Financial Stability

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/2016/3). Measures which are subject to mandatory reciprocity under the CRD IV / CRR legislative framework, including but not limited to Articles 124(5) and 164(7) of Regulation (EU) No 575/2013 which enforce requirements directly on institutions, are not referred to in this list.

The Central Bank of Malta intends to reciprocate the Decree of the Governor of Eesti Pank No.6 of 30 May 2016 "Establishment of the requirement for the systemic risk buffer" as per Recommendation of the European Systemic Risk Board of 24 June 2016 amending Recommendation ESRB/2015/2 on the assessment of cross-border effects of and voluntary reciprocity for macro-prudential policy measures (Recommendation ESRB/2016/4):

24 October 2016 Statement of Decision on the reciprocity of the Systemic Risk Buffer of Estonia

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 set by the designated authorities of other European Member States under the CRD IV / CRR legislative framework.

  • 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}