On January 7, the MFSA presented a report on an assessment that was carried last year on the MFSA’s regulatory structures. The assessment was carried out by an independent team of assessors comprising Piero Ugolini, a former assistant director at the IMF and mission chief of the IMF/World Bank team that had conducted the 2002/3 FSAP exercise, Richard Nun, a former deputy director of the Texas Banking/Finance Commission, Austin-Texas, and currently peripatetic expert in banking supervision at the IMF and Centennial Group, Washington D.C., together with Michael Kehr, senior advisor International Policy/Affairs at BaFin, Bundesanstalt fur Finanzdienstleistungsaufsicht, Federal Financial Supervisory Authority of Germany.
The assessment was based on Basel Core Principles (BCP), the International Organisation of Securities Commission (IOSCO) and the International Association of Insurance Supervisors (IAIS).
Government and other leading personalities together with top representatives of licensed companies were present for the presentation including Prime Minister Lawrence Gonzi and the Minister for Economy, Finance and Investment, Tonio Fenech.
Since its setup in 2002 as the single regulator for financial services, the MFSA has worked to ensure the creation of a reputable financial centre. As part of the initial efforts, the IMF / World Bank were requested in late 2002 and early 2003 to conduct a Financial Sector Assessment Programme (FSAP). The assessment concluded that Malta’s financial system appeared to be healthy and well supervised, with a comprehensive legal framework and strong adherence to most international standards and codes for regulatory and supervisory practices.
EU membership provided a further assessment of the MFSA’s regulatory and supervisory regimes prior to accession in 2004 which has proved to be an important catalyst for the further development of the financial services industry.
In order to maintain the highest standards in regulation and supervision, the Board of Governors of the MFSA requested that an internal audit of the MFSA regulatory activities is carried out every two to three years following the IMF/World Bank assessment. Internal audits were carried out in 2005 and 2007. A further internal audit was due to be carried out in 2009, however, because of the number of new legislative changes coming into force at EU level and because of changes in composition of the Supervisory Council, the internal audit was postponed to 2010.
The board, noting that increased transparency was being requested from companies following the global financial crises, decided that the 2010 internal audit should take the form of an independent assessment and should be carried out using the same format as the FSAP, and this assessment and future assessments should be made public.
Following the publication of the De Larosiere Report 1 recommending increased emphasis on supervision, the EU Commission has moved towards the creation of three European Supervisory Authorities to deal with banking, insurance and pensions, securities and markets supervision. These authorities will periodically organise and conduct peer review analyses of some or all of the activities of competent authorities, to further enhance consistency in supervision across all member states. It is envisaged that when conducting peer reviews, existing information and evaluations already made with regard to the competent authority concerned shall be taken into account by the new authorities. This independent assessment therefore assumes greater importance for the reputation of the MFSA.
The overall outcome of the assessment was that progress was noted in all sectorial assessments with the banking sector having made the most progress. With regards to insurances, the recent extensive changes in the principles did not allow a proper comparison between the assessments. In the securities sector, progress was made from an already relatively 2002/3 positive assessment.
1 De Larosiere: The high-level group on financial supervision in the EU. Report 2009
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