The Malta Financial Services Authority has passed with flying colours an independent assessment of its compliance with the Basel Core Principles on financial sector supervision.
The study by three assessors, led by the International Monetary Fund’s former assistant director Piero Ugolini, revealed “strong progress” over a similar test last carried out in 2003.
The Basel principles are issued by the Basel Committee on Banking Supervision, which provides an international forum for regular cooperation on banking supervisory matters. It aims to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide.
Presenting the findings to Prime Minister Lawrence Gonzi, Mr Ugolini said the assessment showed significant improvement in the MFSA’s overall compliance, mostly due to transposition of EU Directives when Malta joined in 2004.
He said the report also highlighted the resilience of Malta’s financial sector, especially in these times of shocks.
The assessment, carried out last year, covered the MFSA’s sections on banking, insurance and securities. Mr Ugolini said that although Malta’s overall rating was positive, there were some issues which the authority still had to address, primarily the problem of recruitment of staff.
He said MFSA’s recruitment was being hindered by an administrative circular issued by the Office of the Prime Minister in 2005. As a result of this circular, with imposes a “cumbersome process”, the authority’s recruitment process takes several months, with the obvious effect this has on the workload for the authority’s staff.
The report also recommended changes to its legislation in the case of dismissal of a board member whereby the reason is publicly disclosed.
Mr Ugolini’s report said the MFSA was compliant in 21 of 26 principles and largely compliant in the rest. The principles range from independence and transparency to capital adequacy; from liquidity risk to supervisory approach.
In 2003, the authority was compliant in 11 principles and largely complied in 12. Then, there was only one sector in which the MFSA was materially non-compliant.
The MFSA’s banking area saw the most substantial progress since the last report, Mr Ugolini said.
He criticised the fact that the law did not specifically state the MFSA was the competent authority in the supervision of the Maltese financial sector.