The impact of the banking recovery and resolution directive on investment firms in Malta

Abstract

Regulators generally respond to financial crises by tightening up or creating new regulations. The financial crisis of 2007-2009 and the Eurozone debt crisis of 2010/11 initiated the introduction of a Banking Union. As part of this Banking Union we saw the introduction of the Banking Recovery and Resolution Directive (BRRD). The BRRD sets out the structure for the recovery and resolution of banks and Investment Firms dealing on own account. The aim of this dissertation is to analyse the directive, as well as to get an understanding of the impact that it has had on Investment Firms in Malta. This dissertation argues that Investment Firms in Malta do not compare in proportion to the Investment Firms in other Member States, and it is for this reason that they do not fully accept the directive as part of their regulations. Resulting in increased effort needed on the side of the regulators, in this case the MFSA. A number of interviews were conducted with regulation professionals in the financial services industry in Malta. These included professionals working at the MFSA, as well as those in charge of regulating the Investment Firms with a Category 3 Licence. These interviews made it possible to understand the reaction that the local industry has had to the directive.