About the MFSA

The Malta Financial Services Authority (MFSA) is an autonomous public institution established as the single regulator for financial services. It was constituted by law on 23 July 2002 taking over the supervisory functions previously carried out by the Central Bank of Malta, the Malta Stock Exchange and the Malta Financial Services Centre. The MFSA also holds the roles of Listing Authority and the Resolution Authority.

The Authority’s remit extends to all areas of financial services activity, including credit institutions, financial and electronic money institutions, securities and investment services companies, trading venues, insurance companies, pension schemes, trustees and virtual financial assets. It regulates a sector made up of 2,300 firms that accounts for over a tenth of gross value added and employment in the economy.

Malta is a jurisdiction that is actively involved in the European Union, the Commonwealth and the wider international stage in shaping global regulatory policy. The MFSA is a member of the European System of Financial Supervision (ESFS) which includes the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), the European Securities and Markets Authority (ESMA), and the European Systemic Risk Board (ESRB). The Authority also forms part of the Single Supervisory Mechanism (SSM) and participates in the decision making mechanism of the SSM Supervisory Board established within the European Central Bank (ECB).

The Authority is also a member of the International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS) and a signatory of the Multilateral Memorandum of Understanding with other members of these Institutions.

The MFSA is also part of the single resolution mechanism (SRM) which established the Single Resolution Board (SRB), and actively participates in the decision making process related to resolution functions.

What does the MFSA expect of financial service operators?

As prudential and conduct regulator we expect high standards of management and conduct of all firms and individuals operating in the financial services industry. We welcome innovation and recognise the need and ability to develop new products. We are equally on a constant lookout for practices and market developments that may adversely affect the stability and soundness of operators and the interests of consumers and value transparency and pro-active disclosure on the part of operators.

We will fairly but firmly investigate any breach of legislation and licence obligations, take all appropriate action to eliminate any resultant risk and require remedy within the parameters and principles of proportionality established by law. We will do so in full collaboration and co-operation with other financial regulatory bodies both locally and overseas whenever this is required by the circumstances of the case.

Whom does the MFSA report to?

The MFSA is subject to Parliamentary scrutiny in terms of Article 28 of the Malta Financial Services Authority Act. It is bound to transmit a report on its activities and an audited copy of its annual accounts to the House of Representatives within four months of its financial year end.

The Authority also operates within the legal framework established by the European System of Financial Supervision (ESFS), a network centered around three European Supervisory Authorities (EBA, EIOPA and ESMA), the European Systemic Risk Board (ESRB) and national supervisors. Its main task is to ensure consistent and appropriate financial supervision throughout the EU.

The MFSA forms part of the single supervisory mechanism (SSM) which establishes the European Central Bank (ECB) as the central prudential supervisor of credit institutions in the euro area. Under the SSM, the largest banks in the euro area are directly supervised by the ECB working closely with the national supervisors, while the national supervisors continue to monitor the remaining banks. In its role as the Resolution Authority the MFSA also forms part of the single resolution mechanism (SRM) which gives the Single Resolution Board (SRB) responsibility for resolution decisions related to banks under the direct supervision of the ECB. The SRB maintains close cooperation with national resolution authorities that are directly responsible for resolution issues of the remaining banks.

The regulatory and supervisory activities of the Authority are also reviewed annually by the International Monetary Fund (IMF) in line with Malta’s international treaty commitments.

What is the MFSA’s role vis-à-vis international counterparties?

As an EU Member State Malta’s legislation is ingrained in the European legal framework. European Union Regulations are directly applicable in all member states including Malta, whereas EU Directives are implemented within the national legal system. Financial services activity is likewise regulated by relevant internal market rules, as supplemented by technical standards and guidelines issued by the European Supervisory Authorities and transposed into national legislation.

On an international level, regulatory co-operation is based on a network of Memoranda of Understanding reached between regulatory bodies. The MFSA has signed bilateral MoUs providing for the exchange of information and other forms of co-operation with regulators in 29 other jurisdictions. The Authority has also signed multilateral MoUs with International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS).

How are the functions of the MFSA organized?

The Board of Governors is entrusted with establishing the policies to be pursued by the Authority. In determining such policies, the Board of Governors follows any policy guidelines which may be set by Government. The Chairman of the Authority chairs the Board of Governors.

The Board of Governors, the Supervisory Council and the Board of Management and Resources are the main organs of the Authority. The functions and responsibilities of these three organs are co-ordinated through a Co-ordination Committee.

The Co-ordination Committee is responsible for co-ordinating the implementation of the policies of the Authority. The Co-ordination Committee is the point of contact and the principal channel of co-ordination between the Board of Governors, the Supervisory Council and the Board of Management and Resources. The Head of Enforcement also attends as an observer.

The Supervisory Council, as defined in Article 10(1) of the MFSA Act, is responsible for the approval of and for the issuing of licences and other authorisations, for the processing of applications for such licence and authorisations, and for the monitoring and supervision of persons and other entities licensed or authorised by the Authority in the financial services sector.

The Supervisory Council is composed of the following departments: Authorisation, Regulatory Development, Conduct Supervision, Banking Supervision, Securities and Markets Supervision and the Insurance and Pensions Supervision.

The Board of Management and Resources, as defined in Article 11(1) of the MFSA Act, is responsible for carrying out the day-to-day management and the finances of the Authority including human resources, business development and ancillary services and for the general coordination of the Authority’s administrative affairs, and is composed of the persons responsible for such activities within the Authority as may be designated by the Board of Governors.

Legal advice and assistance to the Board of Governors and other organs of the Authority is provided by the Legal Office, which is also responsible for co-ordinating all international legal affairs.

The Audit Committee is established by and reports to the Board of Governors. Acting independently, the Committee assists the Board of Governors in its oversight responsibilities for the internal governance, internal controls, financial statements, risk management and internal audit function of the Authority.

The Board of Governors of the MFSA also acts as the Resolution Authority. A Resolution Committee has been appointed by the Resolution Authority, whose composition, powers and functions are governed by provisions set out in the First Schedule to the MFSA Act and the Recovery and Resolution Regulations (RRR). The Resolution Committee is empowered to take resolution decisions.

How does the MFSA carry out its supervisory duties?

The MFSA is entrusted with ensuring and promoting the soundness of financial entities, fair competition and the integrity of the market, and the general interests and legitimate expectations of consumers.

Under the MFSA Act and other sectoral legislation, licensed entities are required to submit information to the MFSA on a regular basis based on reporting obligations applicable in each respective field. The MFSA carries out its supervisory functions based on a combination of ongoing off-site supervision and onsite supervisory visits.

To this end, the MFSA has been vested with extensive regulatory, investigative and enforcement powers, including the power to:

– require information from any person including any documentation and may use any information as evidence (except in relation to documents and information which are privileged under the Criminal Code);

– appoint inspectors for the conduct of more in-depth investigations as may be required;

– issue directives both generally and in specific circumstances and enter premises of persons on whom a notice of investigation has been served for the purposes of obtaining information.

The MFSA also has the power to issue public warnings and to suspend or cancel a licence or to restrict a licensed entity’s operations.

Furthermore, under Article 16A of the MFSA Act, the Authority may impose an administrative penalty on any licence holder should the person’s conduct, in the opinion of the MFSA, amount to a breach of the regulatory requirements applicable to the licence holder. All sanctions are published on the MFSA’s website.