supervise financial institutions
The Malta Financial Services Authority is responsible for the supervision of entities authorised under the Financial Institutions Act (Cap. 376). These entities, referred to as ‘financial institutions’, fall in two broad categories:
i) Institutions undertaking payment services and/or the issuance of electronic money (more commonly known as ‘payment institutions’ or ‘electronic money institutions’, respectively);
ii) Financial Institutions undertaking other activities such as lending, financial leasing, the provision of guarantees and commitments, foreign exchange services and money brokering.
The Financial Institutions Act, Financial Institutions Rules and other pieces of subsidiary legislation transpose the provisions of the second Payment Services Directive and the second Electronic Money Directive, applicable to authorised payment and electronic money institutions.
The Authority applies a risk-based approach in order to effectively supervise financial institutions. This approach requires the Authority to assess both the system-wide and individual risk posed by each financial institution in order to coordinate its supervisory activities accordingly and allocate its resources to the financial institutions posing the greatest risks.
Those Institutions which are designated as posing the greatest risk are subject to enhanced ongoing supervision which involves:
i) on-site inspections to analyse in detail the different risks, internal control systems, business models or governance of financial institutions;
ii) off-site supervision to continuously monitor the activities of financial institutions through the information which such institutions are required to submit in terms of their legal obligations (such as periodic regulatory returns, financial statements and other documentation submitted).
Conduct supervision of the banking sector regulates, oversees and sanctions the conduct of supervised institutions offering retail banking products and services, based on the existing legal requirements in Malta and also the impositions arising from the European Union’s Directives and Regulations and respective requirements. It aims to ensure:
- compliance with integrity, suitability and competence criteria by the institutions supervised and their staff;
- verification of the rules applying to the offering of banking products and services;
- disclosure of clear, comprehensive and up-to-date information about the banking products and services offered, before and while the contracts are in force.
This supervision is carried out both through on-site and off-site inspections, which results and respective required action to be taken by credit institutions are after communicated to the latter. In those cases where thematic reviews take place, besides the communication to credit institutions in a one to one basis, the Authority also establishes best practices, through Circulars addressed to the respective institutions, and which the latter must follow in their interaction with their customers.
This section provides a list of the main Acts and subsidiary legislation which lay down the framework of the regulatory and supervisory regime applicable to financial institutions. These provide the regulatory structure for the supervision of these entities and include, amongst others, the powers of the MFSA to grant, refuse, cancel and suspend licences issued to financial institutions and to impose administrative penalties on these entities in specific circumstances. The Financial Institutions Act (Chapter 376 of the Laws of Malta), which is the main legislation, also contains enabling clauses allowing the Minister responsible for the regulation of financial services to issue subsidiary legislation as well as the MFSA, as competent authority, to issue Rules to further supplement the provisions in the Act.
In this section you will find the Acts of Parliament which lays down the framework of the regulatory regime applicable to banking and additional subsidiary legislations relating to the supervision of banking.
BR/01/2020 Application Procedures And Requirements For Authorisation Of Licences For Banking Activities Under The Banking Act 1994
BR/02/2011 Large Exposures for Credit Institutions Authorised Under the Banking Act 1994
BR/03/2012 Own Funds of Credit Institutions Authorised Under the Banking Act 1994
BR/04/2013 Capital Requirements Of Credit Institutions Authorised Under the Banking Act 1994
BR/05/2007 Liquidity Requirements of Credit Institutions Authorised Under the Banking Act 1994
BR/06/2007 Statutory Financial Information To be Submitted By Credit Institutions Authorised Under the Banking Act 1994
BR/07/2014 Publication of Annual Report And Audited Financial Statements of Credit Institutions Authorised Under The Banking Act 1994
BR/08/2012 Capital Adequacy Of Credit Institutions Authorised Under the Banking Act 1994
BR/09/2016 Measures Addressing Credit Risk Arising From the Assessment Of the Quality of Asset Portfolios Of Credit Institutions Authorised Under the Banking Act 1994
BR/10/2013 Supervision On A Consolidated Basis of Credit Institutions Authorised Under The Banking Act 1994
BR/11/2007 Extension Of The Applicability Of The ‘Arm’s Length’ Principle By Credit Institutions Authorised Under The Banking Act 1994
BR/13/2009 Prudential Assessment Of Acquisitions And Increase Of Shareholdings In Credit Institutions Authorised Under The Banking Act 1994
BR/14/2020 Outsourcing By Credit Institutions Authorised Under The Banking Act 1994
BR/22/2020 Complaints-Handling Procedures for Credit Institutions Authorised under the Banking Act 1994
BR/02/2011 Large Exposures Of Credit Institutions Authorised Under The Banking Act 1994
BR/03/2012 Own Funds Of Credit Institutions Authorised Under The Banking Act 1994
BR/04/2013 Capital Requirements Of Credit Institutions Authorised Under The Banking Act 1994
BR/07/2013 Publication Of Annual Report And Audited Financial Statements Of Credit Institutions Authorised Under The Banking Act 1994.
BR/08/2012 Capital Adequacy Of Credit Institutions Authorized Under The Banking Act 1994
BR/10/2013 Supervision On A Consolidated Basis Of Credit Institutions Authorised Under The Banking Act 1994
BR/12/2013 The Supervisory Review Process Of Credit Institutions Authorised Under The Banking Act 1994
BR/03/2008 Own Funds of Credit Institutions Authorised Under the Banking Act 1994
BD/04/2002 Solvency Ratio Of Credit Institutions Authorised Under The Banking Act 1994
BD/06/2005 Statutory Financial Information To Be Submitted By Credit Institutions Under The Banking Act 1994
Superseded Banking Rules
BR/14/2019 Outsourcing By Credit Institutions Authorised Under The Banking Act 1994
In this section you will find the Conduct Rules applicable to credit and financial institutions by the MFSA. These Rules supplement the requirements contained in the Main Legislation and in the Subsidiary Legislation which applies to credit and financial institutions. They address in more detail certain requirements such as disclosures, product oversight and governance, selling processes, management of conflicts of interests. Credit and financial institutions are legally bound to comply with these Rules.
In this section, you will find the Circulars issued by the Authority which are applicable to the conduct supervision of credit institutions. These Circulars are a means of keeping the industry updated mainly on regulatory matters. Circulars may be issued to provide updates and clarifications in relation to requirements emanating from banking – related regulatory requirements (for example the Payments Accounts Regulations); to inform the industry on proposed decisions taken by the MFSA and to inform the industry on any relevant documents published by the European Banking Authority (EBA).
In this section you will find the Consultation Documents issued by the MFSA and which are of interest to credit institutions. These documents are issued to explain to the industry any new regulatory requirements which the Authority may be proposing to implement and the manner in which these will be implemented. During the consultation period, credit institutions will have the opportunity to provide their feedback which the Authority review. Following the consultation period, the Authority may issue the Feedback statement with a summary of the comments received in the course of the consultation period on that particular topic and the final position of the Authority with respect to the matters forming the subject of the consultation.