shall be liable for any
loss or prejudice suffered by the payment service users orelectronic money holders as a r esult of the acts, omissions
or insolvency of such person.".
Amends 
regulation 10 of the principal 
regulations.10. Regulation 10 of the principal regulations shall be deleted. 
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