Updated at 4.15pm with PN statement
The Malta Financial Services Authority has defended Malta, Bank of Valletta and itself against a critical report by Standard and Poor’s rating agency.
Credit ratings agency Standard and Poors on Wednesday highlighted increased reputational and operational risks for Malta’s banking sector, moving its risk score up two notches on its 10-point scale. The rating also affected Bank of Valletta’s rating.
Read: Malta's banking sector reputation 'could be at risk', say Standard & Poors
The MFSA on Thursday insisted that the banking sector remained resilient and profitable with local banks benefiting from a steady operating environment and an expanding economy.
It noted that Bank of Valletta was subject to direct supervision of the European Central Bank, although the MFSA engages on an ongoing basis both with the ECB and Bank of Valletta.
“The MFSA is confident that all de-risking measures including potential risks relating to legacy litigation are being addressed strategically by BoV within a long-term view of the business,” it said.
With reference to S&P’s comments regarding the governance of the financial services sector in Malta, the MFSA insisted that it had always supervised the banking sector very closely and continues to do so within a dynamic regulatory environment.
“In efforts to continue strengthening the authority, major reforms are underway in its organisational infrastructure including investment in top tier supervisory technology, increase in human Resources and technical capacity in order to enhance the efficacy and governance of the sector but also to address current and future challenges particularly in the RegTech and FinTech space,” it said.
PN blames downgrade on supervision
The Nationalist Party was having none of it, though, and said in a statement that the downgrade was the direct result of "the deterioration in level and quality of supervision of the financial services sector".
"Pilatus Bank should never have been licensed to operate in Malta. The authorities not only licensed it but also allowed this bank to operate with impunity. These authorities, including the Malta Financial Services Authority and FIAU, fall under the direct ministerial responsibility of Minister Edward Scicluna who must now shoulder his responsibility for yet another damning review of his handling of Malta's financial services sector," finance spokesman Mario de Marco said.
He noted that although Minister Edward Scicluna said in April 2016 that strong and tough decisions had to be taken by the Prime Minister regarding the revelations in the Panama Papers, these decisions were never taken.
"Minister Scicluna himself did nothing to protect our financial services sector, choosing instead to protect his colleagues. Minister Scicluna now has to take a tough decision himself. He must show whether he is capable of assuming political responsibility for the institutional failures that led to the reputational downgrade of Malta's most important economic sector," he said.