The Malta Financial Services Authority is responsible for the supervision of entities authorised under the Financial Institutions Act (Cap. 376). These entities, referred to as ‘financial institutions’, fall in two broad categories:
Institutions undertaking payment services and/or the issuance of electronic money (more commonly known as ‘payment institutions’ or ‘electronic money institutions’, respectively);
Financial Institutions undertaking other activities such as lending, financial leasing, the provision of guarantees and commitments, foreign exchange services and money brokering.
The Financial Institutions Act, Financial Institutions Rules and other pieces of subsidiary legislation transpose the provisions of the second Payment Services Directive and the second Electronic Money Directive, applicable to authorised payment and electronic money institutions.
The Authority applies a risk-based approach in order to effectively supervise financial institutions. This approach requires the Authority to assess both the system-wide and individual risk posed by each financial institution in order to coordinate its supervisory activities accordingly and allocate its resources to the financial institutions posing the greatest risks.
Those Institutions which are designated as posing the greatest risk are subject to enhanced ongoing supervision which involves:
on-site inspections to analyse in detail the different risks, internal control systems, business models or governance of financial institutions;
off-site supervision to continuously monitor the activities of financial institutions through the information which such institutions are required to submit in terms of their legal obligations (such as periodic regulatory returns, financial statements and other documentation submitted).