Banking Prudent Conduct Requirements under Maltese Law

Chetcuti Cauchi | 08 Feb 2012

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The Banking Act provides that an authorised credit institution is required to conduct its business in a prudent manner. Banking Rule BR/01/2008 provides that an authorised institution shall be considered as conducting its business in a prudent manner if:

(a) The directors include non-executive directors as the Authority considers appropriate having regard to the nature and scale of operations of the institution and who shall act in a control capacity in questioning the approach of the executive directors and other management;

(b) Every person who is a director, controller or manager of the institution is a fit and proper person to hold that particular position and to carry out business with integrity and skill. In assessing whether a person has the relevant competence, soundness of judgement and diligence, the Authority will consider the experience of similar responsibilities, qualifications and training;

(c) The credit institution adapts at all times to the requirements of the relative Rules issued under the Act by the Authority;

(d) The credit institution makes adequate provisions for depreciation or diminution in the value of its assets, for liabilities which will or may fall to be discharged by it and for losses which it will or may incur. In assessing the adequacy of an institution's provisions, the Authority shall regard that institution's provisioning policies including the methods and systems for monitoring recoverability of loans and policies and practices for the taking and valuation of security. In this respect the Authority has issued Banking Rule BR/09 on Credit and Country Risk Provisioning in terms of Article 17(a) of the Banking Act;

(e) The credit institution maintains adequate accounting and other records and adequate systems of control of its business and records that are commensurate with its needs and particular circumstances in such a way as to enable the business of the institution to be prudently managed and for it to comply with the duties imposed on it by or under the Act. In assessing this adequacy the Authority shall take into consideration the internal audit procedures of the institution.

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