Dear CEO: MFSA appeals to credit institutions for more transparency when offering green products

The Malta Financial Services Authority (MFSA)’s most recent review has emphasised the need for additional transparency and consumer protection in the market for green financial products, such as green loans and deposits, issued by banks and credit institutions.

The review focused on green or sustainable banking products offered by six local credit institutions to retail clients. Such products are designed to support environmentally friendly projects and contribute to the broader goals of the European Green Deal.

Here, the MFSA evaluated features such as promotional materials, product attributes and documentation, product approval processes, tariffs of charges and compliance with sustainability criteria.

The MFSA communicated the findings of the review to the industry through a ‘Dear CEO’ letter, through which it set clear expectations for credit institutions offering green products.

Overall, it noted several positive practices among local credit institutions, including a growing range of green products to meet market demand, continuous enhancement of green products to align with client expectations, and advantageous interest rates.

In this case, green loans typically offer lower interest rates than traditional loans, while green term deposits generally offer higher rates than regular deposits, incentivising client uptake of green products.

Despite this, the review points out the need for credit institutions to provide clearer information to clients about the benefits and features of green loans such as fee waivers, interest rates, and eligibility criteria for green home loans.

The MFSA also emphasises on the importance of collecting proper documentation to ensure that loan funds are used for genuinely green purposes.

Commenting on the review findings, MFSA’s Head of Conduct Supervision Sarah Pulis stated that ensuring transparency and consumer protection is “paramount” in the financial sector.

“This review highlights the importance of credit institutions providing clear and accurate information to clients when offering green loans. We encourage all institutions to review their practices and take necessary steps to align with the authority’s expectations,” she added.

The Dear CEO letter noted that such steps include conducting a gap analysis, updating internal processes and procedures, and ensuring that all sustainability-related claims are accurate and verifiable.