Banking Regulatory Outlook 2015

Analysis

Deloitte Banking Regulatory Barometer 2016

A review of the current regulatory environment in Malta

Deloitte Malta Banking team presents the key highlights from the Deloitte Banking Regulatory Barometer 2016

What is the Banking Regulatory Barometer?

The Banking Regulatory Barometer is the Deloitte Malta Banking team's review of the current regulatory environment which looks for key trends that may influence the regulatory landscape in Malta.

The review focuses on commercial banks and regulators across Malta. Our main objectives are:

  • To evaluate the current regulatory environment;
  • To identify regulatory trends; and
  • To begin a dialogue on the challenges posed by upcoming regulations.

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(Dynamic PDF, 410kb)

How was it done?

Eight Maltese banks, representing both the domestic and international markets with combined total assets of €21 billion, participated in the survey. The survey was conducted through an online questionnaire and personal interviews, with the objective of capturing and understanding the regulatory impact on businesses, from a strategic level down to operational challenges.

The goals of the survey were to evaluate the current regulatory environment, identify regulatory trends, and to begin a dialogue on the challenges posed by upcoming regulations. The key areas focused on were:

  • Regulatory environment
  • Corporate governance
  • Risk management and supervisory/regulatory requirements
  • Comprehensive Assessment

The Deloitte Banking Regulatory Barometer has identified key issues which banks have identified under the current regulatory environment, and challenges related to Supervisory Review and Evaluation Process (SREP), Stress Testing, Capital and Liquidity Management, Anti-Money Laundering (AML), the impact of financial stability initiatives, and to what level AML activities are evolving in Malta.

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Key messages

Governance framework

  • When asked which of systems, talent, tone at the top, or policies and procedures are more important to the bank, 50% of respondents ranked tone at the top as the number 1 priority. This is consistent with Regulator priorities for the coming years, their top priorities being Business model and strategy and governance.
  • Top of the list of the regulatory challenges which keep bank management awake at night were AML risks and data and systems-related risks. Respondents also commented on the volume of regulatory challenges which were required simultaneously, and due to limited consideration to proportionality was a burden for smaller banks.

Risk and regulatory challenges

  • When asked about risks, credit and operational risk were considered the key risks by most of the respondents, who were also of the opinion that they are moderately exposed to market-wide risks. Respondents representing both systemic and smaller banks commented that the key risk did not emanate from regulated areas but from unregulated areas and cited cyber risk as being the key risk for their banks.
  • Most respondents stated that in their opinion the Regulators should be more focused on the principals of SREP given that they add value to the performance and business strategy of a bank, and stated that they did not receive enough guidance from the local or EU Regulators. When asked what they thought was the main reason for lack of guidance the most common answer was that requirements were as new to the Regulators as they are to the banks.
  • Areas where banks felt that not enough guidance was received from Regulators: Internal stress testing, Assessing Pillar 2 risks (e.g. cyber risk), Collective provisioning models. Banks faced difficulties in these areas due to a lack of statistical data.
  • All respondents stated that they were compliant with current regulatory requirements, and 63% added that their procedures were being brought in line with best practice. A large percentage of respondents in LSIs stated that they did not feel pressured by the Regulators to improve their regulatory compliance.

AML compliance

  • When asked about AML compliance 75% of respondents stated that AML compliance was considered equally important to profitability in terms of priority, and 76% are of the opinion that they are fully in line with requirements. 50% added that they are fully in line with global best practice on AML.
  • When comparing to local peers, half of respondents felt that their AML procedures were on par, while the other half felt that they did more than their peers.
  • Nevertheless a vast majority of respondents stated that they had plans to grow their compliance teams in the foreseeable future, and half of respondents who were subject to AML compliance reviews in the last 2 years stated that moderate or significant improvements were required as a result of the compliance visit. Key improvement areas related to Customer Due Diligence on customers which existed prior to the implementation of AML regulation.

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Making an impact that matters

We would like to express again our appreciation for the time that all participants took in completing the survey. Their involvement has been crucial in contributing to the impactful success of this review.

We take this opportunity to re-emphsise the integrity of our data sourcing procedures, including anonymised participation, our willingness to sign non-disclosure agreements as required and use of the DeloitteDex™ survey tool, which is a secure web platform developed by Deloitte to ensure security and confidentiality of data collection and transmission. Additionally, no company-specific information is passed on to third parties; the data is only accessed by a restricted number of designated Deloitte team members; and results are reported in aggregate, ensuring that participants' anonymity is strictly maintained at all times.

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