Reciprocity
In an integrated financial system like the EU Single Market, strong policy coordination is needed to ensure the effectiveness of national macro-prudential policy. National measures are justified given the divergence of cyclical and structural risks in Member States. Yet, measures can have spillover effects on other countries (outward spillovers) and can sometimes be circumvented by foreign branches and cross-border lending (inward spillovers). In the absence of reciprocity, leakages could take place given that national measures would not apply to institutions providing cross-border services directly or through branches.
An equivalent measure targeting the same foreign exposure of domestically-authorised institutions should be enacted, in order to minimise regulatory leakage and cross-border effects of another country's macro-prudential policy measure.
The European Systemic Risk Board (ESRB) has an important coordination role for the assessment of measures, discussion of cross-border effects and recommendations on mitigating measures, including reciprocity. Reciprocation is the way by which the effectiveness and consistency of macro-prudential policy across borders within the EU can be safeguarded.
At the moment, requests for reciprocation by EU Member States and relevant non-Member States are sent to the ESRB. Following the receipt of the requests, the ESRB assesses such requests and issues subsequent recommendations to relevant authorities concerning reciprocity for certain measures. At this stage, the Central Bank of Malta (hereafter 'the Bank') may comply and reciprocate the measure following an internal assessment. If the Bank decides to not comply, it is obliged to explain to the ESRB the reasons for non-compliance.
Relevant Documents
List of measures reciprocated by the Bank following an ESRB recommendation under ESRB/2015/2
This list of measures refers only to the voluntary reciprocity of measures taken by the Bank following an ESRB recommendation under ESRB/2015/2 (as amended by ESRB/2019/1). Measures which are subject to mandatory reciprocity under the CRDV / CRR2 legislative framework, including but not limited to Articles 124 and 164 of Regulation (EU) No 575/2013 which enforce requirements directly on institutions, are not referred to in this list.
The table below includes macroprudential measures implemented in EU countries and the reciprocation decision adopted by the Central Bank of Malta. The Bank carries out periodic reviews on the exposures of domestic institutions to the relevant markets and will amend its decision taken, if deemed necessary.
|
Country
|
Macroprudential measure
|
ESRB Recommendation date
|
Decision of the
Central Bank of Malta
|
| Denmark |
A 7% Sectoral Systemic Risk Buffer applicable to all types of exposures located in Denmark to non-financial corporations operating in real estate activities and in the development of building projects with the exemption of the part of each exposure that lies in the 0-15% loan-to-value-band.
|
8 July 2024 |
The Central Bank of Malta has decided not to reciprocate the Danish measure on the basis of immateriality of exposures given that, at the current juncture, no domestic banks are exposed towards non-financial corporations operating in real estate activities and in the development of building projects in Denmark.
|
| Italy |
A 0.5% Systemic Risk Buffer that will apply from 31 December 2024 (to increase to 1% from 30 June 2025) applicable on all credit risk and counterparty credit risk exposures located in Italy.
|
11 June 2024 |
The Central Bank of Malta has decided not to reciprocate the Italian measure due to its inapplicability as the Maltese banks' exposures to Italy do not meet the required thresholds for reciprocation purpose. Indeed, none of the Maltese credit institutions have material exposures to credit risk and counterparty credit risk stemming from the Italian market.
|
| Portugal |
A 4% Sectoral Systemic Risk Buffer applicable to IRB retail exposures secured by residential immovable property for which the collateral (immovable property) is located in Portugal.
|
8 December 2023 |
The Central Bank of Malta has decided not to reciprocate the Portuguese measure on the basis of inapplicability of the measure given that Maltese credit institutions do not make use of IRB models for the purpose of calculating their regulatory capital requirements. Furthermore, Maltese credit institutions have no material exposures towards the Portuguese mortgage market.
|
| Belgium |
A 9% (to decline to 6% as from 1 April 2024) systemic risk buffer rate applied on all IRB retail exposures to natural persons secured by residential immovable property for which the collateral backing the loan is located in Belgium.
|
3 October 2023 |
The Central Bank of Malta has decided not to reciprocate the Belgian measure on the basis of inapplicability of the measure since all Maltese credit institutions use the standardized approach for the purposes of calculating their regulatory capital requirements. In addition, Maltese credit institutions do not have material exposures to the Belgian real estate market.
|
| Sweden |
A risk weight floor of 35% for certain corporate exposures secured by commercial properties and a risk weight floor of 25% for certain corporate exposures secured by residential properties located in Sweden to institutions using the IRB approach for calculating regulatory capital requirements.
|
6 July 2023 |
The Central Bank of Malta has decided not to reciprocate the Swedish measure on the basis that Maltese credit institutions do not make use of IRB models for the purpose of calculating regulatory capital requirements. In addition, Maltese credit institutions do not have material exposures to the Swedish corporate sector.
|
| Germany |
A 2% systemic risk buffer rate on (i) all IRB exposures secured by residential immovable property located in Germany, and (ii) all SA-based exposures fully and completely secured by residential immovable property, which is located in Germany.
|
2 June 2022 |
The Central Bank of Malta has decided not to reciprocate the German measure on the basis that Maltese credit institutions do not have material exposures secured by residential property, located in Germany.
|
| The Netherlands |
A minimum average risk weight for exposures to natural persons secured by mortgages located in the Netherlands for credit institutions using the IRB approach for calculating regulatory capital requirements.
|
16 February 2022 |
The Central Bank of Malta has decided not to reciprocate the Dutch measure on the basis of inapplicability of the measure since all Maltese credit institutions use the standardized approach for the purpose of calculating their regulatory capital requirements. In addition Maltese credit institutions do not have material exposures to the Dutch real estate market.
|
| Lithuania |
A 2% systemic risk buffer rate for all retail exposures to natural persons in Lithuania that are secured by residential property.
|
16 February 2022 |
The Central Bank of Malta has decided not to reciprocate the Lithuanian measure on the basis that Maltese credit institutions do not have material exposures to natural persons in Lithuania that are secured by residential property.
|
| Norway |
The following 3 measures were implemented by Norway:
A 4.5% systemic risk buffer rate for exposures in Norway to all credit institutions authorised in Norway
A 20% average risk weight floor for residential real estate exposures in Norway to credit institutions, authorised in Norway, using the IRB approach
A 35% average risk weight floor for commercial real estate exposures in Norway to credit institutions, authorised in Norway, using the IRB approach
|
30 April 2021 |
The Central Bank of Malta has decided not to reciprocate Norwegian measures, given that Maltese credit institutions do not have material exposures towards the mortgage market in Norway.
In addition, Maltese credit institutions do not make use of IRB models for the purpose of calculating their regulatory capital requirements.
|
| Luxembourg |
Legally binding loan-to-value (LTV) limits for new mortgage loans on residential real estate located in Luxembourg, with different LTV limits applicable to different categories of borrowers
|
24 March 2021 |
The Central Bank of Malta has decided not to reciprocate the measure implemented by Luxembourg, given that Maltese credit institutions do not have material exposures towards the mortgage market in Luxembourg.
|
|
Sweden
|
Credit institution-specific minimum level of 25% for the average risk weight on the portfolio of residential mortgage loans secured by housing units in Sweden for banks using the IRB approach.
|
15 January 2019
|
The Central Bank of Malta has decided not to reciprocate the Swedish measure, given that Maltese credit institutions do not make use of IRB models for the purpose of calculating their regulatory capital requirements. In addition, Maltese credit institutions have no material exposures towards the Swedish mortgage market.
|
|
France
|
A tightening of the large exposure limit applicable to exposures to highly-indebted large non-financial corporations having their registered office in France to 5 per cent of eligible capital, applied to global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) at the highest level of consolidation of their banking prudential perimeter.
|
5 December 2018
|
The Central Bank of Malta has decided not to reciprocate the French measure, given that Maltese systemically important institutions (O-SIIs) have no material exposures towards the French highly indebted large non-financial corporations (NFCs) having their registered office in France.
|
|
Belgium
|
A flat risk weight add-on of 5 percentage points and a proportionate add-on of 33 per cent of the exposure-weighted average of the risk-weights applied by IRB banks to the portfolio of retail exposures secured by immovable property situated in Belgium.
|
16 July 2018
|
The Central Bank of Malta has decided not to reciprocate the Belgian measure, given that Maltese credit institutions do not make use of IRB models for the purpose of calculating their regulatory capital requirements. In addition, Maltese credit institutions have no material exposures towards the Belgian mortgage market.
|
|
Finland
|
A credit institution-specific minimum level of 15% for the average risk weight on the portfolio of residential mortgage loans secured by housing units in Finland for banks using the IRB approach.
|
8 January 2018
|
The Central Bank of Malta has decided not to reciprocate the Finnish measure, given that Maltese credit institutions do not make use of IRB models for the purpose of calculating their regulatory capital requirements. In addition, Maltese credit institutions have no material exposures towards the Finnish mortgage market.
|
List of the following countercyclical buffer (CCyB) rates recognised by the Bank:
This list of measures refers only to the discretionary recognition of CCyB rates by the Bank. This list does not include rates recognised under the framework of mandatory recognition of CCyB rates up to 2.5% set by the designated authorities of other European Member States under the CRD/CRR legislative framework. The following relate to the CCyB rates recognised by the Bank:
- Rates in excess of 2.5 per cent set in another Member State {currently not set}
- Rates set in a third country where recognition follows a recommendation under ESRB/2015/1 {currently not set}
With regard to the latter, the Bank identified the United Kingdom, United Arab Emirates and United States of America as material third countries for Malta for the period Q2 2023 till Q2 2024. In accordance with ESRB Recommendation 2015/1, the Bank concluded that the CCyB rates set for the afore-mentioned third countries by their respective authorities are appropriate. The ESRB and the banks operating domestically, have been notified accordingly.
Date last updated: 23 August 2024