From Independent Malta

Green MEP Sven Giegold, member of the Banking Union Working Group of the European Parliament and former rapporteur for the establishment of ESMA, has written to the chairs of the European Supervisory Agencies (EBA, ESMA, Eiopa) and asked whether any peer reviews have been carried out with regards to the Malta Financial Services Authority under chairman Joseph Bannister in view of what Mr Giegold claims are serious conflicts of interest on the part of Professor Bannister.

In a letter which Mr Giegold forwarded to this paper, he wrote:

“I have recently been informed about the suspected breach of standards on operational independence of financial supervisors by Malta, as a result of serious conflicts of interest of the chairman of the Malta Financial Services Authority, Professor Joseph V. Bannister.

“It has been claimed on several occasions that the Chairman of the MFSA is a director on several collective investment schemes in the Cayman Islands. The Chairman of the MFSA has not denied this allegation and has instead indicated that this conflict was cleared by Malta’s Prime Minister in 2012.

“I regard Professor Bannister’s directorships as a serious breach of international standards on operational independence of financial supervisors, set by the Basel Committee of Banking Supervision, the International Organisation of Securities Commissioners and the International Association of Insurance Supervisors.

“Operational independence of national competent authorities is also required in terms of European regulation. Financial supervisors should not be financial market players simultaneously.

“When Council and Parliament legislated for the establishment of the ESAs such problems were very much in our minds. This is the rationale for the recital (EBA: 40) which reads: “Peer reviews are an efficient and effective tool for fostering consistency within the network of financial supervisors. The Authority should therefore develop the methodological framework for such reviews and conduct them on a regular basis. Reviews should focus not only on the convergence of supervisory practices, but also on the capacity of supervisors to achieve high-quality supervisory outcomes, as well as on the independence of those competent authorities. The outcome of peer reviews should be made public with the agreement of the competent authority subject to the review. Best practices should also be identified and made public”.

“The above-quoted recital serves to provide guidance to all ESAs when using their powers to conduct peer reviews and to come up with guidelines and recommendations based on the experience gathered in these peer reviews.

“Therefore, I would appreciate if your Authorities could provide me with the following information:

· which (if any) peer reviews were conducted to look at the subjects of independence and conflict of interest of national supervisors.

· were any peer review conducted on the MFSA (including on issues of operational independence and conflicts of interest) and with which results or recommendations.

· which methodology has been developed on the subjects of peer reviews on independence and conflict of interest as asked for in Art. 30 of the ESA regulations?

· were any guidelines or recommendations on the subjects of independence and conflict of interest of national supervisors discussed or decided?”

Sven Giegold, MEP, accompanied his letters with this article

Financial supervisors must not be financial market players simultaneously Professor Joseph V. Bannister has an impressive career. He is a Professor of Biochemistry and for 20 years and at least until 2019, he has been and will continue to be the Chairman of the Malta Financial Services Authority (MFSA).

In this position Professor Bannister is responsible for the supervision of banks, insurance companies, investment firms, collective investment schemes, trustees and company service providers operating in and from Malta.

Prior to that, he held the position of head of the agency for the promotion of investment in Malta for four years. Simultaneously, and up to now he is Vice Chairman of Finance Malta with the mandate to promote the financial sector in Malta.

And bizarrely enough, on top of that, he is apparently listed as director of a number of collective investment schemes registered in the Cayman Islands.

The reputation of the financial sector in Malta has suffered severely in recent years. The Panama Papers uncovered a large number of entities which have been set up by operators in Malta.

In addition, the Maltese Nemea Bank debacle raises doubts about the performance and efficiency of the MFSA’s supervision of the banking sector.

Furthermore, the failure of Setanta Insurance, headquartered in Malta, caused financial damage to over 75,000 insured in Ireland.

This again indicates that the MFSA supervision is weak, particularly because the Authority reacted too late to the warnings of the Irish Central Bank. Not to mention the recent cases where Maltese company service providers have been reported as having provided services to the Italian Mafia.

Financial services are increasingly provided across borders in the European Single Market, even to ordinary investors and consumers. Therefore, a common standard of financial supervision becomes more and more important to ensure fair competition and to increase consumers’ trust. It is for this reason that the European Supervisory Authorities were put in place in 2010 to ensure consistent and efficient financial supervision in Europe.

The MFSA led by Professor Joseph V. Bannister is a member of the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA).

The MFSA holds a seat and has voting rights in these institutions as well as in the Single Supervisory Mechanism for banks within the European Central Bank’s Supervisory Board and in the EU’s Single Resolution Board.

The MFSA’s recent failures have raised a number of questions and serious concerns at European level on the MFSA’s supervisory processes and its operational independence.

Professor Joseph V. Bannister’s position as a longtime financial supervisor whilst at the same time a director of a number of collective investment schemes in the Cayman Islands constitutes a serious conflict of interest.

In fact, being a supervisor and industry player at the same time is a serious breach of international standards on operational independence of financial supervisors set by the Basel Committee on Banking Supervision, the International Organisation of Securities Commissions and the International Association of Insurance Supervisors. It follows that financial supervisors must not be financial market players simultaneously.

In the context of the European Internal Market, which encourages cross-border business, the supervisory failures in a Member State can have a negative impact in other Member States. Therefore, within the European System of Financial Supervision conflicts of interest and bad governance of national financial supervisors cannot be ignored, as such failures will always damage the European financial system as a whole and undermine the credibility of its institutions.

The legal mandate of the European Supervisory Authorities therefore foresees that checks should be carried out on the independence and good governance of all national financial supervisors. So far however, these national supervisors have hardly ever come under critical scrutiny in this regard.

It is for this reason that I have written to the European Supervisory Authorities to request for explanations on how conflicts of interest, such as those of Professor Joseph V. Bannister, can be addressed and operational independence properly ensured.

This is what the European public expects from the European Supervisory Authorities for the proper safety of the European financial system.

IMAGES:

Malta Financial Services Authority Chairman Joe Bannister

Sven Giegold, MEP

For more on this story go to: http://www.independent.com.mt/articles/2016-06-08/local-news/Green-MEP-claims-serious-conflict-of-interest-on-the-part-of-MFSA-s-Bannister-6736159044