The implications of IFRS 7 for Maltese banks

Abstract

Purpose The objectives of this study were to analyse the practical and regulatory implications for Maltese Banks when implementing IFRS 7, and the effect of this new accounting standard on the quality of information given to users of a bank's financial statements. Design The objectives of this study were achieved through data collection from accounting technical material, a series of semi-structured interviews with Financial Officers from the two major commercial banks in Malta, their auditors, Officials from the Banking Unit at the MFSA, Officials from the Stability, Internal Audit and Risk Assessment Department at the Central Bank of Malta, and mailed questionnaires to stockbrokers. Findings The study showed that whilst there are many challenges, the disclosure requirements of IFRS 7 present banks with the opportunity to prepare a single co-ordinated set of financial risk disclosures, and thus reduce costs through synergy. Banks have the opportunity to increase the transparency of their financial statements and this will make them more competitive and improve the financial stability of the financial market. The study showed that users of financial statements will also benefit from the improved disclosures, but this will depend on how the banks choose to present this new information. Value The Maltese Banking Regulator is in the process of amending its Banking Rules to transpose the Capital Requirements Directive of the EU. In this process it should endeavour to provide more guidance to banks as to implementation of the new requirements, allow banks the opportunity to maximise the benefits that can be obtained through reduced costs, while at the same time acting in the best interest of the users of banks' financial statements.