MFSA hikes in fees anger industry as watchdog splashes millions on direct orders

Recent revelations about how the financial regulator is handling its own financial affairs, disregarding public procurement rules while incurring significant losses, have stunned financial services operators and industry insiders, given the significant increases in supervisory and other fees imposed on the island’s financial services industry.

Last year, the Malta Financial Services Authority (MFSA) quietly rolled out sharp increases to its annual supervisory and application fees –  a change buried in a flurry of legal notices published on Christmas Eve.

The hikes affect banks, insurers, payment service providers, trusts and other regulated entities, with some licences now facing hundreds of thousands of euros more in annual charges than under the old regime.

The fee revision marks a stark reversal for an authority that, just a few years ago, heralded Malta’s regulatory environment as competitive and attractive.

Operators have privately expressed outrage with The Shift at what they describe as a backdoor tax increase, implemented with no consultation and only revealed publicly after the Opposition raised the alarm in Parliament.

The timing is striking, as the fee hikes, which increase every year until 2029, coincide with fresh revelations about the MFSA’s dismal financial performance.

The Authority’s latest accounts show a €4.6 million loss in 2024, despite a massive €17.7 million subvention from taxpayers – a swing from a €2.3 million surplus the year before.

Industry insiders say the losses reflect deep governance failures and unchecked spending. Among the most controversial is a €2.7 million direct order awarded to a small UK reputation-management firm, ostensibly to “boost Malta’s international branding”.

MFSA CEO Kenneth Farrugia has refused to explain why such a large contract was not tendered competitively or why no local firms were considered. He also refused to explain the doubling of the fees being imposed on financial services operators by the MFSA amidst its spending sprees.

The direct-order saga adds to a catalogue of questionable expenditures.

Over recent years, the Authority has awarded eye-watering deals through non-competitive procedures – including expensive office leases and high-value consultancies – drawing increasing scrutiny from the industry. Even milk, consumed by employees, was bought through a direct order, costing over €7,000.

Industry insiders argue that the fee increases are a burden on licensees that have done nothing wrong, while the regulator seemingly struggles with its own books.

“The MFSA is taxing the industry to cover its own mismanagement,” a financial services practitioner told The Shift.

Practitioners warned that, through mounting losses, unexplained direct orders and rising regulatory charges, confidence in Malta’s financial watchdog and the island’s reputation is waning.