MFSA lays down clear supervisory expectations for licensed entities
The Malta Financial Services Authority has issued a document detailing its expectations for financial services entities from the standpoint of supervision
by Massimo Costa
The Malta Financial Services Authority has issued a document detailing its expectations for financial services entities from the standpoint of supervision.
The document lays down the Authority’s supervisory expectations, supported by a number of best practices which licensed entities are expected to adhere to.
Through the publication of the document, titled “Supervision: Risks Identified, Weaknesses and Expected Controls – A Cross-Sectoral Analysis”, the MFSA also identifies the key risks that authorised entities operating in the financial services sector might pose to their clients and the market in general and highlights the common weaknesses which the Authority has identified in the course of its supervisory work.
In comments to BusinessToday, MFSA CEO Joseph Cuschieri said that, through the document, the Authority was establishing what it was expecting from the entities it supervised.
“Essentially, we are informing such entities on which controls and levels of governance and compliance we are expecting from them,” Cuschieri said, “In this way, there should be no reason for excuses that the MFSA is not being clear in terms of what it is expecting.”
The MFSA is emphasising that it expects regulated entities to discuss the contents of the document with their Board of Directors (or equivalent administrative body) including the executive management team and assess how the highlighted points may apply to their business.
Firms are expected to address any misalignments between their internal frameworks and practices and the expectations as set out in this document and to establish the necessary processes in order to ensure that the firm will continue to meet such expectations on an ongoing basis.
“Licenses entities should discuss the expectation laid out in the document at board level, so they can reconcile such expectations with their internal systems of governance to see what discrepancies exist and subsequently start remediating,” Cuschieri said.
“We’ve clearly explained what the MFSA expect and what firms have to do to regulate themselves. At the end of the day, we therefore hope to be met with a certain level of compliance when we carry out our on-site inspections.”
The supervisory expectations document is part of the regulator’s implementation of its Strategic Plan, but also takes on board recommendations from Moneyval regarding cultivating a culture of compliance, he underscored.
“Ultimately, complying with such supervisory expectations will improve the standards of the Maltese jurisdiction,” Cuschieri added.
In line with the Authority’s strategy of enhancing its supervisory engagement, the MFSA will, in the coming weeks, also be publishing a document setting out its Supervisory Priorities for 2020. This will indicate how, through supervision, the regulator will be addressing the weaknesses identified in the supervisory expectations document.
MFSA Chief Officer Supervision, Marianne Scicluna commented that: “The Authority is planning to intensify its supervisory work, both in terms of coverage and standard. The MFSA has fused the three pillars of its supervisory strategy – prudential, conduct and AML Supervision – to ensure a holistic and more efficient supervisory approach.”
“The publication of the Authority’s Supervisory Expectations is part of its commitment to enhance the supervisory engagement with authorised entities, in promoting and ensuring sound governance, high compliance standards and conduct,” Scicluna added.
