Building Bigger and Better Capital Markets

Interview with Lorraine Vella, Head of Capital Markets Supervision

FinanceMalta reached out to Lorraine Vella, the newly appointed Head of Capital Markets Supervision at the Malta Financial Services Authority (MFSA), to find out more about her new role and the regulator's ambitious roadmap to take Malta's capital markets to the next level.


Picture: Lorraine Vella, Head of Capital Markets Supervision

Can you please provide a brief overview of the MFSA's strategy for Malta's capital markets, and explain how your new function fits into that strategy?

The Authority's Capital Markets Strategy objective is to foster sustainable growth of the local markets through a holistic approach, taking into consideration the dynamic environment in which we operate. When I say 'we', I am not only referring to us as regulators but to the different stakeholders and market players. There is no doubt that all stakeholders are facing different challenges, especially when considering the exceptional circumstances we have had to face these last couple of years, but we surely have a common objective: we all want strong local markets, which ultimately would benefit all.

The strategy is based on five pillars, which tackle different aspects, and all of which are fundamental to the whole capital markets ecosystem. These are establishing the Authority's risk appetite in considering applications for admissibility to listing, the revision of the regulatory framework, strengthening the sponsors' regime, building supervisory capacity and - last but not least - educating investors. The new Capital Markets Supervision function will be driving and implementing this strategy over the next years.

In Europe, capital markets reached varying stages of development. How would you describe the current level of activity of Malta's capital markets?

Overall, there is a good level of activity in Malta's capital markets. This year, we have seen an increase in listings of bonds and shares compared to the same period last year, as various local companies are seeing the benefits of raising funds from the local market. This is very encouraging especially when you consider the extraordinary events we are facing.

When you consider the stage of development of a market, you need to take into consideration other aspects, not just activity. I must say that we have come a long way since the first listing on the Malta Stock Exchange in 1992. I was involved in processing applications for admissibility to listing and supervision of listed entities from the early days the MFSA took over this task, and I have seen progress in every aspect: the quality of drafts of prospectuses; the improvement in corporate governance structures; the knowledge and expertise of company secretaries; the complexity of group structures; and the appreciation of the benefits of capital markets by family businesses; to name a few.

What impact will the EU's capital markets union have on Malta?

The EU's capital markets union (CMU) package is a balancing act; on one hand the EU is trying to make it easier for companies to raise capital across the EU, especially for small companies, and on the other hand the objective is for all Europeans, no matter where they are in Europe, to get the best deals for their savings and investments. This, of course, is easier said than done especially when one considers the different stages of development of EU capital markets and investors' financial literacy across Europe. Malta, as part of the EU, will be impacted by the several actions being proposed under the CMU action plan. We need to be ready to adopt the different legislative and non-legislative initiatives. No doubt that this will be challenging for Malta, especially when considering the size of our market, but I am sure that there will be also opportunities to grow our local markets.

You will be actively involved in various other initiatives such as crowdfunding, the DLT MTF Pilot Regime and Green Bonds. What can you tell us about these initiatives?

These are all very interesting EU initiatives, which are part of the EU's green transition and digital transformation and which we are following very closely to make sure that we are ready to operate efficiently and effectively in these areas.

We see crowdfunding as a new form of technology-enabled financial service, which aims to help better match investors with business projects, especially innovative and/or start-up companies, in need of funding. SMEs may have had difficulties in the past raising the necessary funding for projects, and we believe that this can be a further step to help such entities raise the necessary finance through an alternative channel. On 25 January 2022, the MFSA issued the Crowdfunding Rules which contain requirements that Crowdfunding Service Providers are required to follow. Recently, we also issued a Consultation Document on fees for European Crowdfunding Services Providers. We can also say that there will be further developments in this area locally.

The DLT Pilot Regime is likely to start applying in early 2023. At this stage, most of the Level 1 discussions have been finalised within the Council of the EU, and we are now following up through active participation at ESMA level to discuss Level 2 and Level 3 provisions. We are also engaging with the industry to keep our markets updated on this front.

The EU Green Bond Standard, aimed at increasing transparency and accountability as far as Green Bonds are concerned, is still making its way through the European legislative process. Presently our focus in this area, besides obviously following up on the process and giving feedback where necessary, is to create awareness and upskill our staff.

ESG has risen sharply into focus of both issuers and investors. At what point do you expect sustainability to be the default position for securities?

We welcome the inclusion of sustainability as an integral part of financing decisions. There is a lot to chew on, but we are all conscious that time is against us and that if we really want to achieve a sustainable Europe by 2030, we really need to work hard.

From a regulatory and supervisory aspect, what other new initiatives and developments should market participants be aware of?

Well, I guess we have enough on our plate and successfully dealing with all the present initiatives at EU level, and implementing the Capital Markets Strategy during such challenging times, would already be a great success for all of us.

Internationalising Malta's capital markets has long been an ambition of the Malta Stock Exchange. What role can the MFSA play in helping Malta win the confidence of major issuers?

As a regulator, it is important that the MFSA ensures that the regulatory framework is fit for purpose. Only if we have a robust, transparent regulatory framework, can market participants trust our markets. This is why one of the main pillars of the Capital Markets Strategy is to revise the regulatory framework. The way I see it is that if you create the right environment, market players will come and stay.

Of course, a good regulatory framework should always be complemented by effective supervision and enforcement to keep everything in order. Having said that, the MFSA alone or the MSE alone for all that matters, cannot attract international business. As in other sectors, all market players have to do their bit to make Malta a jurisdiction of choice for serious international business.

How is the MFSA working with international groups and regulatory bodies to further develop the capital markets, especially in terms of the sustainable securities markets?

The MFSA, as part of the European System of Financial Supervision, works closely with the European Supervisory Authorities and other national supervisors in different areas of financial supervision, including the capital markets. We referred to various EU initiatives in this area where the MFSA through its participation, particularly in European Securities and Markets Authority (ESMA) working groups and ultimately ESMA Board of Supervisors, contributes to such initiatives. Also, the MFSA is a member of the International Organization of Securities Commissions (IOSCO), where several discussions and interactions in the area of capital markets take place. Through such exchanges we identify good practices and opportunities, as well as learn from the mistakes of other jurisdictions.

What do you expect the future will hold for Malta's capital markets? Do you think there's room for another stock market?

I sincerely believe that the future of Malta's capital markets is a bright one. I really believe that there is true potential for growth in this area. This is why I took up the position of Head of Capital Markets Supervision function within the MFSA. We are living through challenging times, as world economies are recovering from the effects of Covid-19, the ongoing war and the inflationary trend. We are also seeing some bold moves by the EU such as the Sustainable Finance package and the Digital Finance package, which will steer our priorities and possibly change the way we operate. We need to embrace these changes and evolve with the times. Only like this can we grow and flourish.

As far as another stock market, I definitely think yes, there is room for other trading venues, especially trading venues adopting new technologies such as DLT.


Lorraine Vella was appointed Head of the newly established Capital Markets Supervision function on 1 May 2022. Lorraine, a certified public accountant, joined the MFSA in 2000 and has worked in a number of areas within the organisation, gaining extensive knowledge in regulation, supervision and enforcement in the financial markets sphere. Having more than 15 years of experience in capital markets, throughout her career she was also directly involved in the transposition and implementation of various EU legislation, including the Prospectus Directive, Transparency Directive, Shareholders Rights Directive and Takeover Bids Directive. Lorraine has represented the MFSA within various Committees of the European Supervisory Authorities and is currently actively involved in European Network Groups related to supervision in financial services. She is also an alternate member on the Board of Supervisors of the European Securities and Markets Authority.

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