The top five local accountancy firms are involved in the supervisory exercise of three local banks as part of the quality review of EU assets, Finance Minister Edward Scicluna told Parliament on Tuesday.
The ongoing exercise, held with the help of foreign experts, included the value of collateral when individuals sought borrowing from the banks HSBC, Bank of Valletta and Deutsche Bank.
Introducing the Investment Services (Amendment) Bill in second reading, Prof Scicluna said the Capital Requirements Directive (CRD) aimed to prevent financial crises through close supervision of the assets of credit institutions. The government debt of many European countries had blown up due to the bailout they had given to banks and the directive aimed to prevent this happening again.
The minister said that the EU directive also included resolution, with the main objective being that taxpayers would not have to pay for bailing out insolvent financial institutions.
EU member states had dished out €600 billion in bailing out such banks.
Local banks would have to provide more detailed information to the financial authorities under the resolution mechanism.
The resolution fund would operate with €55 billion in capital to protect taxpayers. This would also lead to harmonisation and simplification through a compensation scheme which protected depositors. Prof Scicluna said that this would lead to more confidence by depositors but better financial stability.
Maltese investors had lost millions of euros during the world financial crisis between 2008 and 2012. The minister concluded that once the Bill became law putting the EU directive into practice, it would bring peace of mind to Maltese depositors locally and abroad through the setting up of authorities providing meticulous supervision of local and foreign banks.
Opposition finance spokesman Tonio Fenech said that the EU finance ministers had originally designed the directive in such a way that all Maltese banks would have had to undergo the asset quality review now being undertaken by three local banks.
He said that then, as Malta’s finance minister, he had resisted this option and a compromise had been reached on a threshold of the number of banks in each memebr state to be audited under this new EU framework.
Mr Fenech called on the government to assess the impact that this directive would have on operations by financial institutions in Malta.
He declared the Opposition agreed with the Bill as it provided the necessary financial and banking architecture to prevent financial crises similar to those between 2008 and 2012.
This crisis had led to the setting up of a regulatory framework aimed at bringing peace of mind to investors and taxpayers. European and local financial institutions had to examine their borrowing needs portfolio focusing on the collateral assets which had to guarantee this borrowing.
Also contributing to the debate were Minister Chris Cardona, Labour MP Charles Mangion, government whip Carmelo Abela and Nationalist MP Kristy Debono. The Bill was unanimously approved.
The House has now risen for the Easter recess and will meet again on Monday, May 5.