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Financial Regulation Updates in Malta

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The European Union has introduced several new financial regulations, which have recently entered into force or are set to take effect in the coming months. These regulations aim to strengthen the financial sector and promote sustainable practices.

Key Developments

  • The Digital Operation Resilience Act (DORA) was published in December 2022 and will come into effect on January 5, 2025. DORA requires credit institutions to implement a risk management framework, report major incidents, and undergo threat-led penetration testing.
    • The aim is to make institutions more resilient in the digital age.
  • The Corporate Sustainability Reporting Directive (CSRD) entered into force on January 5, 2023. CSRD expands the scope of non-financial reporting and promotes sustainable practices by requiring companies to report on their environmental, social, and governance performance.

European Sustainability Reporting Standards

The CSRD also introduces a new set of European Sustainability Reporting Standards (ESRS) that will cover environmental, social, and governance matters. The EU Commission is expected to issue delegated acts in the coming months, which will draw upon technical advice from the European Financial Reporting Advisory Group (EFRAG).

Credit Institutions

Credit institutions are encouraged to carry out internal analysis to understand the implications of these regulations.

Covered Bonds Directive

The Covered Bonds Directive has also been implemented, aiming to harmonize supervision and treatment of covered bonds across the EU. The directive requires credit institutions to issue such instruments as a financing tool, subject to certain conditions.

Banking Rules Updates

In terms of banking rules, several updates have been issued by the Malta Financial Services Authority (MFSA). These include:

  • Amendments to the Banking Rule BR/01 on Application Procedures and Requirements for Authorization of Licences for Banking Activities
  • Updates to the Banking Rule BR/02 on Large Exposures and BR/09 on Measures Addressing Non-Performing Exposures and Forborne Exposures

Implementation Guidance

The MFSA has also published circulars and guidelines to clarify the implementation of these regulations. These can be accessed on the MFSA’s website.

Conclusion

Overall, these regulatory updates aim to strengthen the financial sector in Malta and promote sustainable practices. Credit institutions are advised to plan accordingly and ensure compliance with the new requirements.