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    MFSA Sets Out Supervisory Priorities, Issues Reporting Updates

    March 02, 2023

    The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023, updated the supervisory reporting requirements for reporting framework 3.2, and published circulars on the draft regulatory technical standards on identification of groups of connected clients and on criteria for identifying shadow banking entities under the Capital Requirements Regulation (CRR or 575/2013).

    Below are the key highlights of these regulatory developments:

    • The supervisory priorities for 2023 build on the strategic objectives set out in the recently published MFSA Strategic Statement. The three high-level supervisory priorities for 2023 include resilience of supervised entities, digital finance, and sustainable finance. Apart from the high-level supervisory priorities, the Authority highlights three ongoing priorities namely Governance, Risk & Compliance, Financial Crime Compliance, and Consumer Protection & Education, which are considered crucial in the context of its day-to-day processes. The supervisory priorities for 2023 were identified following careful consideration of the market environment and regulatory developments, as well as the European Supervisory Authorities’ priorities, those of the European Central Bank (ECB) and the direction provided by the European Commission. The recommendations of international standard-setters, and MFSA’s own regulatory and supervisory experience were also taken into account.
    • MFSA published circulars on the draft regulatory technical standards, which, in conjunction with the EBA Guidelines on connected clients (EBA/GL/2017/15), provide the complete framework for the identification of two or more natural or legal persons who are so closely linked by idiosyncratic (individual) risk factors, that it is prudent to treat as a single risk. The draft regulatory technical standards elaborate on conditions that lead to the identification of two or more legal persons being connected through control relationship, economic dependency, or combination of both. While the draft regulatory technical standards on criteria for the identification of shadow banking entities ensure consistent implementation from a prudential point of view of the large exposures framework. The draft standards on shadow banking address criteria for identifying both shadow banking and non-shadow banking entities, definition of banking activities and services, and criteria for excluding entities established in third countries from being deemed as shadow banking entities, differentiating between institutions and other entities. MFSA requires credit institutions to take note of the conditions set out in both draft regulatory technical standards, which are expected to be adopted by the European Commission in due course.
    • MFSA updated the guidelines to supervisory reporting requirements for credit institutions and foreign bank branches relating to the reporting framework version 3.2. MFSA also updated supervisory reporting modules on net stable funding ratio, remuneration benchmarking, remuneration benchmarking of high earners, gender pay gap, and approved higher ratios, which are applicable as from reference date December 2022. In addition, MFSA updated the guidelines for credit institutions to upload and review certain supervisory reporting data through the LH Portal. The updated guidelines cover addition of an attribute that will be included in the summary of the ECB’s feedback.

     

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    Keywords: Europe, Malta, Banking, Basel, Regulatory Capital, Reporting, CRR, Supervisory Priorities, Sustainable Finance, Digital Finance, Connected Clients, Shadow Banking, Large Exposures, NSFR, Remuneration Benchmarking, High Earners, LH Portal, Supervisory Reporting, MFSA

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