Insight

The regulator of tomorrow: MFSA aims to review its processes

A radical redesign and modernisation are currently on the agenda of Malta's financial services regulator, says its Chairman Professor Joe Bannister, who also seeks to take advantage of new niche sectors and initiatives such as the EU's Capital Markets Union.

Whilst actively pursuing ways to sustain the dynamism in the funds sector, the Malta Financial Services Autrhority (MFSA) has been working on tackling the various regulatory developments effecting the finance sector as efficiently as possible. Professor Joe Bannister, Chairman of the MFSA speaks about how the MFSA has been addressing the introduction of the Single Supervisory Mechanism,  Solvency II and the Trust and Trustees Act. 

What were the most important regulatory developments and innovation in Malta's finance centre in the past?

The past two years were characterised by the legislative and regulatory changes introduced by the EU to strengthen the financial system, which the MFSA implemented. Certainly the biggest change was brought about by the introduction of the Single Supervisory Mechanism under the European Central Bank; however, there were also a number of other regulatory developments. For instance, the insurance sector was very much at the centre of our attention due to Solvency II, but we also introduced reinsurance special purpose vehicles. In addition, amendments to our Trusts and Trustees Act introduced the concept of a family trust, while the Retirement Pensions Act came into force in 2015. It specifically makes reference to schemes set up as personal retirement schemes and is attracting new business to our shores. The MFSA has been very active in seeking ways to sustain dynamism in the funds sector. One important development was the publication of the Loan Fund Rules in April 2014, which have been revised recently, placing Malta at the forefront of this growing market. In early 2016, we also launched a new framework for socalled notified Alternative Investment Funds, which can be promoted to qualifying or professional investors.

How would you describe the transition to Solvency II, and what have been the main issues?

 The Directive was transposed into Maltese law in a timely manner by end of 2015. This gave legal clarity to insurance companies as to the requirements being placed upon them from the beginning of 2016. Although we can only reach a conclusion on the transition when the companies start filing in their financial submissions throughout the year, we have received encouraging feedback and deem the majority of firms ready for the change. Clearly, teething issues remain, particularly on the extensive reporting requirements introduced by Solvency II, but we are positive that overall the transition will be considered successful.

You have been quoted saying that the Capital Markets Union (CMU) is one of the single most important initiatives the EU has ever promoted. How do you seek to position Malta to take full advantage of the CMU?

The EU process to unlock investment by updating regulatory frameworks and tapping innovation to revitalise capital markets in Europe is a wide ranging and ambitious exercise. Malta’s regulatory development agenda is already very much aligned with key initiatives that are driving the implementation of the CMU. Recent initiatives such as the introduction of regulatory frameworks for loan funds, reinsurance special purpose vehicles and securitisation cell structures will find greater scope within the CMU. We also monitor the potential impact of the CMU on the wholesale and institutional markets and internet-based investment intermediation to determine how best to reposition ourselves in this respect.

What would you highlight as the main challenges that the MFSA is facing at the moment, and how do you plan to address them?

The financial crisis has radically changed the sector, but it has not stopped its growth. Growth in itself brings challenges and everybody – the industry, regulator and stakeholders – needs to respond to these challenges. This is a highly mobile sector, and now more than ever we have to anticipate change in order to protect our competitive advantages. We will therefore keep looking at how to achieve further growth, which niches to tap, and how we can continue to assist existing firms in expanding their operations in Malta.

What is on the MFSA’s agenda for 2016 and 2017, and which areas do you plan to place a greater strategic focus on?

We seek to continue identifying niches for growth – whether its new products or services, for which we can develop the necessary regulation to attract business. While banking, investment and insurance services are well established, over the past years we have seen developments such as the setting up of occupational pensions and pension fund administrators. Creating a diversified sector is healthy for Malta, and we will keep moving forward on this path. We also expect to see further investment as Malta consolidates its position as a European financial centre that increasingly finds opportunities in global markets. We will prepare ourselves for this future by strengthening our human resources base. Moreover, in the second half of 2016, we will review all our processes and activities. This should lead to a radical redesign and modernisation of the MFSA aimed at improving productivity, efficiency and effectiveness. 

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