By David Eacott, Head, Banking Supervision, MFSA
The MFSA published the first, in what will be a series of sectoral updates, called ‘The Nature and Art of Supervision’. The first volume focuses on banking and credit institutions and provides an outline of how we undertake supervision as part of the Single Supervisory Mechanism (SSM), our interaction with the European Central Bank (ECB) and how we fuse its priorities with our own domestic agenda into bank supervisory strategies.
The publication also provided feedback to the industry. We believe Boards need to do more to ensure that the banks will be overseeing the operation prudently and in line with minimum requirements or expected standards. The main lesson is that the Boards of banks are not sufficiently robust in challenging the management of banks on the quality of their business plans, understanding the controls necessary to operate a compliant business, or doing enough to mitigate the risks their businesses could be used for the purposes of financial crime. To underline these messages, we held a roundtable with all the Chairs of Board Risk Committees and provided more detailed presentations. We will be following it up with future events aimed at (Non-Executive Directors) NEDs to improve their understanding and the quality of their oversight.
We have embarked on a very challenging agenda to improve the way we supervise banks and financial institutions. This includes developing new internal governance for decision making on firms, improved written and event communication strategies, risk focused supervisory approaches and improved teamwork. We hope the publication provides you with some insight into what we’re doing and how we’re doing it!
The document is publicly available on the MFSA website.
