Regulation No. 2014-05 - Miscellanea of Targeted Review Interventions to Current Supervisory Provisions

THE GENERAL DIRECTOR
OF THE CENTRAL BANK OF THE REPUBLIC OF SAN MARINO HAVING REGARD TO Law No. 165 of 17 November 2005, and in particular Article 39, which grants the Central Bank of the Republic of San Marino the power to issue measures containing binding and general provisions; HAVING REGARD TO the Statute of the Central Bank of the Republic of San Marino approved by Law No. 96 of 29 June 2005, and in particular Article 30, paragraph 3 of the said Statute, pursuant to which acts of the Central Bank in matters of supervision, deliberated by the Supervisory Coordination, are issued by the General Director; CONSIDERING the opportunity to consolidate at the regulatory level the guidelines and pronouncements already expressed by the Supervisory Coordination, as well as to introduce explanatory or extension norms, also in response to requests from the "system"; CONSIDERING the need to harmonize the analogous disciplines contained in various sectoral regulations, also conforming their procedures and forms; CONSIDERING the need to update certain supervisory provisions due to subsequent changes in the reference legislative framework; HAVING REGARD TO the deliberations of the Supervisory Coordination and the Board of Directors by which the text of Regulation No. 2014-05, named "Miscellanea of Targeted Review Interventions to Current Supervisory Provisions", was approved; ISSUES the attached Regulation No. 2014-05, which enters into force on 1 January 2015. San Marino, 17 December 2014 Signed: THE GENERAL DIRECTOR Mario Giannini

MISCELLANEA
OF TARGETED REVIEW INTERVENTIONS
TO CURRENT SUPERVISORY PROVISIONS year 2014 / number 05

Article 1 - Modifications to Regulation No. 2014-02

1. At Article 9, paragraph 7, point 7d) is added as follows:
   "7d) The report also requires separate evidence between fixed-rate real estate leases and variable-rate leases".
2. At Article 9, paragraph 9, point 9a), sub-point 4), the words "point b" are replaced with "point 2".
3. At the following Articles:

• 9, paragraph 9, point 9a), sub-point 1;
• 13, paragraph 5;
• 18, paragraph 1, letter c)
  the word "salary" is replaced with "salary/pension".

4. The definition of Productive Units in the last paragraph of Article 1, paragraph 1 is replaced as follows:
   "Productive Units": private businesses exercised in individual or collective form (companies, consortia, cooperatives, etc.), their intermediaries, agents, brokers or mandataries, self-employed professionals, autonomous workers and any other natural or legal person who, consistent with the notion of "professional" in Law No. 144 of 28 October 2005 and subsequent amendments, acts in the exercise of a private entrepreneurial, commercial, artisanal or professional activity, and therefore equipped with an Economic Operator Code or equivalent foreign coding, with the exception of the activities listed in Annex 1 of Law No. 165 of 17 November 2005 and subsequent amendments.
5. The third paragraph of paragraph 4 of Article 19 is replaced as follows:
   "- introduce substitute criteria for determining the threshold rate if the reference database for certain technical forms of financing and amount classes is absent or anyway less than 10 units, also summing the total number of relationships pursuant to the previous paragraph 3.".
6. At the following Articles:

• 7, paragraphs 1 and 2;
• 13, paragraph 1;
  the words "signaling schema", "signaling schemas" and "schemas" are replaced respectively with "signaling model", "signaling models" and "models".

7. At paragraph 2 of Article 6, the word "working" is deleted.

8. Article 21 is replaced as follows:
   "Article 21 - Final and Transitional Provisions

9. This Regulation enters into force on 31 March 2014 and repeals Circulars No. 43 and 28/F of 18 May 2005 and their annexes, which will however apply until the report relating to the first quarter of 2015 inclusive, to allow REPORTING ENTITIES to make the necessary adjustments in the meantime from an IT perspective.

10. The provisions of this Regulation will therefore apply starting from the report relating to the second quarter of 2015, to be transmitted to the CENTRAL BANK by 31 August 2015, for the calculation of the threshold rates valid during the fourth quarter of 2015.".

11. The following third paragraph is added to Article 3:
    "The discipline of this Regulation has an exclusively administrative-statistical purpose, aimed at determining the threshold rates. It follows that the criminal relevance of the conditions actually applied by financial intermediaries is left to the exclusive competence of the Judicial Authority, also with reference to the criteria and methods of inclusion or exclusion adopted by the Supervisory Authority for the determination of said threshold rates."

12. Paragraph 3 of Article 16 is replaced as follows:
    "3. For all other forms of financing in the categories - personal credit -, - targeted credit -, - leasing -, - mortgages -, - loans against assignment of the fifth of salary/pension - and - other financing -, it is necessary to refer to the APR (Annual Percentage Rate of Charge), the formula of which is the following:
    k=m
    Σ k=1
    _Ak
    ( 1 + i ) tk
    = k’=m’
    Σ

k’=1
A’k’_
( 1 + i ) tk’ in reference to which:
i is the interest rate with which the equality between the discounted installments flows and the value of the financing is achieved, which can also be given by the sum of several "loans", understanding by "loan" each single disbursement executed by the creditor as a result of the same contract; k is the order number of a "loan"; k’ is the order number of a "repayment installment"; Ak is the amount of loan number K; A’k’ is the amount of "repayment installment" number k’; m is the order number of the last "loan";

m’ is the order number of the last "repayment installment" tk is the date expressed in years and fractions of a year between the date of "loan" no. 1 and the dates of further loans from number 2 to number m; tk’ is the date expressed in years and fractions of a year between the date of "loan" no. 1 and the dates of "repayment installments" from number 1 to number m’.".
Article 2 - Modifications to Regulations Nos. 2007-07 and 2011-03

1. At Article IV.III.2, the following third paragraph is added:
   "3. Upon acceptance of the appointment, the CORPORATE REPRESENTATIVE, if resident abroad, has the duty to communicate to the Board of Directors the election of domicile in San Marino, also pursuant to Article 23, paragraph 5, of the PENALTIES DECREE, if they do not intend to domicile at the registered office of the [bank/FINANCIAL COMPANY] itself; the same communication duty also arises in cases of subsequent transfer abroad of the residence of the CORPORATE REPRESENTATIVE during their term of office.".
2. Paragraph 1 of Article IV.III.5 is replaced as follows:
   "1. A certified copy of the resolutions taken by the Board of Directors in definitive form for each of the CORPORATE REPRESENTATIVES, together with the updated certificate of validity, a copy of the curricula and any communication pursuant to the previous Article IV.III.2 paragraph 3, must be transmitted to the CENTRAL BANK within thirty days from the date of registration of the appointments in the Register of Companies, in the ways provided for in Article III.II.6.".
3. At Articles IV.II.2 and V.II.2, the following fourth paragraph is added:
   "4. The eventual non-existence of one or more "substantially equivalent" certifications in the foreign legal system of residence for the purposes of the previous paragraph 1, letter a), must be:

• attested by a "legal opinion", in compliance with the requirements of Article IV.III.1;
• supplemented by a specific authenticated self-certification, with the contents required by the CENTRAL BANK.".

4. At Article III.II.9, the following third paragraph is added:
   "3. In case of interruption of the term, if within ninety days the information and/or additional documentation pursuant to the previous paragraph 1 does not reach the CENTRAL BANK, the application is deemed expired for all effects.".

5. At Article V.III.5, the following second paragraph is added:
   "2. In cases where the CENTRAL BANK, within the terms of the previous paragraph, communicates to the APPLICANT, pursuant to and for the effects of Article 17 paragraph 2 of the LISF, the need to integrate the application for authorization with information and/or additional documentation beyond those already provided, evaluating it as lacking or not sufficiently clear, the application itself is deemed expired for all effects if what is requested does not reach the CENTRAL BANK within ninety days from the receipt of the relative communication."

6. At Article I.I.2, paragraph 1, the definition of "shareholders" is replaced as follows:
   "subjects who, directly or indirectly, i.e. as controlling subjects of legal entities, hold significant shareholdings in the share capital for their own account;".

7. At Article V.V.4, paragraph 3, the phrase "also by means of electronic mail" is deleted.

8. At Article I.I.2, paragraph 1, the definition of "medium-long term financing" is replaced as follows:
   "credits with a residual duration greater than 18 months;".

9. At Article I.I.2, paragraph 1, the definition of "short-term financing" is replaced as follows:
   "credits with a residual duration not exceeding 18 months;".

10. Paragraph 1 of Article VIII.III.1 is replaced as follows:
    "1. Inspections are aimed at ascertaining that the activity of the [bank/FINANCIAL COMPANY] responds to criteria of sound and prudent management and is carried out in observance of the regulations governing the exercise of the same activity. In this framework, the inspection assessment evaluates the technical and organizational situation of the [bank/FINANCIAL COMPANY] and verifies the correctness of the information provided to the CENTRAL BANK. The assessments may concern the overall business situation ("wide spectrum"), specific operational sectors and/or compliance with sectoral regulations ("targeted") as well as the responsiveness of any corrective actions taken by the [bank/FINANCIAL COMPANY] ("follow up").".

11. Paragraph 2 of Article V.IV.1 is replaced as follows:
    "2. With reference to the hypothesis in letter a):

• the failure to perfect the initiatives subject to authorization under Article V.III.1 must be communicated without delay to the CENTRAL BANK;
• the shareholder has the duty to communicate to the CENTRAL BANK the domicile elected in San Marino territory for the purposes of Article 23, paragraph 5, of the PENALTIES DECREE for those subjects subject to the sanctioning power of the same CENTRAL BANK who are not resident in San Marino and do not intend to domicile, for said purposes, at the registered office of the controlled or participating [bank/FINANCIAL COMPANY]. The same communication duty also arises in cases of subsequent transfer abroad of the residence by said subjects.".

12. Paragraph 1 of Article VII.VI.2 of Regulation No. 2007-07 is replaced as follows:
    "1. Banks must constantly maintain the global amount of MEDIUM-LONG TERM FINANCING, excluding credits classifiable under the previous Article VII.III.4, paragraph 1, letters c) and d) and those under the subsequent Article X.I.3, paragraph 7, letter d), within the maximum limit represented by the sum of the following factors:
    a) supervisory capital net of investments under the previous article; b) 80% of DIRECT MEDIUM-LONG TERM COLLECTION, without attribution to the CLIENT of the right of early repayment; c) 30% of residual direct collection.".
13. Paragraph 1 of Article VII.VI.2 of Regulation No. 2011-03 is replaced as follows:
    "1. FINANCIAL COMPANIES must constantly maintain the global amount of MEDIUM-LONG TERM FINANCING, excluding credits classifiable under the previous Article VII.III.4, paragraph 1, letters c) and d), within the maximum limit represented by the sum of the following factors:
    a) supervisory capital net of investments under the previous article; b) bond loans issued with a residual duration greater than 18 months, without attribution to the CLIENT of the right of early repayment; c) other debts with predetermined maturity with a residual duration greater than 18 months".
14. At paragraph 3 of Article VII.II.3, the word "inclusive" is replaced with "total".
15. At paragraph 2 of Article VII.II.4, the following sentence is added at the end: "For the purposes of deduction from supervisory capital, the participations referred to in the previous paragraph are also equated with other interests in FINANCIAL ENTERPRISES, i.e. investments, in whatever form realized, computed in the risk capital of the FINANCIAL ENTERPRISE, participated directly or indirectly, and as such computed in the supervisory capital of the latter."
    Article 3 - Modifications to Regulation No. 2014-03
16. Letter l) of paragraph 4 of Article 3 is replaced as follows:
    "l) any secondary branches in the Republic of San Marino;".
17. Letter g) of paragraph 1 of Article 1 is replaced as follows:
    "g) "Relevant Group": group or conglomerate, pursuant to Articles 53 and 60 of the LISF, for which the following additional conditions apply:

• the assets are represented, to a measure not less than 50% of the total, by the balance sheet assets of FINANCIAL ENTERPRISES;
• the parent company is a sammarinese AUTHORIZED SUBJECT or a sammarinese participation company pursuant to Article 54, paragraph 2, of the LISF;
• all companies or entities that compose it are controlled by the parent company and have as their object the exercise of reserved activities or activities connected to them, instrumental or accessory, including companies in voluntary liquidation or subject to bankruptcy procedures or extraordinary proceedings under Part II, Title II of the LISF or analogous foreign procedures.".
  Article 4 - Modifications to Circulars Nos. 2012-03 and 2013-01

1. Paragraph 8.6 of Circular No. 2012-03 and paragraph 8.4 of Circular No. 2013-01 are replaced as follows:
   "a. With reference to deductions from SUPERVISORY CAPITAL provided for in paragraph 1 of Art. VII.II.4 of the REGULATION, any shareholdings held in the capital of BCSM do not count, as this does not fall within the definition of "Financial Enterprises" provided in Art. I.I.2 of the REGULATION.
   Shareholdings in financial enterprises placed in voluntary or compulsory administrative liquidation are also excluded from deductions. Starting from the REPORT relating to the month in which the cancellation from the respective rolls or lists occurred as a result of liquidation, [the reporting bank/THE REPORTING SUBJECT] will treat, from a prudential perspective, the financial enterprise in liquidation as any other non-financial enterprise; b. Deductions from SUPERVISORY CAPITAL for subordinated liabilities and hybrid capitalization instruments held by the REPORTING SUBJECT, provided for in paragraph 2 of Art. VII.II.4, are carried out without any limitation regarding the country of establishment of the issuing subject.
   c. Deductions from SUPERVISORY CAPITAL for other interests in "Financial Enterprises", provided for in paragraph 2 of Art. VII.II.4, are carried out, in cases of indirectly held participations, in the measure resulting from the application of the equity ratio rule, consistent with what is provided for in the following paragraph and regardless of the reattributability of the intermediary enterprise/es to the category of "Financial Enterprises.".
   Article 5 - Modifications to Circular No. 2010-02
2. Letter a) of paragraph 4 is replaced as follows:
   "use the acquired funding fiduciarily to finance the CREDIT ACTIVITY carried out on own account, i.e. outside mandates of type 3, even if a generic release is acquired from the fiduciaries;".
   Article 6 - Modifications to Regulation No. 2006-03
3. Paragraph 1 of Article 25 is replaced as follows:

"1. The CORPORATE REPRESENTATIVES of a SG must possess the integrity requirements indicated in the previous Article 21 and the further requirements of professionalism and independence indicated in the subsequent articles, and, if resident abroad, have the duty to communicate to the board of directors, upon acceptance of the appointment, the domicile elected in San Marino, also pursuant to Article 23, paragraph 5, of Decree No. 76/2006 and subsequent amendments, if different from the registered office of the SG. The same communication duty also arises in cases of subsequent transfer abroad of the residence of the CORPORATE REPRESENTATIVE during their term of office.".
2. Paragraph 3 of Article 25 is replaced as follows:
"3. A certified copy of the resolutions taken by the board of directors in definitive form for each of the CORPORATE REPRESENTATIVES, together with the updated certificate of validity, a copy of the curricula and any communication pursuant to the previous paragraph 1, must be transmitted to the CENTRAL BANK within thirty days from the date of registration of the appointments in the Register of Companies, in the ways provided for in Article 2.".
3. Article 21 is replaced as follows:
"1. Natural persons who intend to acquire, also indirectly, a SIGNIFICANT SHAREHOLDING in a SG must possess, in addition to the suitability requirements of Article 1, paragraph 1, point 9, letters a) and c) of the COMPANIES LAW, the following integrity requirements:
a) never having received, save for the effects of rehabilitation, final convictions to custodial sentences for crimes against property and against public economy, with the exception of contraventions, and special ones provided by the LISF and current legislation in matters of prevention and combating money laundering and terrorist financing as well as in matters of cross-border transport of cash and similar instruments; b) never having received, save for the effects of rehabilitation, final convictions for felonies falling among crimes against public order, against public faith or of private individuals against public administration, for which the penalty of imprisonment for a time not less than one year not suspended has been applied; c) never having received, save for the effects of rehabilitation, final convictions for felonies of another nature for which the penalty of imprisonment for a time not less than two years not suspended has been applied; d) never having held positions of CORPORATE REPRESENTATIVE in authorized subjects subject in the last five years to extraordinary measures under Part II, Title II, Chapters I and II of the LISF.
2. The possession of the integrity requirements referred to in the previous paragraph must also exist with reference to the absence of equivalent final convictions (letters a, b and c) or to the absence of impeditive situations (letter d) applied in jurisdictions other than the sammarinese one.
3. The requirement under paragraph 1 letter d) is deemed lacking if the position of CORPORATE REPRESENTATIVE was held for at least 18 months in the 24 months preceding the adoption of the measure and administrative sanctions were imposed on the CORPORATE REPRESENTATIVE, regarding the same premises of the measure.

4. The possession of the requirements under the previous article is proven through:
   a) the production of the general criminal certificate, the certificate of pending charges, the civil certificate or of never having declared bankruptcy, issued by the competent public offices of the place where the person has resided administratively for the longer period in the last five years, in compliance with the criteria of "substantial equivalence" of Article 1, paragraph 2 of the COMPANIES LAW; b) the production, with reference to all remaining jurisdictions, of self-certification rendered by the interested subject before a sammarinese Public Notary, using the model attached to this Regulation under letter B.
5. To the certificates under the fourth paragraph, also for the purpose of verifying the territorial competence of the public authorities that issued them, a copy of a valid identification document is added.
6. The certificates under the fourth paragraph, letter a), may also result from a single cumulative document and must:
   a) be in original or in a certified copy authenticated by a sammarinese Public Notary; b) bear a date not earlier than six months with respect to that of presentation; c) be drawn up in Italian or, if drawn up in a foreign language, bear attached a sworn translation in Italian;
7. The eventual non-existence of one or more "substantially equivalent" certifications in the foreign legal system of residence for the purposes of the previous paragraph 4, letter a), must be:

• attested by a "legal opinion", in compliance with the requirements of the subsequent Article 3;
• supplemented by a specific authenticated self-certification, with the contents required by the CENTRAL BANK.".

4. Paragraph 8 of Article 2 is replaced as follows:
   "8. The terms are interrupted if the requested documentation is incomplete or if the applicant subject voluntarily sends new integrative or modifying documentation of that initially transmitted. The CENTRAL BANK communicates the interruption of the term to the interested party. A new term of duration equal to the interrupted one begins to run from the date of receipt of the missing, integrative or modifying documentation. If within ninety days the information and/or additional documentation requested does not anyway reach the CENTRAL BANK, the application is deemed expired for all effects;".

5. At Article 19, the following second paragraph is added:
   "2. In cases where the CENTRAL BANK, within the terms of the previous paragraph, communicates to the requesting subject, pursuant to and for the effects of Article 17 paragraph 2 of the LISF, the need to integrate the authorization request with information and/or additional documentation beyond those already provided, evaluating it as lacking or not sufficiently clear, the request itself is deemed expired for all effects if said information and/or documentation does not reach the CENTRAL BANK within ninety days from the receipt of the relative communication."

6. Paragraph 2 of Article 70 is so