FIR/03: Enhancing regulatory reporting for financial institutions.

The new Financial Institutions Rulebook (FIR/03) introduced by the Malta Financial Services Authority (MFSA) marks a significant regulatory update for licensed financial institutions, particularly payment and electronic money institutions. This framework aims to enhance compliance, governance, and operational resilience in line with evolving EU standards. The rulebook is part of MFSA's commitment to ensuring a robust regulatory framework for financial institutions operating in Malta. One of the updates is the introduction of a specialised regulatory reporting tool known as the Financial Institutions Return (FI Return) to facilitate supervisory oversight.

Reporting requirements

Quarterly FI Returns

Institutions are required to submit quarterly FI Returns within one month of the reporting date.

Annual reporting (AR)

In addition to quarterly returns, institutions must submit audited financial statements, management letter and the auditor’s report on the FI Return within specified deadlines. This requirement aims to provide a comprehensive view of the institution's financial health on an annual basis.

Streamlined reporting framework

The MFSA's new FI Return stems from the FIR-03 Rulebook, replacing previous returns (BR02, BR03, BR04, BR05, and BR08). The BR06 return will remain in place but will be streamlined to reduce reporting burdens.

The MFSA is also collaborating with the Central Bank of Malta and the Financial Intelligence Analysis Unit (FIAU) to streamline data collection processes, reducing redundancy in reporting requirements. This consolidation aims to alleviate the regulatory burden while maintaining robust oversight.

Notification obligations

Institutions must notify the MFSA promptly regarding significant changes affecting their operations, such as alterations in senior management, evidence of fraud, or material legal proceedings. These notifications are crucial for maintaining transparency and ensuring that the regulator is kept informed of any potential risks.
 

Key data points in the FI Return

The Financial Institutions Return (FI Return) includes various critical data points that licensed financial institutions must report. These data points are designed to enhance transparency, compliance, and regulatory oversight. Below are the key categories of information included in the FI Return.

Carrying value of investments

Institutions must report the carrying value of all investments used for safeguarding clients' funds at the end of the reporting period.

Intangible assets

Reporting on intangible assets is required, categorised into three classifications, including software assets that are not adversely affected by insolvency.

Income and expenses

Interest Income: Institutions need to report interest income from various sources, including:
• Interest earned from safeguarding client funds.
• Interest from loans and advances granted to group entities and third-party entities.

Realised/unrealised gains and losses

Institutions must report both realised and unrealised gains or losses on financial assets attributable to clients, measured at fair value through profit or loss.

Safeguarding requirements

Detailed reporting of clients' funds held by the institution is required, including amounts safeguarded and how these funds are managed.

Operational metrics

Institutions are required to provide information on their operational metrics, including income derived from different activities and any negative interest paid to banks for holding funds.

Additional documentation

Alongside the FI Return, institutions are required to submit a signed Representations Sheet, confirming the accuracy of the reported data; this must include signatures.

Conclusion

The data points included in the FI Return under FIR/03 reflect a comprehensive approach to regulatory reporting for financial institutions in Malta. By requiring detailed disclosures on financial position, income sources, safeguarding practices, and compliance with regulatory standards, the MFSA aims to strengthen oversight and promote transparency within the sector. Institutions must ensure they are well-prepared to meet these reporting obligations as part of their compliance strategy moving forward.