meta_id 3145840

The Malta Financial Services Authority (MFSA) has issued a "Dear CEO" letter concerning its thematic review of Pillar 3 disclosures conducted by its banking supervision function. The review assessed the quality, consistency and regulatory compliance of both qualitative and quantitative disclosures covering key metrics, including the leverage ratio, own funds and credit risk, with the aim of strengthening transparency and market discipline. The letter outlines the MFSA’s key observations from the thematic review and reiterates its supervisory expectations regarding the quality, consistency and regulatory compliance of Pillar 3 disclosures under the Capital Requirements Regulation . The MFSA’s key findings covered: Governance and processes variability - governance arrangement supporting Pillar 3 disclosures varied across the local banking sector, and the MFSA found that for the majority of banks, disclosures were complete, accurate, published in the required formats and made publicly available in line with Article 434 of the CRR; however, in other banks, governance arrangements seemed insufficient, leading to non-compliance with regulatory requirements. Quantitative data accuracy - the quantitative review identified a range of data quality issues and inconsistencies between Pillar 3 disclosures and underlying supervisory reporting across several disclosure areas. The MFSA observed some key issues, including: Incorrect or incomplete template population was observed across a limited but non-negligible subset of institutions. These issues primarily affected specific disclosure areas and data points, rather than entire templates. Miscalculation between related items, most notably between retained earnings, interim profits, accumulated other comprehensive income and regulatory adjustments within own funds disclosures. Incomplete pubic disclosure of correct data, institutions provided corrected information to the competent authority following the identification of discrepancies, without re-publishing the amended disclosures to reflect the corrected data. Incorrect or incomplete template population was observed across a limited but non-negligible subset of institutions. These issues primarily affected specific disclosure areas and data points, rather than entire templates. Miscalculation between related items, most notably between retained earnings, interim profits, accumulated other comprehensive income and regulatory adjustments within own funds disclosures. Incomplete pubic disclosure of correct data, institutions provided corrected information to the competent authority following the identification of discrepancies, without re-publishing the amended disclosures to reflect the corrected data. Qualitative disclosures - most institutions demonstrated awareness of the applicable disclosure requirements and acknowledged supervisory feedback, but the quality and completeness of qualitative disclosures varied significantly across banks. The MFSA made key observations, such as: The widespread inconsistency in the availability of mandatory EU qualitative tables. Only a minority of institutions that included the relevant qualitative templates fully adhered to the detailed regulatory instructions. The dispersion of qualitative information across multiple sections or documents. Although relevant qualitative content was often present, it was frequently fragmented across different parts of Pillar 3 reports or external publications rather than consolidated within the relevant disclosure tables. The widespread inconsistency in the availability of mandatory EU qualitative tables. Only a minority of institutions that included the relevant qualitative templates fully adhered to the detailed regulatory instructions. The dispersion of qualitative information across multiple sections or documents. Although relevant qualitative content was often present, it was frequently fragmented across different parts of Pillar 3 reports or external publications rather than consolidated within the relevant disclosure tables. The MFSA expects banks to ensure that disclosures are accurate, complete, consistent and in line with the ITS on Pillar 3 disclosures, applying the same rigour as in other regulatory reports. These expectations apply on a proportionate basis, taking into account the nature, scale and complexity of institutions, while maintaining consistent minimum standards for governance, accuracy and transparency. The MFSA will continue to monitor developments in institutions’ Pillar 3 disclosure practices as part of its ongoing supervisory activities, and future assessments will focus on planned topics including liquidity, interest rate risk in the Banking Book, operational risk and asset encumbrance.