Refining our 2022/2023 strategy – Joseph Gavin

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July 2022 marks the 20th anniversary of the establishment of the MFSA as the single regulator for financial services.

Building on foundations that were reshaped by EU membership and global regulation after the financial crisis – not to mention more recent challenges, such as the FATF gray list, which have continued to strengthen its resolve – We at the MFSA are refining our strategy as we prepare for even more complex changes in business and regulatory dynamics in the years to come.

There is no doubt that digitalization will revolutionize the way we seek to oversee our industry as BigTech and AI continue to take root and permeate business.

As supervisors, we will have to trust these new technologies as regulated entities increasingly come to rely on them to conduct their business. Working closely with our counterparts, we must continuously monitor these developments as we seek to better understand the risks, work on new policy responses and reflect them in our surveillance framework.

Sustainable finance is a huge systemic change on a global scale that demands priority attention. There is little legislation on financial supervision that will not be impacted by the EU action plan on sustainable finance.

The need to incorporate key pieces of legislation into the supervisory and conduct regime, even as the finer details of this package are being worked out, is a big ask – but one that nevertheless requires our urgent attention.

We will focus our efforts on developing our capabilities to take on the challenging oversight responsibilities in this area, integrate market monitoring and environmental, social and governance (ESG) risk assessment into our processes, and develop the tools to ensuring transparency and combating greenwashing. We will also seek to engage with European Supervisory Authorities, the European Commission and industry players to ensure convergence and adopt best practices in this area.

With regard to the banking sector, it has once again proven its resilience in times of economic stress induced by the COVID-19 pandemic and emerging reputational and geopolitical risks. These coincided with an intensification of regulatory obligations and prudential supervision aimed at further strengthening the resilience of banks in the face of systemic vulnerabilities.

Here, our efforts should also focus on consolidating our supervisory systems, the sound development and growth of the banking system, and the quality of service delivery by credit institutions, in line with the effective implementation of the banking package. of the EU.

The securities and markets sector operates in a highly competitive environment but has nevertheless maintained its momentum. The investment fund market is a mature market, populated by a cross section of retail and professional funds, and well diversified in terms of size, strategy and complexity.

Insurance remains a constantly growing sector-Joseph Gavin

Ongoing updates to regulatory frameworks and processes in this area will be complemented by a focus on strategic needs, including efforts to increase choice and reduce concentration risk in child care provision.

We are committed to fostering and improving the competitive position of the securities industry and markets over the next two years, with a focus on process improvements, niche products and the development of a more institutional.

In recent years, the legal infrastructure has also been developed to reflect the regulation and supervision of more innovative and technology driven activities, in particular Malta’s payment and e-money services sector. We also see this as an area of ​​strategic focus for the future.

This is an area that is increasingly challenged to come up with innovative legal concepts and supervisory techniques to mitigate inherent risks, while allowing innovation to add value to the financial system. . The authority will need to take this into account in its longer-term planning process, while ensuring that appropriate timely initiatives and targeted legislative interventions are also among its most immediate priorities.

Insurance remains a constantly growing industry, encompassing various business models. The strong legal and regulatory infrastructure has enabled the jurisdiction to develop into a cross-border insurance hub, combining the effective enforcement of EU regulations with the effective assimilation of internationally established industry characteristics. .

While continuing to seek EU regulatory best practices and develop its risk-based supervisory model, the authority will look to the increased deployment of data and technology-based tools in its supervisory work. We also find that increasing the local availability of actuarial expertise and other specializations could unlock additional potential in this area, and that this in turn would require strengthening the supervisory skills and risk management frameworks of our part.

CSP and fiduciary services are widely regarded as gatekeepers to the wider economy. Given the growing number of providers falling within the scope of the new legislation, the authority will also place transparency, risk awareness and two-way communication at the center of its efforts to continuously improve standards in this area.

There are other important themes that run through our industry, but probably none as comprehensive as governance and compliance. A strong culture of compliance adds value to the business and contributes to effective regulation by placing consumer interests, market integrity and financial strength at its core.

Beyond that, the MFSA expects the industry to be a beacon of good corporate governance that inspires corporate issuers and users of the financial system to follow suit. Governance standards will therefore remain high on our agenda in the years to come, to which we should expect to see an added dimension of sustainability.

Looking forward to transforming these objectives into priority actions in the months and years to come, we will continue to invest to ensure that they are underpinned by a well-equipped workforce.

Supervisors will receive all the support they need to continue their professional development through our Financial Supervisor Academy, as we invest more in supervision technology to enable us to perform more thorough and timely supervision, strengthen our application and improve our risk management. monitoring based at all levels. Finally, we will continue to focus on financial crime compliance, due diligence and enforcement.

Only by adopting a truly connected approach to translating these objectives into coordinated policy actions and operational measures can we be sure that we remain aligned with our statutory objectives, safeguarding financial stability, market integrity and consumers. long-term.

Joseph Gavin is CEO to MFSA.

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