MFSA to Focus on Long-Term Sustainability of Financial Sector in 2021

MFSA has recalibrated its position and regrouped its strategic priorities under three key areas, which are supervisory transformation, fostering a stronger compliance culture, and innovation and growth. MFSA highlights the following key points in the strategic update:

• Before the end of 2021 and progressively thereafter, supervisory processes will become more digitally centric and the convergence of risk modeling frameworks will be completed as MFSA aims for data (quantitative) risk driven supervision for all sectors.
• Going forward, MFSA will continue to strengthen and refine the data inputs and parameters underpinning all levels of its supervisory risk model allowing for improved trends analysis and vulnerability assessments related to stability and soundness, governance and risk management practices, money laundering and terrorist financing risks, cybersecurity risk, and adverse reputational impact at entity, sectoral, and cross-sectoral levels.
• During 2021 and beyond, MFSA will continue to upgrade and update supervisory policies and processes while encouraging digital transformation and adoption of best practices by regulated entities.
• MFSA will be reviewing the positive and any negative impact brought about by the implementation of EU regulations and seek to identify the means to ensure and facilitate market wide, consistent compliance with the requirements as early as possible. To this end, MFSA will be consulting with stakeholders, including experts in the field, and publishing a discussion paper during 2021, holding information and discussion meetings, and enhancing awareness and deeper understanding among various market players and investors. MFSA plans to steer its focus on the development of a supporting framework to facilitate the greening of finance, financing green investments, and creation of a sustainable finance node in Malta.

In addition, MFSA announced that it will not take the option to apply the provisions to insurance intermediaries and investment firms, which employ fewer than three persons as outlined under Article 17(1) of the Sustainable Finance Disclosure Regulation (SFDR). As a result, the SFDR shall not apply to such insurance intermediaries that  provide insurance advice with regard to insurance‐based investment products and to investment firms that provide investment advice. Article 17(1) of the SFDR exempts insurance intermediaries that provide insurance advice with regard to insurance‐based investment products and investment firms that provide investment advice that are enterprises irrespective of their legal form, including natural persons and self-employed persons, provided that they employ fewer than three persons. Finally, MFSA notified about a webinar organized for Non-Executive Directors and professional advisors on the regulatory expectations of Bank boards. The webinar addressed various subjects including the role of the Non-Executive Director in business planning and stress testing, role of the Non-Executive Director in the oversight of a three lines of defense model, MFSA’s minimum engagement level for banks and interviews with Non-Executive Directors and anti-money laundering (AML) challenges facing banks and expected standards.

Related Links

• Notification on Strategic Update
• Strategic Update (PDF)
• Circular on SFDR (PDF)
• Notification on Webinar

Keywords: Europe, Malta, Banking, Insurance, Securities, SFDR, Sustainable Finance, Climate Change Risk, ESG, Governance, Disclosures, Green Finance, Fintech, Credit Risk, MFSA