FIMBank's consolidation strategy fully aligned with outcome of MFSA audit

05.04.2016

FIMBank plc has announced its response to the outcome of an onsite inspection by the Malta Financial Services Authority (MFSA) that took place in March 2015. The MFSA has determined that governance arrangements, processes and mechanisms in place at the time of the inspection were not considered to be comprehensive to the nature, scale and complexity of the credit institution’s activities.  The Authority did not impose a fine or penalty on the Bank, but applied limitations on geographic expansion and required prior MFSA approval for further investment in its network. Incidentally, this coincides with the strategy already being pursued by FIMBank, and does not constrain it in pursuing and executing its approved strategy.

The inspection took place following the most difficult year in the Group’s history, which saw FIMBank registering impairments events across various Group entities, predominantly arising in Russia and India. Following the publication of the Bank’s 2014 results, the Group embarked on a consolidation strategy which sought to address a number of issues, including those highlighted by the MFSA, amongst which were the reinforcement of governance, risk structures and internal control capabilities.  Commenting on the MFSA’s inspection and its outcome, Murali Subramanian, FIMBank Group CEO, stated that “The circumstances leading to the 2014 financial results provided the impetus for the internal, strategic and structural changes we undertook during 2015. I strongly believe that our determination to effect these changes, and the fact that we were transparent, accountable and responsive vis-à-vis the regulator throughout the whole process, had a material bearing on the Authority’s assessment.”

Elaborating on the measures undertaken by the Bank, Dr John C. Grech, FIMBank Group Chairman, highlighted that “Our new shareholders had identified weaknesses in governance as early as 2013, which led to a process of strengthening the Board and risk structures. January 2015 saw the start of a gradual replacement of senior management executives, and we have been actively working towards adopting a more consistent implementation of robust control measures in order to be in a position to reach a stage where there is a complete revocation of the restrictions imposed.” The Chairman also emphasised that “These restrictions coincide with our own strategic objectives which I announced at last year’s AGM, where I expressed the need to consolidate the Group and focus on performance and profitability, rather than on expansion.”

Twelve months after the inspection, the Authority has reported significant progress, noting changes at senior management level, tangible and sustained level of shareholder support and a number of corrective measures. Dr John C. Grech said that “These measures have been implemented in line with our commitment to shareholders, made during the last AGM, to effect the required turnaround within the shortest time-frame possible.

 

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