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International Monetary Fund. Monetary and Capital Markets Department
This technical note reviews the institutional arrangement and supervisory practices for the insurance and securities sectors in Malta, focusing on supervisory effectiveness. The legal powers and supervisory objectives of the Malta Financial Services Authority (MFSA) are clear and in line with international standards. The MFSA has adequate legal authority to discharge its supervisory responsibilities and to take the necessary preventive and corrective measures to protect the public interest. Clearly established legal gateways for information sharing facilitate supervisory coordination and cooperation between the MFSA and relevant supervisors/authorities, domestically and internationally. For the avoidance of doubt, the MFSA has proposed amending the MFSA Act to explicitly include the promotion of financial stability and financial market integrity as one of its key functions. Stable funding and full autonomy over the recruitment process are needed to support the MFSA’s operational and financial independence. Recognizing the scope for harmonizing and enhancing the current sectoral risk-based supervision frameworks (RBSF), the MFSA is developing an integrated RBSF.
International Monetary Fund. Monetary and Capital Markets Department
This Financial System Stability Assessment of Malta shows that while Malta has benefited from considerable financial inflows, the associated risks, especially related to money laundering and terrorism financing, need to be closely monitored and addressed. Key metrics suggest that the banking system is in good health, but challenges exist. The banking system remains resilient under a severe scenario, with weaknesses limited to a few small banks. The system is sufficiently capitalized to absorb losses in the event of a severe macroeconomic shock, but risky exposures would lead to potential losses at a few small banks. The analysis suggests that ensuring adequate resources is critical to preserve the effectiveness and operational independence of the Malta Financial Services Authority (MFSA). In order to strengthen bank supervision, the MFSA should take timelier supervisory actions, increase the frequency of onsite inspections, make more use of monetary fines as part of the sanctioning regime, and ensure supervisory action is not delayed through judicial appeal.
International Monetary Fund. Monetary and Capital Markets Department
This technical note consists of five chapters focusing on various aspects of systemic risk analysis across the euro area financial system. The chapters cover bank profitability, balance sheet- and market-based interconnected analysis, contingent claims analysis, and a brief discussion of data gaps in the nonbank, non-insurance (NBNI) financial sector. The ongoing economic recovery will support euro area bank profitability in general, but it is unlikely to resolve the structural challenges faced by the least profitable banks despite some recent improvements. This is important because persistently weak bank profitability is a systemic financial stability concern. Empirical analysis of 109 major euro area banks over 2007–2016 reveals that real GDP growth and the NPL ratio are the most reliable determinants of profitability, after accounting for other factors. Although higher growth would raise profits, a large swath of banks with the weakest profitability would most likely continue to struggle even with a robust recovery. Therefore, banks should take advantage of the current upswing by resolutely addressing their NPL stocks—such a strategy holds the most promise for weak banks’ profitability prospects.
International Monetary Fund
The quota database has been updated by one year through 2014. Overall, the results of the update continue the broad trends observed in previous updates, but the shifts between the main country groups are generally smaller. Using the current quota formula, the calculated quota share of Emerging Market and Developing Countries (EMDCs) as a group increases by 0.6 percentage points relative to the 2015 update to 49.3 percent, which is about half the increase in the last update. The paper takes stock of recent discussions on the quota formula, including the outcome of the Quota Formula Review in 2013 and subsequent discussions in the context of the annual quota data updates. It also updates the illustrative simulations of possible reforms of the quota formula presented previously, using the latest data. These simulations have sought to capture possible reforms that would be broadly in line with the conclusions of the Quota Formula Review and Directors’ guidance is sought on the relative merits of these reforms and the most productive areas for future work. Download Quota Data: Updated IMF Quota Formula Variables - September 2016
International Monetary Fund
The Executive Board has held three formal meetings on the quota formula review, and discussions have also taken place in other fora including the IMFC Deputies work stream and the G-20 IFA Working Group. Considerable progress has been made in terms of identifying areas of common ground as well as those areas where views differ. At their most recent meeting in late September, Directors reaffirmed their commitment to completing the review by January 2013, and stressed that achieving this goal will require constructive engagement and a spirit of flexibility and compromise from all sides. At its subsequent meeting in Tokyo, the IMFC called on the membership to develop the consensus needed through further engagement of the Executive Board, with input from the IMFC Deputies, to complete the review by January 2013.
International Monetary Fund
In March 2012, the Executive Board held its first formal discussion on the comprehensive review of the quota formula. This review, to be completed by January 2013, is an important part of the quota and governance reforms agreed in 2010. Directors stressed the importance of agreeing on a quota formula that better reflects members’ relative positions in the global economy for future discussions on the 15th General Review of Quotas. This view was reiterated in April by the IMFC, which looked forward to an agreement by January 2013: "…on a simple and transparent quota formula that better reflects members’ relative positions in the world economy." The IMFC also reaffirmed its commitment to complete the 15th quota review by January 2014. It noted that any realignment is expected to result in increases in the quota shares of dynamic economies in line with their relative positions in the world economy, and hence likely in the share of EMDCs as a whole; and that steps shall be taken to protect the voice and representation of the poorest members. The Board held an informal follow-up meeting on June 13, 2012.
International Monetary Fund
The report provides the details of the Malta Financial Stability Assessment (MFSA). It defines its roles, responsibilities, and objectives for financial policies. It reviews the reports on the observance of standards and codes on monetary and financial policy transparency, banking supervision, securities regulation, insurance regulation, corporate governance, and payment systems. It assesses the macroeconomic environment and risks, soundness and vulnerabilities of the financial system, and also provides recommendations.