Europe > Malta

You are looking at 1 - 6 of 6 items for :

  • Type: Journal Issue x
  • Financial services law & regulation x
Clear All Modify Search
Mr. Selim A Elekdag, Sheheryar Malik, and Ms. Srobona Mitra
This paper explores the determinants of profitability across large euro area banks using a novel approach based on conditional profitability distributions. Real GDP growth and the NPL ratio are shown to be the most reliable determinants of bank profitability. However, the estimated conditional distributions reveal that, while higher growth would raise profits on average, a large swath of banks would most likely continue to struggle even amid a strong economic recovery. Therefore, for some banks, a determined reduction in NPLs combined with cost efficiency improvements and customized changes to their business models appears to be the most promising strategy for durably raising profitability.
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 technical note on banking supervision for Malta focusses on selected topics in relation to the supervision of less significant institutions, which are not directly supervised by the European Central Bank, and on non-European Union branches. The Malta Financial Services Authority’s (MFSA) internal organization reflects its role of an integrated supervisor, and several units are involved in supervision and/or enforcement. Review of supervisory measures reveals that the MFSA has taken decisive action in several instances, but such actions have not been timely. A new organizational structure of the MFSA has been proposed recently. Developing resources devoted to enforcement will enable the unit to spend less time on the preparation of the sanctions and more time on ongoing supervisory monitoring. Involving the head of enforcement and the General Counsel in the decision-making process is positive. The report recommends developing a five-year plan to increase the MFSA’s budgetary resources and capacity to reflect the size and importance of the financial sector in Malta.
International Monetary Fund. Monetary and Capital Markets Department
This technical note presents Malta’s risk analysis related aspects of financial system. A comprehensive set of stress tests and interconnectedness analyses were conducted to assess the resilience of Malta’s financial system and shed light on potential vulnerabilities, complementing the euro area Financial Sector Assessment Program. Key metrics suggest that the banking sector is in good health, but challenges exist. Banks are well-capitalized, liquidity is ample, and profitability has been healthy. The solvency stress tests indicate that the banking sector remains resilient, with vulnerabilities limited to a few small banks. The banking sector appears resilient to liquidity pressures, but some small banks are vulnerable to more severe events. The interconnectedness analysis suggests that contagion risk through interlinkages from within the Maltese financial sector is currently higher and more wide-spread than contagion risk through cross-border interbank exposures. Monitoring and conducting periodic analysis of cross-border linkages, and further enhancing the existing inter-sectoral linkages analysis, is expected to provide an early warning before contagion risks accumulate.
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.