The implications of the bank recovery and resolution directive on non-core banks and investment firms in Malta

Abstract

Purpose: This research study sets out to analyse the implications of the BRRD on noncore domestic banks as well as investment firms. The main aim behind this study is for the researcher to gain an insight into how such institutions are managing in view of the requirements of the BRRD. Besides building a thorough understanding of the impact of BRRD provisions on these institutions, this study also set out to explore the potential challenges that might arise following the application of said provisions. Design: Purposive sampling was applied, whereby the researcher collected the data by holding semi-structured interviews with representatives from a select number of noncore domestic banks and investment firms. Findings: The findings converge on a number of points. The institutions under study lacked the necessary guidance, largely because the BRRD was implemented rather quickly to immediately address the weaknesses of resolution and supervision that came to light after the 2008 financial crisis. In this respect, the institutions concerned were not able to invest adequate time in their preparation process. In line with previous local research, an ambivalent approach was also observed in relation to the benefits of the measures under the BRRD, especially in the case of small-sized institutions. Conclusion: These outcomes show that the BRRD might be too recent of a regulatory framework to bear concrete results. Although it has generally been welcomed as a constructive measure bent on bringing improvements in the spheres of recovery and resolution, there needs to be further time, and understanding and work by both authorities and institutions to fully realise its benefits. Implications/Value: Given that the BRRD is an important step towards further maintaining financial stability and fighting against financial calamities, this study carries the value of bringing together the existing research done already in this area, further extending the research to cover more domestic institutions and ultimately contributing to a more holistic understanding of the implications of the BRRD in Malta.