A creditor’s obligation to assess the creditworthiness of a consumer
by Ganado Advocates
23rd April 2024
by Ganado Advocates
5th April 2024
The Malta Financial Services Authority (“MFSA”) has released its Supervisory Priorities for 2024, outlining a change to an outcomes-based approach to supervision. The aim of such approach is to assess the results achieved by licence holders in specific areas in line with identified outcomes. This approach is consistent with the MFSA’s risk-based approach, which has focused supervisory efforts based on the likelihood of failure and the impact on stakeholders of the financial industry.
The MFSA has retained its focus on achieving the six supervisory priorities identified last year, namely Governance, Risk & Compliance, Financial Crime Compliance, Consumer Protection and Education, Resilience of Supervised Entities, Sustainable Finance and Digital Finance, while also identifying a new priority for 2024, namely Cross-Border Supervision.
The MFSA have also identified sectoral supervisory priorities. In the investment management sector, resilience will be monitored by the MFSA by focusing on liquidity risk management, the applicability of liquidity management tools and liquidity stress testing (in line with expectations outlined by ESMA in guidelines published in relation to liquidity stress testing in UCITS and AIFs). Supervision in this respect will indirectly also assess areas of the valuation function, and related policies and procedures depending on the nature of the assets within the fund portfolios.
The MFSA shall also monitor the robustness of business models and governance structures of licensed investment services providers, with a particular focus on the adequacy of their operational set-up, safeguarding/segregation of client assets and monies, cash flow and investment restriction monitoring in the area of fund depositaries. Additionally, in light of the newly launched Notified Professional Investor Fund regime, the MFSA shall carry out reviews on due diligence service providers, as well as ongoing reviews on the net asset value calculation process of recognised fund administrators.
The MFSA shall continue to monitor the capital of fund managers to ensure that it is sufficient to capture market and operational risks, given the importance of capital adequacy. Investment service licence holders having a cross-border presence shall have such presence reflected in their risk rating, and the oversight on cross-border operations will continue to be assessed.
The adequacy of governance structures, effectiveness of control functions, and compliance of investment firms with the IFR and IFD, will also continue to be assessed throughout the MFSA’s interactions over the course of 2024. Additionally, the MFSA announced that it will intensify its focus on sustainable finance and evaluating compliance with SFDR, Taxonomy, and relevant delegated acts.
Lastly, the MFSA will continue to monitor any upcoming developments in the area of digital finance through participation in European Supervisory Authority committees and how such developments could impact the regulatory responsibilities of investment funds and investment firms, and will keep the industry abreast with any developments in relation thereto.
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by Ganado Advocates
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