I acquired an interest in foundations a few years ago when building an extension to the house I was living in at the time. I realised when work started just how much professional effort went into making sure they were deep and resilient enough to stand the pressure put on them when the building went up. I reflect on the expertise the architect and builders used to design and lay those foundations now as I look to the future of banking regulation here in Malta.
Last November, the MFSA published the first in a series of booklets which provides an insight into how we are improving the supervisory approach of the MFSA to ensure the foundations of a stable industry in Malta. Transparency and accountability from the MFSA are needed because the work we do is a very an important part of the national effort to deliver a prosperous economic environment for everyone. Effective financial supervision is a foundation layer for a stable and resilient banking system that can support a dynamic and vibrant economy and meet the challenges each year presents.
Effective financial supervision is a foundation layer for a stable and resilient banking system
This will be a particularly important year for Malta and the MFSA in this regard. We need to be in a position to meet the challenges head on, demonstrating we have effective regulation in place to pass the MONEYVAL assessment. We need to work towards an environment where correspondent banks feel comfortable providing services to local businesses; and, we will need to ensure the effects of COVID-19 are managed by banks in a way that doesn’t impact financial stability. This will only be possible with an independent and well-resourced regulator capable of driving improvements in industry standards.
The banks also need to play their part in delivering sound foundations for their industry here on the Islands so we can all prosper together. They must invest in their operations, so they are robust enough. That means, financially robust business models, robust controls on money flows so they aren’t used by criminals, and robust enough to provide good services to their customers. From our work last year, we know the foundations aren’t as strong as they need to be yet and banks need to make concerted efforts to improve matters. The non-executive directors and management of banks on bank boards are accountable for this and we have been very clear about what they need to do to improve their businesses.
These foundations are equally important for our future prosperity too. Technology and innovation will continue to alter the way we live our lives and as a result, the support we need from our banks and financial services providers will need to reflect that too. Sound foundations now will give Malta a much better chance of playing its part in those developments and support the industry to develop. We have several banks interested in coming to Malta - an effective regulator and good industry standards are important factors to attracting business and delivering future prosperity. So, the work we do now is an important foundation for our vision for the future.
The nature and art of supervision requires good analytical skills to spot and size up the issues, relationship management skills to explain our judgements, patience while action is taken, and resolve to see the improvements delivered in the banks we regulate. We will use these skills to improve the foundations here in Malta as part of the national effort; bank boards will need to heed the professional advice offered by the MFSA and other regulators, and re-double their own efforts to build these foundations too.