The Malta Financial Services Authority (MFSA) has released an assessment of the level of preparedness among local banks, in view of the amendments to EU banking regulations known as CRR3.
This follows an industry-wide survey conducted in 2024, which revealed different “levels of readiness among banks and identified key areas that require further attention.”
The new rules, which aim to further “strengthen financial stability, will affect how risks are managed and accounted for.”
The MFSA found that most banks are on track to comply, with the majority of local banking sector assets “belonging to institutions categorised as either highly or reasonably prepared.”
However, some financial institutions still need to do “more to meet the new requirements.”
The new and amended EU rules pertaining to “credit risk, the new operational risk framework, and Environmental, Social, and Governance (ESG) requirements have been singled out as the ones that will impact local credit institutions the most.”
Particularly, the MFSA expects banks to “increase their efforts in ensuring compliance with the new rules to improve their overall identification and risk management.”
It has been noted that to prepare for these changes, many banks “are investing in staff training to ensure they fully understand the new rules.”
Based on the results of the survey, 73% of banks have focused “on ESG and operational risk training, while others are improving expertise in credit and leverage risk.”
Banking institutions are now expected to update their “internal frameworks, policies and procedures to incorporate the underlying CRR3 changes.”
The overall goal is to create a more “stable financial system, reducing risks for both banks and their customers.”
Catherine Galea, Head of Banking Supervision at the MFSA, emphasised the importance of these reforms:
“The findings show that most banks are well-prepared, but some still need to make further improvements. ESG is, of course, a new risk area which banks need to onboard and embrace into their frameworks. Strengthening these areas will ensure a more resilient and responsible financial system that ultimately benefits consumers.”
The MFSA will continue working closely with banks to ensure they are able to effectively “meet the new standards and maintain a secure and stable financial system.”