Opinion of the European Central Bank of 6 February 2018 on funding sources and governance of the Malta Financial Services Authority (CON/2018/6)
Date: 2018-02-06
Institutions: European Central Bank
Subjects: Malta, banking supervision, financial services, financial supervision, national law, supervisory body

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 6 February 2018 

on funding sources and governance of the Malta Financial Services Authority  

(CON/2018/6) 

Introduction and legal basis 

On  22  December  2017  the  European  Central  Bank  (ECB)  received  a  request  from  the  Central  Bank  of 

Malta,  acting  on  behalf  of  the  Parliamentary  Secretariat  for  Financial  Services,  Digital  Economy  & 

Innovation,  for  an  opinion  on  a  draft  law  proposing  amendments  to  the  Maltese  Financial  Services 

Authority Act (hereinafter the ‘draft law’). On 8 January 2018 the ECB received additional information from 

the Central Bank of Malta with further proposed amendments to the draft law. 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning of the European Union as the draft law concerns the specific tasks conferred upon the ECB 

concerning  the  prudential  supervision  of  credit  institutions  under  Article  127(6)  of  the  Treaty.  In 

accordance  with  the  first  sentence  of  Article 17.5  of  the  Rules  of  Procedure  of  the  European  Central 

Bank, the Governing Council has adopted this opinion. 

1. 

Purpose of the draft law 

1.1  The proposed amendments to the Malta Financial Services Authority Act (hereinafter referred to as 

the  ‘MFSA  Act’)  stem  from  feedback  from  stakeholders  to  a  consultation  document  entitled 
‘Strengthening  the  Malta Financial  Services Authority; Taking the financial sector to a new  level1, 

which was issued in August 2017. During the consultation process, stakeholders called for greater 

levels  of  efficiency  and  effectiveness  of  the  MFSA,  echoing  similar  views  expressed  by  the 

European Commission, the European supervisory authorities and the International Monetary Fund 
(IMF)2. 

1.2  The  draft  law  proposes  amendments  to  the  MFSA  Act  in  order  to  strengthen  the  governance 

structure of the MFSA through the creation of a Chief Executive Officer (CEO) position. The CEO 

will be responsible for the MFSA’s overall performance in terms of the achievement of its objectives 

and implementation of its strategy and policies, as set out by the Board of Governors. The CEO will 

be appointed by the Board of Governors and will be a non-voting member of the Board. 

1.3  The MFSA currently manages Malta’s Registry of Companies, and the Registrar of Companies is 

an MFSA senior official appointed by the Minister of Finance on the advice of the MFSA, pursuant 

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2  

Available on the Prime Minister of the Republic of Malta’s website at www.opm.gov.mt. 
See the IMF’s Staff Concluding Statement of the 2017 Article IV Mission on Malta from 17 November 2017, available 
on the IMF’s website at www.imf.org. 

 
 
 
 
                                                 
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to the Companies Act3. The draft law proposes to separate the function of Registrar of Companies 

from the MFSA. In particular, the Registrar will no longer be a member of the MFSA Coordination 

Committee  and  the  Registry  of  Companies  will  thereby  be  separated  from  the  MFSA.  This  is 

complemented by the deletion of references to the Registrar of Companies in the MFSA Act.  

1.4  The draft law also addresses the financial provisions of the MFSA Act. It proposes that any sums 

required  by  the  MFSA  for  carrying  out  any  of  its  functions  will  be  paid  out  of  the  Maltese 

Government’s  Consolidated  Fund  and  without  further  appropriation.  In  preparing  the  estimates of 

the MFSA’s income and expenditure for a given financial year, the MFSA must take account of any 

funds  and  other  monies  that  may  be  due  to  be  paid  to  it  from  the  Consolidated  Fund  during  the 

relevant financial year. The MFSA must also aim to ensure that its total revenues are sufficient to 

cover  all  sums  properly  chargeable  to  its  income  and  expenditure  account.  A  House  of 

Representatives committee will examine the estimates and report its findings for consideration by 

the  House  of  Representatives.  Where,  in  respect  of  any  given  financial  year,  it  is  found  that  the 

amount  approved  by  the  MFSA  Board  of  Governors  is  not  sufficient  or  a  need  has  arisen  for 

expenditure  for  a  purpose  not  provided  for  in  the  estimates,  the  MFSA  Coordination  Committee 

may adopt supplementary estimates for approval by the Board of Governors and for consideration 

by  the  House  of  Representatives  following  examination  by  the  abovementioned  committee.  The 

sums referred to in the estimates will be fixed by resolution of the House of Representatives after 

considering the estimates prepared by the MFSA and the committee report. 

1.5  The separation of the Registry of Companies from the MFSA will have a significant impact on the 

revenue of the MFSA. However, the Government is determined to guarantee the MFSA’s full and 

effective autonomy  as a public institution reporting to the House of Representatives. To this end, 

the annual budget of the MFSA will no longer depend substantially on the income of a structure – 

the Registrar of Companies – that is statutorily not within the MFSA’s responsibility. 

2. 

Observations  

2.1  Pursuant to  Article 127(6)  of the Treaty and Article 6 of Council Regulation (EU) No  1024/20134, 

the ECB carries out its tasks within a single supervisory mechanism (SSM) composed of the ECB 

and  the  national  competent  authorities  (NCAs).  Within  the  framework  for  cooperation  within  the 

SSM, the ECB is responsible for the effective and consistent functioning of the SSM, and both the 

ECB  and  NCAs  are  subject  to  a  duty  of  cooperation,  and  an  obligation  to  exchange  information. 

Where appropriate and without prejudice to the responsibility and accountability of the ECB for the 

tasks  conferred  on  it  by  Regulation  (EU)  No  1024/2013,  NCAs  are  responsible  for  assisting  the 

ECB, under the conditions set out in Regulation (EU) No 468/2014 of the European Central Bank 
(ECB/2014/17)5,  with  the  preparation  and  implementation  of  any  acts  relating  to  the  tasks 

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5 

See Article 400 of the Companies Act and Chapter 386 of the Laws of Malta. 
Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). 
Regulation  (EU)  No  468/2014  of  the  European  Central  Bank  of  16  April  2014  establishing  the  framework  for 
cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent 
authorities and with national designated authorities (SSM Framework Regulation) (OJ L 141, 14.5.2014, p. 1). 

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conferred  on  the  ECB  under  Article  4  of  Regulation  (EU)  No  1024/2013  related  to  all  credit 
institutions, including assistance in verification activities6.  

2.2  Taking account of the foregoing responsibilities of the MFSA within the framework of the SSM, the 

ECB would like to point out that, when considering the MFSA’s resources, the Maltese authorities 

should take into account the SSM’s need for NCA staff on joint supervisory teams and inspection 
teams and the more intense supervision expected for less significant institutions 7. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 6 February 2018. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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7  

Without prejudice to certain provisions of Regulation (EU) No 1024/2013, NCAs shall carry out and be responsible 
for  certain  tasks  and  adopting  all  relevant  supervisory  decisions  with  regard  to  certain  less  significant  credit 
institutions or financial holding  companies. Wherever the ECB  is assisted by national competent authorities for the 
purpose  of  exercising  the  tasks  conferred  on  it  by  Regulation  (EU)  No  1024/2013,  the  ECB  and  the  NCAs  shall 
comply  with  the  provisions  set  out  in  the  relevant  Union  acts  in  relation  to  the  allocation  of  responsibilities  and 
cooperation between competent authorities from different Member States. 
See  paragraph  2.4  of  Opinion  CON/2016/43.  All  ECB  opinions  are  published  on  the  ECB’s  website  at 
www.ecb.europa.eu. 

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