Analysing regulatory compliance across Maltese banking institutions

Abstract

As a response to the Global Financial Crisis (GFC), to mitigate its impact and avoid a similar situation, regulators and banks sought to reshape the regulatory landscape. While before the GFC, substantial sections of the industry were self-regulated, in its aftermath, there are ever-increasing laws and regulations that financial institutions need to abide by. These might vary across jurisdictions, but the regulatory requirements are becoming increasingly global. This research explores how Maltese banks implement regulatory compliance. It also considers the role that ethics, organisational culture and communication have on today’s regulatory compliance requirements. Are these important for an effective and valid regulatory compliance approach, or are a set of internal obligatory rules sufficient? Finally, advancements in technology are revolutionising both what people understand by banking and how banks can monitor and manage their risks. In 1994, Bill Gates famously said “Banking is necessary, but banks are not”, so how are banks incorporating the technology within their regulatory compliance frameworks in adhering to the regulators’ rules as well as in ensuring a healthy reputation? Towards these aims, the research adopts a mix of qualitative and quantitative approaches whereby 6 semi-structured interviews were conducted, with 5 experts each representing a major Maltese banking institution, and 1 expert represented the regulator, namely the Malta Financial Services Authority (MFSA). The findings and views emanating from these interviews are substantiated through 221 anonymous surveys with non-compliance employees from the same 5 banking institutions. The main findings of the study indicate that Malta’s main banking institutions are well equipped in handling today’s regulatory requirements. Sufficient importance to ethics, culture and communication are noted, however, more work may need to be done in the investment and implementation of compliance software to make full use of modern technology.