The impact of the securities financing transactions regulation on banks in Malta

Abstract

Purpose: The study is aimed to look at the impact that the SFTR has had on banks and the financial system in Malta. The Securities Financing Transaction Regulation imposes several challenges which may require these banks to adopt new features and operations to comply with the new reporting requirements, disclosures to fund investors and restrictions on reuse of collateral. To this extent, the study will identify the possible benefits and costs that arise to complying with the SFTR requirements. Design: An overview of the subject matter will be given in the literature review, which will be followed by the discussion of findings stemming from the five open-ended surveys completed by professional bank officials. Findings: The major observation obtained from this study is the fact that the requirements of the SFTR has in fact created additional compliance and reporting costs in the financial system. The regulation seems to benefit both the stakeholders and the banks and regulators however, this study shows that the stakeholders seem to benefit more. Some participants though have complained of the SFTR and saw this as an increase in compliance costs and paperwork which will mainly benefit the stakeholders which results in the soundness of the financial system. Conclusions: It can be clearly seen that complying with the requirements of the SFTR, which mainly aim to increase transparency of SFTs, are well worth the costs incurred by the SFTR on banks in Malta. Also, the majority of the survey participants agree that such a regulation to mitigate the risks of SFTs on the financial system, by improving transparency, was well needed. Value: This study hopes to create more awareness on the use of SFTs and their reports and disclosures to stakeholders and how this regulation helps to increase the safety and resilience of the Financial System locally. In particular, this study will show how creating the necessary transparency of these types of transactions will create a more efficient local financial market locally.