The Malta Financial Services Authority is to carry out a number of reforms in 2015 in order to enhance the protection of consumers where these are disadvantaged in transactions with financial service providers, chairman Joseph Bannister has told The Business Observer.
These will include an enhanced institutional framework, an improved regulatory framework and a strengthened enforcement regime.
“During the past year the MFSA, following the introduction of the Single Supervisory Mechanism under the European Central Bank, has been working on the introduction of legislation and practice wide-ranging initiatives at EU level which underpin a stronger focus on good customer outcomes in investment services, insurance and banking,” Prof. Bannister said.
The MFSA chairman said the current international emphasis on prudential regulation, that seeks to promote stable and fair markets, is a principle which also drives consumer confidence and fosters positive financial outcomes for consumers.
“However, a new emphasis on the conduct of business was the initiative taken by the G20 in February 2011, which called on the OECD and other international institutions to develop common principles on consumer protection in the field of financial services.
The MFSA is to embark on a major internal restructuring exercise
“The creation of a separate conduct regulator in the UK, the US and other jurisdictions reflects this new prioritisation for conduct of business in financial services,” he said.
He said the MFSA is to embark on a major internal restructuring exercise to reflect these international priorities in 2015.
He added: “The MFSA is currently preparing legislative proposals for the adoption of a conduct-of-business regime, and the revised MFSA Act will also establish a more defined enforcement process and an internal audit function as required under the ECB to enhance the systematic evaluation of MFSA’s governance processes, internal controls and risk management.”
Malta’s economic development
Prof. Bannister said the proposed legislative changes together with the set of rules for enforcement and conduct-of-business rules will be published for consultation in 2015.
“The proposed changes will be supported by the setting up of the Financial Services Arbiter. The MFSA has made recommendations to the government for the setting up of this office which will be a specialised, single and independent dispute-resolution authority.”
Prof. Bannister said the MFSA faces a challenge to continue making Malta attractive for international finance. The authority, he said, has been reviewing insurance legis-lation for some time as part of its efforts to introduce innovation within the existing EU legislation.
“Specific legislation for redomiciliation of insurance companies followed by the Protected Cell Company legislation and more recently as part of the drive to introduce capital markets activity, legislation for reinsurance special purpose vehicles was introduced. However, this latest introduction – the Securitis-ation Cell Company legislation – allows securitisation vehicles to set up cell structures.
The financial services industry has continued to expand
“This is a unique type of legis-lation not available in any other jurisdiction as it allows a single cell to issue separate tranches, to transact in different currencies and keep accounts in the currency of choice. The Securitisation Cell Company is also applicable for all types of securitisation transactions,” he said.
Prof. Bannister told The Business Observer that various other pieces of legislation and rules are expected to be published during 2015. Regulations regarding a revised Companies Act Tenth Schedule for the establishment of investment funds as limited partnerships are expected in the new year as well as the rules for Personal and Occupational Pensions under the Retirement Pensions Act. These rules aim to further enhance the development of the international pensions sector.
Prof. Bannister said that in spite of the global economic crisis, the country’s financial services industry has continued to expand and to be instrumental in Malta’s economic development, to job creation, and to the building of a competitive infrastructure for the islands’ financial services industry.