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• Central Bank of Malta Act

The Central Bank of Malta Act (Cap. 204) was originally published by means of Act XXXI of 1967. Since then, there have been a number of amendments to the Act, affecting the Bank, its competencies, as well as its organisation.

The Act is arranged as follows:

The Central Bank of Malta is a body corporate established under article 3 of the Act. In terms of article 4 of the Act, the primary objective of the Central Bank of Malta is to maintain price stability. The Central Bank of Malta is a fully independent body in terms of article 5(2) of the Act, article 7 of the ESCB Statute, and article 130 of the Treaty on the Functioning of the European Union. It enjoys institutional and financial independence, while its Governors enjoy a high degree of personal independence.

By virtue of article 5 of the Act, the Bank has the following tasks:

• to implement monetary policy;
• to hold and manage financial assets;
• to ensure the stability of the financial system;
• to formulate and implement macro-prudential policy;
• to promote a sound and efficient payment system;
• to provide for the circulation of euro bank notes;
• to provide for the circulation of euro coins issued for and on behalf of the Government;
• to advise the Government generally on financial and economic matters;
• to compile and publish statistics as may be necessary to carry out its tasks.

The Central Bank of Malta acts as banker and adviser to government, but may not provide financing, credit or overdrafts to the Government of Malta or to any public undertaking, as required by the monetary financing prohibition laid down in article 27 of the Act as well as article 123(1) of the Treaty on the Functioning of the European Union.

The Central Bank of Malta also maintains direct relations with credit and financial institutions. The legal basis of this relationship and its implications are included in articles 30 and 31 of the Act. In accordance with the provisions of these articles, the Bank:

• may act as banker to credit and financial institutions;
• may accept deposits from credit and financial institutions;
• may appoint credit institutions as agents in exceptional circumstances;
• shall seek co-operation and shall co-operate with credit and financial institutions;
• is to oversee and regulate the operation of, and participation in, payment systems.

In implementing monetary policy, in accordance with the Statute of the European Central Bank, the Bank is further authorised to require credit institutions to open and maintain reserve deposit accounts and report thereon.

The Act also empowers the Bank to require reporting agents, which include credit and financial institutions, to submit such statistical or other information as it may require for the fulfilment of its duties in terms of the Act itself.

The Bank has also issued a number of Central Bank of Malta Directives.

Penalties

Article 56 of the Act (Cap. 204) allows the Bank to impose administrative penalties in respect of non-compliance with its Directives.

Designate Authority to implement Macro-Prudential Instruments

In terms of the Central Bank of Malta Act (Appointment of Designate Authority to implement Macro-Prudential Instruments) Regulations, 2014, the Minister responsible for finance has appointed the Bank as the designate authority for the purposes of implementing a number of macro-prudential instruments as stipulated in Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms and Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (i.e. commonly referred to as the 'CRD IV package'). The Bank will be responsible to set the systemic risk buffer and the countercyclical buffer rate; to identify  jointly with the competent authority (the Malta Financial Services Authority) global systemically important institutions (G-SIIs) and other systemically important institutions (O-SII); and to identify changes in the intensity of macro-prudential or systemic risk in the financial system leading to the adoption of the required macro-prudential measures.