Regulation No. 2020-01 - Miscellany of Targeted Review Interventions to Current Supervisory Provisions

THE DEPUTY DIRECTOR
OF THE CENTRAL BANK OF THE REPUBLIC OF SAN MARINO HAVING REGARD TO Law 17 November 2005, No. 165 (Law on Banking, Financial and Insurance Enterprises and Services) 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, and Article 15, which, with specific reference to corporate officers and corporate bodies, provides for the introduction in regulatory proceedings, as an integration of the requirements of honorability, professionalism, and independence, of criteria of correctness, competence, and overall adequacy as well as limits on the accumulation of offices (so-called "fit and proper"); HAVING REGARD TO the Statute of the Central Bank of the Republic of San Marino approved by Law 29 June 2005, No. 96 and in particular Article 30, paragraph 3, according to which acts of the Central Bank in matters of supervision, deliberated by the Supervisory Coordination, are issued by the General Director, and Article 14, paragraph 5, which regulates the case of absence or impediment of the General Director; HAVING REGARD TO the outcomes of the self-assessment referred to in Annex 7 of Regulation No. 2019-01 and of the public consultation procedure on the draft regulatory amendment of Regulations No. 2006-03, No. 2007-02, No. 2007-07, No. 2008-01, No. 2011-03, and No. 2016-02; CONSIDERING the opportunity to:

• reclassify this regulation as a "miscellany," given the already significant extension of its scope of intervention, the primary purpose of aligning certain supervisory provisions with subsequent modifications of the primary normative framework, and the typified legislative technique used;
• consequently extend the scope of intervention of the regulation to include further targeted revisions aimed at consolidating at the regulatory level the guidelines and pronouncements already expressed by the Supervisory Coordination and to address certain requests for simplification from the system;
  HAVING REGARD TO the resolutions of the Supervisory Coordination and the Board of Directors by which the text of Regulation No. 2020-01, named "Miscellany of Targeted Review Interventions to Current Supervisory Provisions," was approved, ISSUES the attached Regulation No. 2020-01 which enters into force on 19 March 2020. San Marino, 18 March 2020 Signed: THE DEPUTY DIRECTOR f.f. Avv. Giuseppe Ucci

MISCELLANY
OF TARGETED REVIEW INTERVENTIONS
TO CURRENT SUPERVISORY PROVISIONS year 2020 / number 01

Article 1 - Amendments to Regulation No. 2007-07
1. In paragraph 1 of Article I.I.2, the definitions in points 9, 31, and 53 are replaced as follows:
"9. 'head of the executive structure': General Director or, in the absence thereof, administrator with delegation to perform the functions of General Director, and any Deputy Director;
31. 'corporate officers': natural persons holding the offices of administrator, auditor, or head of the executive structure;
53. 'repurchase agreement with obligation to resell': spot sale of financial instruments owned by the bank ('spot seller') to the client ('spot buyer') with simultaneous forward sale, not exceeding 12 months, at a predetermined price, of the same instruments for the same nominal amount, carried out between the client ('forward seller') and the bank ('forward buyer'), resulting in the unavailability of the financial instruments for further use for the entire duration of the operation. The obligation to repay the funds raised, which constitute funding, is independent of any subsequent event regarding the value or negotiability of the financial instruments subject to the operation;"
2. In Article I.I.2, paragraph 1, the following definitions are inserted:
"12.bis 'managerial tasks': managerial or top-level functions or otherwise performed by personnel holding organizational units, falling within senior management, pursuant to Law No. 102/2019, and in the subjects subject to sanctions, pursuant to Article 22, paragraph 2, letter b), of the Sanctions Decree;" "27.bis 'Deputy Director': natural person called to temporarily or occasionally substitute for the functions of head of the executive structure in the event of absence of the General Director or the administrator delegated thereto;" "31.bis 'corporate officers with executive offices': head of the executive structure or administrator who exercises the powers delegated to them by the Board of Directors, individually or as a member of an Executive Committee or of Internal Technical Committees with operational functions;" "31.ter 'corporate officers with non-executive offices': auditors and members of the Board of Directors who do not fall within the definition in point 31.bis;" "53.bis 'competent body': the body of which the officer is a member (Board of Directors or Board of Statutory Auditors) or, in the case of the General Director and Deputy Director, the Board of Directors that confers the offices;" "60.bis 'rigorous procedures': extraordinary proceedings referred to in Part II, Title II, Chapters I and II of the LISF and resolution procedures referred to in Law 14 June 2019 No. 102 and subsequent modifications and integrations.
3. In paragraph 1 of Article I.I.2, the definition in point 82 is replaced as follows:
"82. 'defaulted company': companies subject to insolvency proceedings or rigorous procedures or foreign proceedings equivalent to those regulated in the Sammarinese legal system respectively:
1 by Law 15 November 1917, No. 17 and Article 115 of the Companies Law; 2 by Part II, Title II, Chapters I and II of the LISF; 3 by Law 14 June 2019, No. 102;".
4. In the articles on administrative sanctions reported below, the reference to the articles of Decree 30 May 2006 No. 76 (Sanctions Decree) is integrated with the reference also to Article "18-bis" of the same Decree:

• II.I.2, III.I.2, IV.I.2, V.I.2, VI.I.2, VII.I.2, VIII.I.2, IX.I.2, X.I.2.
  5. Article II.II.3 is replaced as follows:
  "Article II.II.3 - Reserved Activities
  1. Banks, in addition to banking activity, may exercise, upon obtaining specific and additional authorizations from the Central Bank and in compliance with the relevant regulations, the following reserved activities:
  a) INVESTMENT SERVICES referred to in letters D1, D2, D3, D4, D5, D6, D7, D8, and D9 of Annex 1 of the LISF; b) data communication services on transactions concluded on financial instruments at trading venues referred to in letter D-ter of Annex 1 of the LISF, limited to trading systems managed by the banks themselves; c) payment services referred to in letter I of Annex 1 of the LISF; d) electronic money issuance services referred to in letter J of Annex 1 of the LISF; e) currency exchange intermediation activities referred to in letter K of Annex 1 of the LISF; f) participation acquisition activities referred to in letter L of Annex 1 of the LISF.
  2. The activity of granting loans, marked with the letter B in Annex 1 of the LISF, may be carried out by banks as it is included in the banking activity marked with the letter A.
  3. The reserved activities marked with letters C, D-bis, D-quater, E, F, G, H in Annex 1 of the LISF are incompatible with banking activity.
  4. Pursuant to Article 156 paragraph 1 of the LISF and Article 33 paragraph 1 of Delegated Decree 29 March 2019 No. 61, banks authorized before the entry into force of the LISF may continue to carry out the reserved activities referred to in letters A, B, C, D1, D2, D3, D4, D5, D6, D7, I, J, K, L.".
  6. Paragraph 1 of Article II.II.4 is replaced as follows:
  "1. Banks may exercise the following associated, instrumental, or accessory activities:
  a) administration of real estate acquired for functional use of the bank pursuant to Article VII.VII.1 and for debt recovery pursuant to Article VII.VII.2; b) preparation and management of IT services for own use or for controlled or controlling companies; c) study, research, analysis, in economic and financial matters; d) processing, transmission, communication of economic and financial data and information; e) advice to companies on financial structure, industrial strategy, and related issues, as well as advice and services concerning concentrations and the acquisition of companies; f) rental of safety deposit boxes and closed deposits; g) professional exercise of the office of trustee, also in San Marino if authorized by the Central Bank pursuant to Delegated Decree No. 49/2010 and subsequent modifications and integrations.".

7. Paragraph 1 of Article III.I.1 is replaced as follows:
"1. The provisions contained in the following Part have their legislative source in Articles 6, 7, 8, 9, 10, 13, 14, and 75 of the LISF and in Title I of Delegated Decree 26 March 2019 No. 50.".
8. Letter e) of paragraph 1 of Article III.II.3 is modified as follows:
"e) certifications and original documentation required for the verification regarding the initial CORPORATE OFFICERS of compliance with the requirements and criteria referred to in Title II of Part IV;".
9. In Article III.II.3, after paragraph 2, the following paragraph is inserted:
"3. In the event of changes that affect the accuracy of the information and documentation provided in the authorization application submitted, the PROMOTING SUBJECTS must inform the CENTRAL BANK without delay.".
10. Article III.II.7 is replaced as follows:
"Article III.II.7 - Term of the Measure
1. The CENTRAL BANK, within one hundred and eighty days from the date of receipt of the application, communicates in writing to the address indicated in the application itself the acceptance or denial of the authorization. In cases where the term is interrupted or suspended, the authorization or denial measure must nevertheless be issued within twelve months from the date of receipt of the application.
2. In the authorization measure, the CENTRAL BANK also indicates the subsequent obligations for obtaining the approval to begin operations referred to in Title V of this Part.".
11. Paragraph 3 of Article III.II.8 is repealed.
12. Letter m) of paragraph 2 of Article III.III.1 is modified as follows:
"m) in the event of subsequent loss of honorability or independence requirements, or subsequent inadequacy regarding the criteria of correctness or availability of time or compliance with the limit on the accumulation of offices by CORPORATE OFFICERS, it must be provided for the obligation on their part to immediately communicate this to the respective COMPETENT BODY;".
13. Paragraph 1 of Article III.III.7 is replaced as follows:
"1. Pursuant to Article 13, letters g) and h) of the LISF, those indicated in the authorization application as CORPORATE OFFICERS of the bank to be established must meet the requirements and criteria, both on an individual basis and on a collective basis, specified in Part IV, Title II of this Regulation.".
14. Title IV of Part III is repealed.
15. Paragraph 1 of Article III.V.4 is replaced as follows:

"1. The application must contain all information useful for acceptance and must be accompanied by the documents listed below:
a) certified copy of the deed of incorporation, complete with statutes; b) certificate of validity in original; c) copy of the operating license; d) attestation signed in original by the members of the Board of Statutory Auditors of the full payment of the share capital, with attached copy of the accounting receipts issued by the depositary bank; e) signed curricula vitae of PERSONNEL HOLDING ORGANIZATIONAL UNITS; f) copy of any outsourcing contracts, complete with minimum service levels and control measures on the OUTSOURCER's activity; g) copy of the contract with the AUDIT FIRM appointed for ACCOUNTING CONTROL and certification of the financial statements; h) copy of the contract attesting the legitimate availability of the headquarters; i) copy of the software license contract and IT assistance.".
16. Paragraph 2 of Article III.V.8 is replaced as follows:
"2. In the event of further denial, the CENTRAL BANK will activate verification procedures to verify, for the purpose of possible revocation of the authorization, the existence of one of the hypotheses referred to in Article 10 of the LISF or in Article 6 of Delegated Decree 26 March 2019 No. 50.".
17. Letter e) of paragraph 1 and paragraph 2 of Article III.V.9 are repealed.
18. Paragraph 1 of Article III.VI.1 is replaced as follows:
"1. The issuance of the authorization is subject to the verification of the following conditions:
a) existence in the home country of the foreign bank of adequate regulation in matters of supervision, also on a consolidated basis, which also includes the activity carried out abroad; b) existence of agreements for the exchange of information with the Supervisory Authorities of the home country of the requesting foreign bank; c) authorization and effective carrying out in the home country of the activities that the BRANCHES intend to exercise in the Republic of San Marino; d) respect in the home country of conditions of reciprocity or, in the absence thereof, favorable deliberation by the Credit and Savings Committee; e) prior consent of the Supervisory Authority of the home country to the opening of the BRANCH in San Marino and to the carrying out of the activities chosen by the bank supervised by it; f) existence of a endowment fund not less than the minimum share capital established for Sammarinese banks; g) submission of a three-year program concerning the activity of the BRANCH; h) compliance with the requirements and criteria referred to in Title II of Part IV, by the HEADS OF THE BRANCH; i) possession of the authorization to carry out banking activity, also through a BRANCH or under the regime of PROVISION OF SERVICES WITHOUT ESTABLISHMENT, in one or more of the countries that, with regard to the fight against financial crime

(money laundering of illicit proceeds, usury, financing of terrorism, etc.) are not included in the list of high-risk countries referred to in Article 16-undecies of Law 17 June 2008 No. 92.".
19. Letter d) of paragraph 1 of Article III.VI.2 is modified as follows:
"d) certificates and documentation referred to in Article III.II.3, letter e) regarding the HEADS OF THE BRANCH, together with copy of the resolutions of the administrative body by which the validity of the certificates was verified and the suitability of the HEADS OF THE BRANCH regarding the requirements and criteria provided for in Part IV of this Regulation;".
20. In Article III.VI.2, after paragraph 2, the following paragraph is inserted:
"3. In the event of changes that affect the accuracy of the information and documentation provided in the authorization application submitted, the requesting foreign bank must inform the CENTRAL BANK without delay.".
21. Paragraph 1 of Article III.VI.4 is replaced as follows:
"1. The HEADS OF THE BRANCH, equally or substantially equivalently to what is provided by Part IV of this Regulation for Sammarinese banks, must meet:
a) the honorability requirements and correctness criteria required for CORPORATE OFFICERS; b) the professionalism requirements and competence criteria required for the HEAD OF THE EXECUTIVE STRUCTURE; c) the independence requirements required for the General Director; d) the criteria relating to availability of time and limits on the accumulation of offices referred to in Chapter IV, of Title II of the aforementioned Part IV.".
22. Article III.VI.5 is replaced as follows:
"Article III.VI.5 - Authorization Procedure
1. The foreign bank submits the application for authorization to open the BRANCH to the Supervision Department of the CENTRAL BANK using the methods indicated in Article III.II.6 or by courier.
2. The CENTRAL BANK, within the terms referred to in Article III.II.7, communicates in writing to the foreign bank the acceptance or denial of the authorization.
3. The aforementioned term may be:
a) suspended, if aspects emerge from the examination of the information that make further in-depth analysis necessary or if it is necessary to request further information from the Supervisory Authority of the home country; b) interrupted, if the documentation submitted is incomplete or inadequate.
4. The provisions of Articles III.II.8 and III.II.9 apply to cases of suspension and interruption.
5. For the beginning of operations, the approval of the CENTRAL BANK referred to in Article 9 of the LISF is not required.

6. The BRANCH of a foreign bank, which has begun operations towards the public, must immediately communicate this in writing to the CENTRAL BANK.".
23. Paragraph 1 of Article III.VI.8 is replaced as follows:
"1. The issuance of the authorization is subject to the verification of the following conditions:
a) existence in the home country of the foreign bank of adequate regulation in matters of supervision, also on a consolidated basis, which also includes the activity carried out abroad; b) existence of specific agreements for the exchange of information with the competent authorities of the home country; c) authorization and effective carrying out in the home country of the services intended to be provided in the Republic of San Marino; d) respect in the home country of conditions of reciprocity or, in the absence thereof, favorable deliberation by the Credit and Savings Committee; e) prior consent of the Supervisory Authority of the home country to the application for the provision of services without establishment in San Marino by the bank supervised by it; f) conformity of the service provision methods to the norms applied to Sammarinese banks for the provision of the same services or equivalent services; g) possession of the authorization to carry out banking activity, also through a BRANCH or under the regime of PROVISION OF SERVICES WITHOUT ESTABLISHMENT, in one or more of the countries that, with regard to the fight against financial crime (money laundering of illicit proceeds, usury, financing of terrorism, etc.) are not included in the list of high-risk countries referred to in Article 16-undecies of Law 17 June 2008 No. 92.".
24. In Article III.VI.9, after paragraph 1, the following paragraph is inserted:
"2. In the event of changes that affect the accuracy of the information and documentation provided in the authorization application submitted, the requesting foreign bank must inform the CENTRAL BANK without delay.".
25. Paragraph 1 of Article III.VI.10 is replaced as follows:
"1. For the authorization procedure, reference is made to the provisions set forth in Article III.VI.5 with reference to the application for opening a BRANCH by the foreign bank.".
26. Letter b) of paragraph 1 of Article III.VI.13 is modified as follows:
"b) in the country of origin, respect for conditions of reciprocity is guaranteed or, in the absence thereof, a favorable deliberation is adopted by the Credit and Savings Committee;".
27. Paragraph 3 of Article III.VII.1 is replaced as follows:
"3. The CENTRAL BANK, within one hundred and eighty days from receipt of the application, communicates in writing to the bank the acceptance or denial of the authorization, in conformity with what is provided for in the previous Part II, Title II.".
28. In Article III.VII.1, after paragraph 5, the following paragraph is inserted:

"6. In cases where the term has been interrupted or suspended, the authorization or denial measure must nevertheless be issued within twelve months from the date of receipt of the application.".
29. Article III.VII.3 is modified as follows:
"Article III.VII.3 - Revocation of Authorization

1. The CENTRAL BANK, pursuant to Article 10 of the LISF, may revoke the authorization to exercise banking activity in cases where the authorized subject:
   a) no longer meets the requirements of:
   1) Part III, Title III and/or Article III.V.9, for Sammarinese banks;
   2) Article III.VI.1, for Sammarinese branches of foreign banks;
   3) Articles III.VI.8 or III.VI.13, for foreign banks without establishment or with representative offices;
   and any other requirement to which the authorization is subject or does not inform the CENTRAL BANK of relevant changes in this regard; b) does not use the authorization/approval within twelve months or expressly renounces it pursuant to what is provided in Article III.VII.2; c) has ceased to exercise, for more than six months, any activity for which it obtained authorization; d) obtained the authorization/approval by submitting false declarations or documents, or resorting to other irregularities; e) has a deed of incorporation not conforming to the draft submitted for the purpose of authorization; f) constitutes a threat to the stability of the system or to confidence in it by continuing its activity; g) has seriously and systematically violated the provisions regulating the exercise of the reserved activity for which it obtained authorization.
   2. For the purposes of letter c) of the preceding paragraph, the absence, for the period indicated therein, of contracts in force, concluded within the exercise of the reserved activity, is relevant.
   3. The CENTRAL BANK may also revoke the authorization to exercise banking activity in the cases provided for in Article 6 of Delegated Decree 26 March 2019 No. 50.".
   30. The heading of Title II of Part IV is modified to "Requirements and Criteria".
   31. The heading of Chapter I of Title II of Part IV is modified to "Honorability Requirements and Correctness Criteria".
   32. The heading of Article IV.II.1 is modified to "Honorability Requirements".
   33. Letter d) of paragraph 1 of Article IV.II.1 is modified as follows:
   "d) having not held the office of CORPORATE OFFICER in FINANCIAL ENTERPRISES subject in the last five years to RIGOROUS PROCEDURES.".