Malta Central Bank Statement

Author: | Published: 5 Sep 2017
Email a friend

Please enter a maximum of 5 recipients. Use ; to separate more than one email address.

The financial services industry plays an important role in Malta's economic development, operating on the back of a robust regulatory and supervisory framework that promotes financial stability. The World Economic Forum Competitiveness Report 2016-2017 ranks Malta 16th out of 138 for soundness of banks. Regulatory responsibilities at micro level lie with the Malta Financial Services Authority, whereas the Central Bank of Malta is the macroprudential authority. The Joint Financial Stability Board strengthens co-operation between the two institutions, ensuring implementation of the European Systemic Risk Board's recommendations. The European Central Bank (ECB) in its micro and macro responsibilities contributes to the resilience and stability of the financial system.

Following the financial crisis, Basel III was implemented in the EU in 2013. Malta transposed all EU laws into national regulation, reinforcing domestic banks' ability to withstand potential shocks. Overall, Maltese banks remained liquid and profitable with robust capital ratios.

The EU is transposing further Basel III reforms. In the first half of 2017, as Malta held the presidency of the Council of the EU, it initiated negotiations of these reforms. A number of milestones were reached in financial services: the proposed regulation regarding the transitional period for mitigating the impact of IFRS 9 on capital, given its forward-looking approach which is likely to increase somewhat credit loss provisioning; amendments to the large exposure framework regarding the exemption for exposures to certain sovereign debt of member states issued in a non-domestic EU currency; and the proposed directive on the ranking of unsecured debt instruments in the insolvency hierarchy. TLAC/MREL were also discussed. Sufficient time should be given for the build-up of these buffers, especially for countries whose banks rely on short-term deposit funding. Malta also recognises the importance of completing the Banking Union. Progress on the EU Commission's European Deposit Insurance Scheme proposal was also registered.

In the course of its presidency, Malta made significant progress on the Anti-Tax Avoidance Directive II and the Double Taxation Dispute Resolution Mechanism, contributing to the prevention of tax avoidance in non-EU jurisdictions and ensuring tax certainty. It also closed the Fourth Anti-Money Laundering Directive, which came into force on June 26 2017.

The high level of non-performing loans (NPLs) in the EU banking sector remains a challenge. Various international entities pronounced themselves on this issue. In Malta, banks' asset quality continued to improve while further measures have been taken through revised legislation requiring credit institutions to resolve their legacy NPLs.

Cyber risks should be high on the agenda of financial institutions and supervisors. Financial institutions need to remain vigilant to mitigate potential cyber risks. Supervisors should identify and measure cyber risks as part of their SREP assessment. Furthermore, while the banking industry is encouraged to embrace the benefits of fintech, regulatory authorities need to implement the necessary safeguards such as regulatory sandboxes.

While the potential effects of Brexit have been assessed to be contained as far as Malta is concerned, Brexit also offers challenges for the EU regulatory framework and supervision.

 


 

 

close Register today to read IFLR's global coverage

Get unlimited access to IFLR.com for 7 days*, including the latest regulatory developments in the global financial sector, updated daily.

  • Deal Analysis
  • Expert Opinion
  • Best Practice

register

*all IFLR's global coverage published in the last 3 months.

Read IFLR's global coverage whenever and wherever you want for 7 days with IFLR mobile app for iPad and iPhone

"The format of the Review has changed over the years; the high quality of its substantive content has not."
Lee C Buchheit, Cleary Gottlieb

register