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Malta’s Financial Services Regulation: A Year in Review

As the Maltese financial sector continues to evolve, it is essential to understand the regulatory framework that governs the industry. In this article, we will delve into the world of banking regulation and supervision in Malta, exploring the role of the Malta Financial Services Authority (MFSA) and its priorities for 2021.

The MFSA’s Origins

Established in 1994, the Banking Act introduced a regulatory framework aimed at ensuring the stability and integrity of the Maltese financial sector. Article 4B of the Act granted the MFSA the power to license, regulate, and supervise credit institutions, electronic institutions, and financial institutions in Malta.

The MFSA’s Role

As the competent authority responsible for supervising the banking industry, the MFSA plays a crucial role in ensuring that banks operate within the framework established by EU Banking Legislation. The Authority conducts on-site and off-site inspections to monitor compliance with regulatory requirements, assessing governance, risk management, and operational controls.

Supervisory Priorities for 2021

In light of the COVID-19 pandemic’s impact on the global economy, the MFSA has identified several key priorities for 2021. These include:

  • Governance: Assessing the governance of credit institutions and financial institutions as a sector-specific priority
  • Board Evaluation: Evaluating the effectiveness of boards, particularly Non-Executive Directors, and assessing succession planning
  • SREP Mitigation Actions: Continuing to assess the Supervision Review and Evaluation Process (SREP) mitigation actions taken by banks
  • Business Model Viability: Focusing on business model viability, including post-COVID viability and compliance costs
  • Credit Risk Analysis: Analyzing credit risk, asset quality, and preparedness for balance sheet and operational challenges
  • Capital and Funding Trajectories: Examining capital and funding trajectories

Conduct of Business Rules

The MFSA is set to release Conduct of Business Rules for the banking sector in the coming months. These rules will provide a framework for assessing creditworthiness and ensuring that banks operate in a manner consistent with regulatory requirements.

Conclusion

As Malta’s financial sector continues to evolve, it is essential that regulatory bodies adapt to emerging challenges. The MFSA’s priorities for 2021 demonstrate its commitment to strengthening supervision and regulation, ensuring the stability and integrity of the Maltese financial sector.