The Malta Financial Services Authority will be launching its Strategic Plan next month, as it takes stock of new challenges and continues its process of reform.

MFSA CEO Joseph Cuschieri, speaking during a recent interview with TV producer Saviour Balzan, highlighted the challenges the organisation was tackling, giving rise to the need for a revamped version of the Authority.

Joseph Cuschieri underscored the dramatic way in which the regulatory landscape overseeing the financial services sector in Europe and around the world had changed. He explained that, in the wake of the 2008/2009 financial crisis, the way banks were managed and supervised changed significantly, which, poses its own set of challenges to the MFSA.

The regulatory environment is also more complex today, with various regulations – such as the European Union’s Fourth Anti-Money Laundering Directive and the Markets in Financial Instruments Directive (MiFID) II – coming into effect.

The Fifth Anti-Money Laundering Directive has also been adopted by the EU and will need to be transposed by its member states.

The MFSA CEO  noted that such regulations placed additional supervisory responsibilities and demands on financial sector regulators, such as the MFSA, but also on banks and other financial institutions.

“Within this context, several reforms had to be carried out internally within the Authority, essentially evolving it into an “MFSA Version 2”. Therefore, in preparation for the next generation of regulation, the MFSA is working on increasing its capacity and up-skilling its staff, so that the MFSA remains relevant and dynamic”, continued Joseph Cuschieri.

Drive for a more efficient and pro-active MFSA

Cuschieri also spoke of the growth potential of the MFSA, underscoring that in order to achieve this, it needs to show that it is a more efficient and proactive regulator.

The Authority has drawn up a comprehensive strategy which will clearly set out its plans.

He underlined, however, that it was important to not only look at ways the MFSA can improve, but to also consider the entire financial sector ecosystem, its infrastructure and IT connectivity.

Banks need a more sophisticated approach to taking on new customers

Another aspect discussed in the interview was the degree of risk aversion within the Maltese banking system.

Joseph Cuschieri pointed out that only six banks currently service the local economy since the other supervised credit institutions tend to focus on businesses beyond the traditional retail market.

In this regard, he said that the country was under-banked and needed more banks to establish themselves on the island and to service the local community.

Cuschieri acknowledged that there was an element of risk when it came to servicing certain customers, and pointed out that the MFSA insisted that banks have the proper governance, financial crime controls and other necessary controls in place.

However, he said that banks had to be more innovative and sophisticated when it came to taking on board customers.

Instead of applying a “one-size-fits-all” method, banks should take a risk-based approach and avoid putting everyone on the same page, he added.