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Malta’s Banking Regulation: An Overview

The Malta Financial Services Authority (MFSA) plays a crucial role in regulating and supervising banks in Malta. In this article, we will explore the history of banking regulation in Malta, the responsibilities of the MFSA, and its priorities for 2021.

Role of the MFSA

In 1994, the Banking Act was introduced to regulate the banking industry and implement European Union Directives into Maltese law. The MFSA, through Article 4B of the Banking Act, is granted the power to license, regulate, and supervise credit institutions, electronic money institutions, and financial institutions in Malta.

The MFSA forms part of the Single Supervisory Mechanism (SSM), which establishes the European Central Bank (ECB) as the central prudential supervisor of credit institutions in the Euro area. The authority is responsible for:

  • Off-site and on-site inspections of banks
  • Assessing governance, risk management, and compliance with regulatory requirements

Supervisory Priorities for 2021

For 2021, the MFSA’s supervisory priorities include:

  • Assessing the governance of credit and financial institutions
  • Expanding its communication channel and training strategy to support board development
  • Evaluating the effectiveness of boards
  • Assisting business model viability of banks in light of the COVID-19 pandemic

Additionally, the MFSA plans to release Conduct of Business Rules for the banking sector, which will require banks to:

  • Conduct creditworthiness assessments when granting facilities
  • Ensure that these assessments are sufficient

Focus on Risk Management

The MFSA is placing increased emphasis on risk management, requiring banks to:

  • Invest further in their risk and compliance infrastructures
  • Provide additional resources
  • Assess the quality of controls
  • Report on credit risk
  • Prepare for higher credit risk profiles

Conclusion

In conclusion, the MFSA’s priorities for 2021 aim to strengthen its supervisory and regulatory capacity by developing new functions covering financial crimes, conduct, ICT, and cybersecurity. The authority will continue to expand and intensify its supervision, focusing on risk management and compliance culture within banks in Malta.