Financial Stability

Tools

The Central Bank of Malta has a range of macro-prudential tools at its disposal to address systemic risk in the banking sector. Macro-prudential tools are instruments that can be used to contain systemic risk. The Joint Financial Stability Board (JFSB) discusses instruments that may be necessary for adoption at the national level. In such discussions, the Board also takes into consideration the guidance provided by the ESRB and the ECB. Macro-prudential instruments generally include policy measures:

(a) aimed at preventing cyclicality in the financial system on both the asset and liability sides of financial institutions' balance sheets;

(b) directed to increase the resilience of the financial system, including that linked to leverage, liquidity, intra-financial system exposures and maturity mismatches;

(c) set to mitigate structural vulnerabilities in the system and limit systemic spill-overs in times of stress.

The CRR/CRD IV provides the legal basis for the Central Bank of Malta's power to issue macro-prudential instruments which is also reflected in national legislation setting out the Bank's financial stability mandate and power to issue, amend and revoke directives in order to implement macro-prudential policy and tools.

Countercyclical Capital Buffer

Systemically Important Institutions

Borrower-Based Measures