The launch of MFSA’s Corporate Governance Code

On 5 August 2022, the Malta Financial Services Authority (the ‘MFSA’ or the ‘Authority’) introduced its new cross-sectoral Corporate Governance Code (the ‘Code’) for all persons authorised by the Authority in an effort to enhance corporate governance practices within the Maltese financial services sector. The publication of the Code was accompanied by a feedback statement highlighting the key points of stakeholders’ contributions received during the consultation period and the MFSA’s response and position thereto.

Good corporate governance is perceived by the Authority as being fundamental in its pursuit of preserving financial stability, safeguarding the integrity of the markets, and protecting consumers of financial services. Through the Code’s launch, the Authority strives to reinforce governance structures by creating a culture of strong corporate governance and in turn, to enhance stakeholders’ trust; guide steering board members and practitioners alike in taking optimal decisions in the best interest of all parties involved; as well as integrating environmental, social and governance elements (‘ESG’) into their respective strategies with a view to bring long-term value to the economy as a whole.

All legal persons authorised by the MFSA, other than entities (albeit authorised) falling within the scope of the Capital Markets Rules, should follow the principles laid down in the Code. Such principles should be followed on a ‘best-effort’ basis - this as a way to ensure a proportionate approach across the sector and to take into account the diversity in nature of the entities falling within scope. The Authority, in its press release, reiterated the aforementioned by stating that entities are expected to adhere to the Code in manner that is commensurate to their nature, size and complexity.

The Code comprises a number of guiding principles, which are then complemented with supporting provisions. These are organised into four sections, namely:

i. The effective Board;
ii. Internal controls;
iii. Stakeholder engagement; and
iv. Corporate culture, corporate social responsibility (‘CSR’) and ESG.

The Section on ‘Effective Board’ sets out principles to ensure and maximise the effectiveness of an entity’s Board, while the section on ‘Internal Controls’ deals with the adequacy of internal control and oversight systems which an entity should put in place and incorporate in its governance structure. Furthermore, the section on ‘Stakeholder engagement’ identifies the principles aimed at fostering the relationship between the authorised entity and all of its stakeholders, including, inter alia, shareholders, employees, consumers, and public authorities. The final section on ‘Corporate culture, CSR and ESG’ places the focus on promoting the integration of ESG and CSR factors into an entity’s business strategy and model and encouraging senior management to establish and operate in conformity with an ethical corporate culture that cultivates trust, integrity and sustainability.

The Code, without prejudice to the legal, institutional and regulatory framework, will serve as a benchmark for future policy alignments and in assessing any updates to existing MFSA Rules and existing codes/guidelines.

Deloitte Malta will be monitoring developments in the furtherance and application of the Code.

A link to the Code may be found here.