Malta: Financial Sector Assessment Program-Technical Note-Macroprudential Policy Framework and Tools

IMF Staff Country Reports, November 21, 2019

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Canonical URL: Malta: Financial Sector Assessment Program-Technical Note-Macroprudential Policy Framework and Tools

Purpose: Evaluate the domestic macroprudential policy framework in Malta and provide recommendations to strengthen it.
Main objectives:
- Assess the domestic institutional arrangements.
- Assess the systemic risk monitoring framework.
- Assess the macroprudential policy toolkit.
- Assess current financial vulnerabilities in Malta to develop specific policy recommendations.

Domestic institutional arrangements:
- Review of current domestic institutional arrangements and provision of recommendations.
- Finding: The legal backing of inter-agency coordination could be further strengthened.
Systemic risk monitoring framework:
- Discussion of the existing systemic risk monitoring framework and options to enhance it further.
Macroprudential policy toolkit:
- Evaluation of tools and consideration of planned policy measures to address sectoral vulnerabilities.

The planned introduction of borrower-based measures is identified as a welcome step to proactively address a build-up of vulnerabilities in the housing and household sectors.
There is scope to refine the design of the planned borrower-based measures to reduce uncertainty over policy effects.
The Central Bank of Malta plans to introduce borrower-based measures to proactively address the potential build-up of vulnerabilities in the housing and household sectors.

Strengthen the legal backing of inter-agency coordination to support macroprudential policy implementation.
Enhance the systemic risk monitoring framework with options discussed in the note to improve early identification of risks.
Refine the design of borrower-based measures to reduce uncertainty over policy effects and improve effectiveness in addressing housing and household sector vulnerabilities.