CBM Maintains CCyB at 0%; MFSA Publishes Study on Fintech Adoption
The Central Bank of Malta (CBM) decided to maintain the countercyclical capital buffer (CCyB) rate for banks at 0%, for the second quarter of 2023. The Malta Financial Services Authority (MFSA) issued a circular on the transposition of the Covered Bonds Directive, published a study on the state of digital transformation and fintech adoption within the Maltese financial services sector; it also announced the integration of financial institutions’ authorization and supervision teams, which were within the remit of the Banking Supervision function until end of February 2023, into Fintech Supervision, with effect from March 01, 2023.
The Covered Bonds Directive sets out principles for a pan-European framework for covered bonds and aims to harmonize the supervision and treatment of these instruments across European Union Member States. The purpose of the Directive is to regulate the conditions under which credit institutions can issue covered bonds as a financing tool, by laying down requirements for issuing covered bonds, the structural features of covered bonds, covered bond public supervision and publication requirements in relation to covered bonds. The circular highlights that the Covered Bonds Directive has been transposed by virtue of Financial Markets Act (covered bonds) regulations, amendments to the recovery and resolution regulations, as well as amendments to the investment services rules. Going forward, MFSA will be supplementing the transposition with further details in relation to the implementation of the said Directive.
The Fintech Adoption Study provides an in-depth understanding and analysis on the adoption of fintech, its market conditions, and their consequent externalities. The findings show that more than 50% of financial services entities surveyed by MFSA in July 2022 have taken actions towards digitization, digitalization, or the implementation of enabling technologies and innovations. Respondents have cited efficiency, enhanced customer experience and engagement, as well as a reduction of operational risks as the main objectives behind their adoption of digital transformation strategies. The study reveals that the main enabling and innovative technologies adopted were cloud computing, application programming interfaces (APIs), and web and mobile applications. The cloud computing was found to be mostly prevalent across insurance intermediaries, APIs across financial institutions, and web and mobile applications across investment funds. A significant number of respondents have also confirmed that they make use of regulatory technology solutions, mostly for anti-money laundering and counter terrorism financing (AML/CFT) purposes. While cyber risk was perceived as the highest level of risk mostly prevalent across cloud computing, web and mobile applications and APIs according to respondents, they believed that the increase in such risk was low, indicating no immediate threats to financial stability.
Keywords: Europe, Malta, Banking, Basel, Regulatory Capital, CCyB, Covered Bond Directive, Regtech, Fintech, Digital Transformation, Operational Risk, API, AML CFT, Cyber Risk, Cloud Computing, CBM, MFSA
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