S.L. 371.9 Art. 25Compensation Contribution.

(1) Subject to regulation 23 (2), the Scheme may require members to pay a Compensation Contribution at least once in every financial year, commencing from the financial year ending 31

December 2016. The Compensation Contribution shall be allocated to the available financial means.

(2) If the available financial means of the Scheme are insufficient to repay depositors when deposits become unavailable, the Scheme shall require members to pay an extraordinary Compensation Contribution not exceeding 0.5% of their covered deposits per financial year. The Scheme may in exceptional circumstances and with the consent of the competent authority require higher contributions.

(3) The Compensation Contribution (including any extraordinary Compensation Contribution) shall be based on the amount of covered deposits (excluding temporary high balances) of each member and the degree of risk incurred by the respective member:

Provided that a member may be required to pay a minimum contribution under a Compensation Contribution irrespective of the amount of its covered deposits or its degree of risk. For the avoidance of doubt and saving the provisions of these regulations, the annual compensation contributions shall be determined by the Scheme for each member having regard to:

(a) the applicable percentage of the covered deposits of its members as specified under regulation 23(2);

(b) the covered deposits of each member at the end of the year immediately preceding the relevant financial year;

(c) the degree of risk incurred by each member by reference to an aggregate risk weight in terms of regulation 25(5) for the year immediately preceding the relevant financial year; and

(d) an adjustment coefficient in terms of regulation 25(6).

(4) Subject to the provisions of sub-regulation (3), the competent authority shall by banking rules establish:

(a) a method (hereinafter referred to as the "risk-based method") for determining the degree of risk incurred by members;

(b) a method (hereinafter referred to as the "Compensation Contribution method") for determining the amount of Compensation Contribution due by each member in each financial year: Provided that:

(i) the competent authority may review or amend any risk-based method or Compensation Contribution method, account being taken where appropriate of any guidelines which may be issued by the European Banking Authority;

(ii) the competent authority shall inform the European Banking Authority about the risk-based method.

(5) The competent authority shall determine at least once in every financial year the Aggregate Risk Weight for each member

(ARWi) in accordance with the risk-based method for the purpose of determining the compensation contribution in respect of the relevant financial year.

(6) The competent authority shall determine at least once in every financial year the Adjustment Coefficient (µ) for all members with the aim of reaching the target level whenever the total risk-adjusted contributions would be too high or too low for the purpose of determining the compensation contribution in respect of the relevant financial year.

(7) Every member shall provide to the competent authority the information required for the determination of the Aggregate Risk Weight of that member.

(8) Subject to the provisions of regulation 23(3), the Scheme may provide that a portion of a Compensation Contribution be provided to the Scheme by means of a payment commitment.

(9) The competent authority may issue banking rules in order to review and amend the effective date or percentages indicated in sub-regulation (8).

(10) Any payment commitment shall become payable to the Scheme on the Scheme’s demand. The payment commitment of a member shall also become payable to the Scheme whenever that member ceases to be licensed in Malta for any reason whatsoever:

Provided that when a member ceases to be licensed on account of a merger with or acquisition by another member, the Scheme may, at its discretion, either:

(a) demand payment of the payment commitment; or

(b) require that the payment commitment is transferred to the other member which has acquired the member who has ceased to be licensed in Malta or with which the latter member has merged.

(11) Details on the type of assets which may be accepted as collateral for Payment Commitments and on the modalities used to implement such Payment Commitments may be specified by banking rules.

(12) The value of assets comprising collateral for the Payment Commitments shall be the market value of such assets, determined in accordance with such discounting rules ("Valuation Haircuts") as shall be established by banking rules.

(13) The assets comprising collateral for the Payment Commitments shall be denominated in euro irrespective of the currency of the covered deposits.

(14) A member may not switch from one asset comprising collateral for the Payment Commitments to another asset, without the prior written consent of the Scheme.

(15) A member may, with the prior approval of the Scheme, pay the equivalent amount of the Payment Commitments directly with the Scheme, in which case such payment shall be on account of the member’s liability under sub-regulation (8), and the provisions of this regulation shall, where applicable, also be applicable to such payment. No interest shall be payable by the Scheme to the member in respect of such payment. The Scheme may, in its absolute discretion, request the member to substitute such payment with the Payment Commitments due under these regulations.