The Malta Financial Services Authority said on Friday said it would be steaming ahead with a reform that the International Monetary Fund warned against.
A financial system stability assessment by the IMF, published earlier this week, warned against the planned centralisation of supervisory functions around the MFSA’s chief executive.
MFSA CEO Joe Cuschieri, who used to head the Malta Gaming Authority, was selected for the post directly by the Office of the Prime Minister in 2018 and no public call was issued.
In its report, the IMF said Malta’s financial regulator should maintain a dedicated committee tasked with supervisory and enforcement powers.
All supervisory powers currently vested in the MFSA’s supervisory council are planned to be transferred to the MFSA’s executive committee, chaired by the CEO and made up of five MFSA staff members reporting to Mr Cuschieri, the IMF report noted.
MFSA should have full autonomy over its recruitment process
Read: Joe Cushcieri's first interview as MFSA chief
To enhance checks and balances in the decision-making process, a dedicated statutory committee tasked with supervisory and enforcement powers should be maintained, ensuring that enough attention, time and resources are devoted to supervisory actions, the IMF said.
The IMF said the MFSA has the supervisory authority to carry out its tasks, but the necessary preconditions for operational independence are not all met.
In its Friday statement, the MFSA said it welcomed the IMF’s recommendations, including those made on the authority’s proposed new organisational structure.
The MFSA said it had conducted a broad consultation exercise with local and international stakeholders and other experts to ensure that the new MFSA organisational design would address current and future challenges, bringing it in line with those of its peers.
As part of this restructuring exercise, a new executive committee would be established taking on the responsibilities of the present Co-Ordination Committee, Supervisory Council and Board of Management and Resources.
The executive committee is earmarked to be responsible for all the corporate, operational and supervisory functions of the authority, the MFSA said.
“The proposed organisational structure is a single component forming part of a broader transformation programme (as part of the MFSA’s Vision 2021) focusing primarily on clearer organisational objectives, enhanced corporate governance structures, capacity building, knowledge management and technological innovation amongst other key strategic initiatives,” the authority said.
The MFSA also said that a dedicated Enforcement Decisions Committee and a Regulatory Committee, both of which would be composed of independent experts in the respective fields, had been included in the revised operating model.
The MFSA’s new organisational structure, the authority said, would also include the establishment of a risk committee and a financial crime compliance (AML) committee with the objective of strengthening the areas of risk management and AML supervision.
“The implementation of the MFSA’s organisational restructuring is work in progress and is currently undergoing the required legislative and parliamentary process,” the statement reads.
Full details of the new MFSA organisational model, it said, would be published once the process was completed.