meta_id 3248848

On June 17, 2026, the Malta Financial Services Authority (MFSA) issued a Dear CEO Letter to credit institutions communicating outcomes from its recent assessment of the Internal Liquidity Adequacy Assessment Process (ILAAP) framework across a sample of less significant institutions (LSIs). The assessment forms part of the MFSA's Compliance Outcomes-Based Supervision approach and identifies deficiencies in liquidity and funding risk management practices. The MFSA reviewed seven key areas: Internal governance and oversight. Risk appetite framework (RAF). Internal audit coverage. Risk management and internal controls. Online deposit platforms (ODPs). Liquidity contingency planning. Stress testing frameworks. The assessment revealed significant weaknesses in several areas. Only 26 percent of the reviewed areas were found to be fully compliant, while 34 percent were partially compliant and 40 percent were non-compliant. Of particular concern are the following findings: Approximately 75 percent of institutions failed to escalate key ILAAP aspects to the board level. The RAF recorded the lowest level of compliance, at 25 percent, with institutions relying predominantly on regulatory metrics rather than institution-specific risks. 50 percent of institutions lack formal liquidity contingency plans. 75 percent of LSIs exhibit significant shortcomings in their stress testing, with only 25 percent conducting adequate intraday liquidity monitoring. The MFSA expects credit institutions to give due consideration to the findings outlined in the letter and, where relevant, to take timely and appropriate action to address any identified gaps, thereby ensuring ongoing compliance with the applicable regulatory framework and supervisory expectations. The MFSA expects all credit institutions to address these gaps by strengthening their governance frameworks, enhancing their internal controls, improving their data quality and automation, creating comprehensive risk appetite frameworks that capture institution-specific liquidity risks, conducting robust contingency funding assessments and carrying out more rigorous stress testing that incorporates reverse and alternative scenarios.