MFSA sets out administrative penalties methodology

The Malta Financial Services Authority (MFSA) has published a Guidance Note setting out its methodology for calculating administrative penalties on credit institutions that breach regulatory requirements. The Guidance Note applies to credit institutions authorised and supervised by the MFSA and also, where relevant, to legal persons carrying out unauthorised banking activities. Under the methodology, penalty severity is assessed using several factors: the impact and duration of the infringement, any profits gained or losses avoided as a result, the effect on third parties, the implications for effective supervision and the extent of the misconduct involved.

Where profits gained or losses avoided can be reliably quantified, those amounts may also be factored directly into the penalty calculation. Regulatory breaches are categorised across five severity levels, ranging from Minor to Extremely Severe. Penalties are further calibrated according to asset-based clusters, so that sanctions reflect the size and financial strength of the institution concerned.

The framework allows for adjustments based on aggravating and mitigating factors. These include voluntary disclosure of the breach, cooperation with the MFSA, remedial measures taken by the institution and the institution's overall financial situation. The framework also includes safeguards to ensure that penalties do not jeopardise the financial viability of the institution being sanctioned.

The MFSA stated that the Guidance Note "should not be interpreted as a rigid or automatic penalty calculation mechanism," and that the Authority retains discretion to account for the specific circumstances of each case. The MFSA described the publication as part of its ongoing efforts to enhance regulatory transparency and provide stakeholders with greater clarity about its enforcement approach.