2024
MeDirect Bank (Malta) plc
Annual Report and
Financial Statements
2Annual Report and Financial Statements 2024
Table of contents
Directors’ Report .....................................................................................................................................................................................
Who We Are ................................................................................................................................................................................................
Group History ............................................................................................................................................................................................
Group Board ..............................................................................................................................................................................................
Statement of Compliance with the Principles of Good Corporate Governance ......................................
Remuneration Report ..........................................................................................................................................................................
Financial Statements ...........................................................................................................................................................................
Statements of Financial Position .....................................................................................................................................
Statements of Comprehensive Income ....................................................................................................................
Statements of Changes in Equity .................................................................................................................................
Statements of Cash Flows ..................................................................................................................................................
Notes to the Financial Statements ...............................................................................................................................
Five-Year Comparison .........................................................................................................................................................................
Company Information .........................................................................................................................................................................
Independent Auditor’s Report ......................................................................................................................................................
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3Annual Report and Financial Statements 2024
Directors’ Report
We hereby present the annual report of MeDirect Bank (Malta) plc (the “Bank”) and of the Bank and its subsidiaries
(“MeDirect” or the “Group”) for the year ended 31 December 2024.
1
These results reflect the consolidated position of
the Bank and its principal subsidiaries.
2
A year of change ...
The year 2024 was an important year of transition for the Group. MeDirect’s controlling shareholder, AnaCap Financial
Partners II LP (“AnaCap”), identified a new prospective controlling shareholder for the Group which is committed to
reinforcing the Group’s capital base and facilitating the growth plans of both MeDirect Malta and MeDirect Belgium.
On 28 November 2024, the immediate parent company of MDB Group Limited, Medifin Finance Limited, entered into
a share purchase agreement with Banka CREDITAS a.s. (“Banka CREDITAS”), pursuant to which Banka CREDITAS
agreed to purchase 100% of the share capital of MDB Group Limited, subject to receiving all required regulatory
approvals.
Banka CREDITAS is a Czech financial institution that is part of CREDITAS Group (“CG”), a privately-owned investment
group with investments primarily in financial services, real estate (rental housing and development) and energy
(distribution and generation). The financial services arm of CG has investments in banking, investment services, asset
management, leasing and other related areas.
Banka CREDITAS is interested in using the MeDirect banks to grow and diversify its financial services business into
additional European markets. As such, it plans to retain both MeDirect banks and to invest additional capital to enable
them to continue to build their businesses.
In addition to the above, after almost eight years as chair of the Company and MeDirect Malta, Mike Bussey decided
to leave MeDirect in December 2024 to have time to pursue other interests, including his recent appointment as
Chair of the Board of Trustees of the London Clinic, one of the largest private hospitals in England. His successor is
Bart Bronselaer, who has been a director of MeDirect Belgium since January 2021. Mr. Bronselaer has over 30 years’
of experience in European institutional financial services and was a director and temporarily the interim CEO of the
Belgian financial holding company Dexia and the French bank Dexia Crédit Local.
Finally, after having led the Group for more than five years, Arnaud Denis decided to leave MeDirect effective 31 January
2025. During his time as CEO, Mr. Denis led the de-risking, scaling and transformation of the Group into a fully-fledged
digital bank offering a wide range of banking, wealth and investment services, and backed by cutting-edge technology.
He also oversaw the transition of MeDirect to a new controlling shareholder.
The successor to Mr. Denis as Group Chief Executive Officer is Jean-Claude Maher (subject to regulatory approval),
currently the Group’s Chief Operating Officer. Mr. Maher has more than 30 years of experience in banking and, prior to
joining MeDirect, worked since 1994 with Deutsche Bank AG where he held various roles in research, corporate banking,
transaction banking, private banking and country management. His most recent role at Deutsche Bank was as Country
Chief Operating Officer and Branch Manager of Deutsche Bank in Belgium.
1 This report is prepared in accordance with the Maltese Companies Act (Cap. 386) (the “Act”) and complies with the disclosure
requirements of the Sixth Schedule to the Act.
2 The principal subsidiaries of the Bank are MeDirect Bank SA (“MeDirect Belgium”) and MeDirect Tech Limited. The Bank also
consolidates certain entities in respect of which MeDirect Malta and MeDirect Belgium have retained substantially all the underlying risks and
rewards. These include Bastion 2020-1 NHG B.V., Bastion 2021-1 NHG B.V. and Bastion 2022-1 NHG B.V., each of which is a controlled special
purpose entity established in the Netherlands as part of the Group’s funding strategy, and Medifin Estates, a property leasing partnership. The
parent company of the Bank is MDB Group Limited.
4Annual Report and Financial Statements 2024
... in which MeDirect continued to execute its business strategy
Notwithstanding changes in management and the prospective change in shareholder, MeDirect continued to execute
its business strategy by growing its franchises in Malta, Belgium and the Netherlands, developing its digital platform,
transforming its balance sheet, building its capabilities in recently launched asset classes such as Belgian and Maltese
mortgages.
Growing a pan-European client franchise
The Group enhanced its brand awareness in its core markets of Malta, Belgium and the Netherlands. During 2024, the
Group’s client base grew by 17% to reach 155,000 by 31 December 2024, compared with 133,000 at year-end 2023.
At year-end 2024, the Group had 118,000 retail clients in Belgium, 34,000 in Malta and 3,000 in the Netherlands. In
December, MeDirect Belgium received an award from Spaargids.be as Best Savings Bank in Belgium.
MeDirect also expanded its corporate client base. It now serves over 500 corporate customers doing business in 15
countries by offering innovatve technology, high quality, personalised services and tailored financial solutions. Through
its new corporate banking platform (described at greater length below), MeDirect Malta offers a full range of banking
and lending services for both companies and their owners.
Individual and corporate clients have grown their financial assets with MeDirect, reaching an aggregate of €5.9 billion in
December 2024, an increase of 19% from year-end 2023. Assets under custody have grown to €2.1 billion, an increase
of 22% from year-end 2023.
Developing MeDirect’s cutting-edge digital platform
In 2024, MeDirect solidified its position as Malta’s digital bank. By leveraging technology and maintaining a customer-
centric approach, MeDirect delivered transformative solutions that significantly enhanced its offerings for both individual
and corporate clients.
Corporate banking platform
A major highlight of the year was the launch of the MeDirect Corporate Banking Platform, an innovative solution that
provides businesses with seamless banking experiences. One of its standout features is a salary payment module,
enabling businesses to streamline payroll processes with ease and precision. Built as an omni-channel solution, the
platform is accessible through both web and mobile interfaces, ensuring flexibility and convenience for users.
This solution was developed with an emphasis on user-centric design, resulting in highly positive Net Promoter Scores.
Businesses and their owners can now manage their corporate and personal accounts through a unified journey,
eliminating the need for separate tools and processes. This integration not only saves time but also empowers clients
with greater control and visibility over their finances, setting a new benchmark in digital banking solutions.
Expansion of payment options: Google Pay and Apple Pay
Another key achievement in 2024 was the rollout of Google Pay and Apple Pay services in Malta and Belgium. These
launches followed the introduction of MeDirect’s debit card services, which were successfully implemented just months
earlier. By integrating these globally recognised payment platforms, MeDirect has enabled its clients to make secure,
contactless payments effortlessly, aligning with the rapidly growing demand for digital payment solutions.
The addition of digital wallets marks a significant step forward in MeDirect’s commitment to delivering modern, tech-
driven financial services. These features have not only enhanced convenience but also strengthened the bank’s value
proposition in key markets.
5Annual Report and Financial Statements 2024
A cutting-edge banking ecosystem
Underpinning these advancements is MeDirect’s internally developed banking ecosystem, designed for rapid
innovation and scalability. Built with cutting-edge technologies, the platform leverages distributed micro-frontends
and microservices architecture, hosted on expansive Kubernetes clusters. This architecture provides MeDirect with
unparalleled flexibility to scale its services in response to growing customer demands.
The adoption of distributed micro-frontends ensures that different components of the platform can be updated
independently, enabling faster feature releases and a smoother user experience. Similarly, the microservices architecture
enhances system resilience and reliability, ensuring uninterrupted service delivery even during peak usage.
By investing in such a robust technological foundation, MeDirect has positioned itself to enrich its offerings continuously
and respond dynamically to market needs. This commitment to innovation has not only reinforced client trust but has
also set the stage for future advancements.
Newest developments: SEPA instant payments and wealth management
Looking to the future, MeDirect has an ambitious roadmap aimed at further enhancing its services. One of the most
anticipated developments is the introduction of SEPA Instant Payments, a feature that will enable real-time euro
transfers across participating banks. This will serve as an add-on to MeDirect’s internally built payment hub, providing
clients with faster and more efficient payment capabilities.
In addition, MeDirect is exploring an open model that will allow clients to invest in model portfolios tailored to their
financial goals. This innovative solution aims to simplify wealth management, making it more accessible and user-
friendly for clients seeking to grow their investments.
Financial performance
The Group delivered net operating profit of €14.3 million in 2024, a decrease of 6.5% (2023: €15.3 million). Net
operating profit was driven by the following factors:
• Operating income decreased by €2.8 million, or 3.1%, to €85.8 million (2023: €88.5 million). The Group’s top
line was adversely affected by further de-risking of its balance sheet through a reduction of the International
Corporate Lending (“ICL”) portfolio, which continued at pace in 2024. Lower net interest income from the ICL
portfolio reduced -net interest income by approximately €12.0 million versus 2023.
• Excluding the impact of ICL portfolio, operating income grew €9.6 million or 15.7%. This was principally driven by
growth across all sectors of mortgage lending as well as in Maltese corporate portfolios, generating higher net
interest income, partially offset by increased cost of funding. Growth of €2.1 million or 40.4% was registered in
fees from the wealth business and other commissions for a total amount of €7.2 million in 2024.
• Operating costs decreased by €1.8 million to €71.5 million (2023: €73.2 million), principally as a result of lower
professional services and marketing expenditure which more than offset an increase in personnel costs incurred
as the Group strengthened its resources by acquiring new talent in the areas of regulatory compliance, risk
management, customer experience and product development.
Expected credit losses (“ECLs”) for the financial year 2024 amounted to a €19.3 million net charge (2023: €0.9 million
net charge), predominantly driven by adverse developments in the ICL portfolio. The net ECL charge impact was due
to realised losses as a result of targeted divestments of selected exposures and deterioration in two specific lending
positions. During the comparable period of 2023, the Group recorded a substantial recovery of Stage 3 exposures and
benefited from larger releases of provisions based on ECL model calculations.
6Annual Report and Financial Statements 2024
With net operating profit of €14.4 million offset by unfavourable ECL impact of €19.3 million, the Group’s net result for
financial year 2024 was a loss before tax of €5.0 million (2023: €14.3 million profit before tax).
Balance Sheet Position
The Group’s balance sheet grew by 1.9% in 2024 and stood at €5.07 billion as of 31 December 2024 (2023: €4.98
billion).
Balance sheet transformation
The funding mix shifted moderately further toward customer deposits as the Group’s primary source of funding, mostly
through increased retail deposits. At year-end 2024, customer deposits stood at €3.9 billion, an increase of 17.2% from
the previous year’s €3.3 billion.
After successfully reducing the size of the Group’s ICL portfolio to €329 million (net of provisions) by the end of
2023, MeDirect continued to de-risk its balance sheet. By year-end 2024, the ICL portfolio was reduced by a further
37%, to €206 million (net of provisions). The Group proactively reduced the ICL portfolio through non-replacement of
repayments and selected loan sales.
Net loans and advances to customers as of 31 December 2024 reached €2.9 billion, an increase of 6.3% when compared
with the €2.8 billion of 31 December 2023, driven by increased mortgage lending. Key developments in the mortgage
asset class were:
• MeDirect’s Dutch-government guaranteed NHG mortgage activity continued to form the core of its mortgage
portfolio, comprising 40% of the Group’s total balance sheet. The partnership with HollandWoont, a leading
Dutch NHG origination and servicing platform, enables MeDirect to control the origination of NHG mortgages
based on its strategic priorities and market conditions.
• MeDirect’s Dutch buy-to-let mortgage portfolio, established in October 2022 in partnership with Build Finance,
more than doubled in size and reached €173.5 million as of 31 December 2024. Using the Build Finance
platform, MeDirect is building its Dutch buy-to-let business in a controlled manner and benefits from attractive
risk-adjusted returns.
• MeDirect further expanded its Belgian and Maltese mortgage lending businesses, both of which registered
double-digit growth.
The corporate lending portfolio in Malta grew by 7.5% during the period, reflecting continued support of local businesses
through collateralised facilities.
The investment portfolio increased by a net €37.2 million or 2.8%. The effective rate of return on treasury investments
improved from 2.4% in 2023 to 3.2% in 2024. One of the key contributing factors was an investment into “AAA” rated
notes issued by securitisations of consumer finance, auto loans and mortgage loan receivables originated in the Dutch
and German markets.
Capital position of the Group
MDB Group’s capital and liquidity positions remained adequate, supporting the continuation of its business strategy
and further growth. As of 31 December 2024, MDB Group’s Tier 1 capital ratio stood at 16.4%, with a total capital ratio of
19.8%, both above regulatory requirements, recommendations and management buffers.
7Annual Report and Financial Statements 2024
Asset Quality
The Group continued to execute its de-risking strategy and to improve its asset quality by actively managing its Non-
Performing Loan (“NPL”) portfolio and reducing its NPL ratio by divesting certain non-performing loans, predominantly
in the ICL portfolio. As of 31 December 2024, the NPL ratio was reduced to 2.2%, from 2.5% as of 31 December 2023.
ESG and Social responsibility
MeDirect continued to integrate Environmental, Social and Governance (“ESG”) principles into its business and to raise
ESG awareness throughout the organisation. During 2024, MeDirect expanded its offering of green funds and ETFs,
green mortgage loans and introduced a new green lending product in Malta.
Additionally, it reported its carbon footprint for the first time in December 2023 and
has since continued to monitor its carbon emissions. This effort aligns with MeDirect’s
commitment to reducing its own carbon footprint and financed emissions to achieve
net-zero by 2050, in line with the Group’s ESG Strategy. To reduce its own emissions,
MeDirect sources 100% green energy for its offices in the Netherlands and the United
Kingdom, while its Malta and Belgium offices are LEED (Leadership in Energy and
Environmental Design) and CWaPE (Commission wallonne pour l’énergie) certified.
In 2024, MeDirect continued to improve its EcoVadis rating, earning a prestigious Platinum medal. This recognition
places MeDirect in the top 1% of companies rated by EcoVadis, a leading sustainability rating provider. The Group
continue its efforts to increase ESG awareness throughout the organisation.
Diversity and inclusion are two important values for MeDirect. As of December 2024, MeDirect had employees from over
30 nationalities, with 62% of the workforce being male and 38% female. In April 2024, MeDirect Malta was re-certified
with the Equality Mark by the National Commission for the Promotion of Equality. MeDirect prides itself on developing
its employees and promoting from within. It contributes to the local communities in which it operates by supporting
charitable organisations as well as talented individuals in areas such as sports and culture through sponsorships,
donations and the voluntary actions of its employees.
Conclusion
In 2024, MeDirect took an important step toward securing a bright future. On 28 November 2024, Banka CREDITAS
agreed to purchase MeDirect, subject to all required regulatory approvals. The prospective acquisition of MeDirect by
Banka CREDITAS is expected to provide the Group with a strong controlling shareholder, committed to reinforcing the
Group’s capital base and facilitating its sustainable growth plans in each of the markets in which it competes. Banka
CREDITAS has both the financial strength and industry expertise to work in partnership with MeDirect with the aim
of continuing to build MeDirect’s client franchise and technology platform and of producing stable and consistent
profitability.
Notwithstanding the many changes during 2024, MeDirect continued to execute its business strategy. The Group
continued to de-risk its balance sheet and to reduce the size of its ICL portfolio, whilst maintaining adequate prudential
ratios, in excess of regulatory requirements, recommendations and management buffers.
At the same time, MeDirect continued to build its customer-centric platform, adding additional features and functionalities
designed to make banking and wealth management as effortless as possible. From the launch of an omni-channel
corporate banking platform to the introduction of globally recognised payment solutions, MeDirect has consistently
demonstrated its ability to innovate and adapt. Supported by a cutting-edge technological infrastructure, MeDirect is
well-positioned to continue its trajectory of growth and innovation, shaping the future of digital banking for years to
come.
8Annual Report and Financial Statements 2024
By listening to client feedback and staying ahead of industry trends, MeDirect intends to continue to deliver solutions
that cater to the evolving needs of its diverse corporate and retail customer base.
Board of Directors
Under the Bank’s Articles of Association, directors shall be appointed for a maximum term of three years and may be
re-elected for additional three-year terms. Terms are staggered such that an election of at least two Board members
shall take place at each annual general meeting. Directors may be removed before the expiration of their term of office
by majority vote of the Bank’s shareholders in accordance with the Act or the Company’s Memorandum and Articles
of Association.
The Directors of the Bank who held office during the year were:
Mr. Bart Bronselaer – appointed as independent non-executive director on 27 November 2024 and became Chair on
11 December 2024
Mr. Michael Bussey – appointed as independent non-executive director and chair on 20 February 2017 and resigned
on 11 December 2024
Mr. Arnaud Denis – appointed as chief executive officer and executive director on 15 October 2019 and resigned on 31
January 2025
Ms. Izabela Banas – appointed as chief financial officer and executive director on 4 September 2024
Mr. Philip English – appointed as non-executive director on 21 August 2023
Ms. Lisa Fergus – appointed as chief risk officer and executive director on 14 December 2023
Mr. Radoslaw Ksiezopolski – appointed as chief financial officer and executive director on 4 October 2019 and resigned
on 15 July 2024
Ms. Dina Quraishi – appointed as independent non-executive director on 6 July 2023
Mr. John Zarb – appointed as independent non-executive director on 17 July 2017
Mr. Jean-Claude Maher was nominated as chief executive officer and executive director on 1 February 2025, subject to
regulatory approval.
Dividends and reserves
The accumulated losses of the Group amounted to €16.3 million (2023: €10.3 million) and of the Bank amounted to
€17.1 million (2023: €12.0 million). After consideration of the financial results of the Group, the Directors of the Bank do
not recommend the payment of a final dividend. The Board has determined that the Group should conserve its capital
to maximise its ability to support its customers, to continue to strengthen its balance sheet and to invest selectively in
its Wealth platform.
Confirmation of MeDirect’s going concern assessment
After due consideration of MeDirect’s business, profitability projections, funding and capital plans, robust risk and
internal control processes and taking into account the broader macroeconomic outlook, the Directors declare that
MeDirect is in a position to continue operating as a going concern for the foreseeable future. The Board is satisfied that
at the time of approving these financial statements, MeDirect will have sufficient capital to meet not only its regulatory
capital and liquidity requirements but also any internal risk buffers and any buffers recommended by its regulators.
Enhancing risk governance
MeDirect understands the importance of adopting sound enterprise-wide risk management principles. MeDirect’s core
objective in the management of risk is to protect its customers and counterparties and to ensure its ability to grow
9Annual Report and Financial Statements 2024
sustainably and continue to develop a strong risk culture.
Managing risk effectively, efficiently and sustainably is an integral part of the Group’s business strategy. MeDirect’s
risk management approach focuses on ensuring continued financial soundness and safeguarding the interests of its
stakeholders while retaining the ability to pursue value-creating business opportunities in a fast-changing environment.
This is achieved through high standards of corporate governance and sound risk management principles embedded
in the Enterprise Risk Management Framework (“ERMF”). The ERMF outlines the highest level principles for risk
management by setting out standards, objectives and key responsibilities of different risks and groups across the
Group.
MeDirect has a well-established risk governance structure, with an active and engaged Board of Directors supported
by an experienced senior management team and a centralised risk management function that is independent
of the business lines. Decision making is primarily conducted through the Board of Directors with oversight from a
Board level Risk and Compliance Committee and delegated authority within executive level committees, including
the newly established Enterprise Risk Management Committee and Compliance and Financial Crime Committee. The
responsibilities of the Group’s Risk Management function are to protect the Group through embedding a strong risk
culture and to enable it to deliver sustainable income by facilitating and monitoring the implementation of effective risk
management practices and assisting risk owners in defining and controlling risk exposures.
The Group has established a comprehensive and robust risk management framework which sets forth the steps
necessary to assess, manage, monitor and report current and emerging risks, whilst continually seeking to improve and
evolve its risk management practices to ensure that it can proactively manage its risk environment.
MeDirect has designed its risk management framework to support and enable the sustainable delivery of its strategy.
This risk management framework ensures that new and proposed business lines, areas of growth, changes in technology
and management decisions have robust oversight and are well governed.
Risks are monitored through regular and timely risk reporting, enabling the proactive identification and management
of risks with the aim of reducing or avoiding undue exposure to various specific risk types. The ERMF identifies ten
principal risks which are: business model and strategy risk, capital adequacy, liquidity risk, credit risk, market risk,
operational risk, IT and information security risk, financial crime risk, regulatory risk and reputational risk. For 2025,
however, the Group has also introduced an eleventh risk category: sustainability risk, covering ESG matters.
Risk appetite limits established by the Board set forth the amount and types of risk that MeDirect is prepared to accept
or tolerate when delivering its strategy. These risk appetite limits are embedded in policies, management authorities
and limits across the Group. Frequent and close monitoring of all risk appetite limits, combined with comprehensive
reporting to management and the Board ensures that risk is maintained within acceptable levels in accordance with
the Group’s risk appetite.
In addition, all critical risk appetite limits are subjected to stress testing analysis at a risk type and portfolio level to
ensure that MeDirect remains financially healthy during and after severe risk events. Stress testing is an important part
of the Group’s risk management framework and addresses a range of idiosyncratic and market-wide scenarios. The
results of stress testing enable senior management to assess any potential vulnerability to exceptional but plausible
adverse events. Stress testing enables MeDirect to assess its capital adequacy and liquidity risks and to identify
potentially risky segments in its business model, as well as inherent systematic risks. This enables the Group to develop
appropriate risk controls, contingency plans and mitigating actions to address relevant risks before adverse events
occur.
MeDirect’s Board regularly discusses and monitors controls, addressing any threats or emerging risks which could
potentially have an adverse effect on the operations or financial condition of the Group. Controls include, amongst
others, maintaining an adequate and diversified funding base, interest rate hedging aimed at protecting its balance
sheet, continuing reduction of credit risk and diversification of the balance sheet into lower-risk mortgage assets and
10Annual Report and Financial Statements 2024
robust operational risk controls, particularly in view of the Group’s increasing reliance on technology to improve the
efficiency of its operations.
Related parties
During the year ended 31 December 2024, other than the transactions described under note 36 to the financial
statements, there were no material changes in related party transactions as compared with those described in the
financial statements for the year ended 31 December 2023. In addition, no related party transactions materially affected
the financial position or liquidity of MeDirect.
MeDirect confirms that there were no material contracts to which it or any of its subsidiaries was a party in which any
of its directors was directly or indirectly interested.
1
Events after the reporting date
There were no events after the reporting date that would have a material effect on the financial statements of the Bank
or the Group.
Pillar 3 disclosures
MeDirect is required to publish Pillar 3 quantitative and qualitative disclosure requirements.
2
The Group publishes its
full Pillar 3 disclosures annually as a separate document that is available on MeDirect’s website.
Standard licence conditions applicable under the Investment Services Act (Cap. 370)
Licence holders are required to include in the Directors’ Report breaches of standard licence conditions under the
Investment Services Act (Cap. 370). The Directors confirm that no breaches of standard licence conditions and no other
breach of regulatory requirements under the Investment Services Act (Cap. 370) that were subject to administrative
penalty or regulatory sanction were reported during the financial year.
2
Statement of Directors’ responsibilities for the financial statements
MeDirect is required by the Maltese Banking Act (Cap. 371) and the Maltese Companies Act (Cap. 386) to prepare
financial statements that give a true and fair view of the state of affairs of the Bank and the Group as of the end of each
reporting year and of the profit or loss for that year.
In preparing the financial statements, MeDirect is responsible for:
• ensuring that the financial statements have been drawn up in accordance with International Financial Reporting
Standards as adopted by the EU;
• selecting and applying appropriate accounting policies;
• making accounting estimates that are reasonable in the circumstances; and
• ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate to
presume that the Bank and the Group will continue in business as a going concern.
MeDirect is also responsible for designing, implementing and maintaining internal controls designed to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error, and that
1 Statement pursuant to Capital Market Rule 5.70.1.
2 As governed by BR 07: Publication of Annual Report and Audited Financial Statements of Credit Institutions authorised under the Mal-
tese Banking Act (Cap. 371), issued by the MFSA, which follows the disclosure requirements of EU Regulation No 575/2013 (CRR) of the European
Parliament and of the Council of 26 June 2013 and the Commission Implementing Regulation (EU) 2021/637 of 15 March 2021.
11Annual Report and Financial Statements 2024
comply with the Maltese Companies Act (Cap. 386). MeDirect is also responsible for safeguarding the assets of the
Bank and the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The financial statements of the Company for the year ended 31 December 2024 are included in the Annual Report
2024, which is published in hard-copy printed form and will be made available on the Group’s website. MeDirect is
responsible for the maintenance and integrity of the Annual Report on the website in view of its responsibility for the
controls over and the security of its website. Access to information published on the Group’s website is available in other
countries and jurisdictions where legislation governing the preparation and dissemination of financial statements may
differ from requirements or practice in Malta.
Statement by the Directors pursuant to Capital Market Rule 5.68
1
The undersigned declare that to the best of their knowledge, the financial statements were prepared in accordance with
the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss
of the Bank and its subsidiaries included in the consolidated financial statements and that this report includes a fair
review of the performance of the business and the position of the Bank and its subsidiaries included in the consolidated
financial statements, together with a description of the principal risks and uncertainties that it faces.
Signed by Bart Bronselaer (Chair), Izabela Banas (Chief Finance Officer) and Lisa Fergus (Chief Risk Officer) on
12 March 2025.
1 Statement in accordance with SLC 7.60 of the Investment Services Rules for Investment Services providers regulated by the MFSA
12Annual Report and Financial Statements 2024
Who we are
Purpose, Mission and Core Values
Our customer proposition is:
Empowering people to manage their wealth with confidence and autonomy.
Delivering on this exciting mission is why we have built a world class mobile app and digital banking platform, giving our
clients a one-stop shop for their wealth and banking needs. Our vision for our customers is embodied in our “My Money,
My Choices” branding, which speaks to the freedom and flexibility provided to customers in managing their finances.
We aim to meet the needs of the underserved affluent customer segment and to provide the best digital services
available in our markets both to people who want to control their finances and to those want to be guided in their
investment journeys. Our solution addresses the needs of a large potential universe, ranging from first time to
experienced investors. We offer a wide choice of investment products and a highly convenient platform that enables
our customers to achieve their financial goals. Increasingly, we are helping our corporate by providing a digital solution
for their banking and financing needs.
Users of our platform may include:
• affluent individual and corporate customers unsatisfied with the offline journey provided by their current bank
or investment advisors;
• people who do not have the time or expertise to manage their money and want to delegate or be guided;
• tech-savvy investors who want to access a highly functional trading platform with real-time capabilities and
rich information; and
• customers who do not qualify for private banking, which typically caters only to customers with significant
investible wealth.
MeDirect addresses these needs with cutting-edge technology and customer-centric solutions. We offer, on a single
multi-channel platform with open architecture, a broad range of online investment solutions combined with superior
user experience and attractive pricing. Our app provides customers with a wide range of services including trading,
advisory and discretionary portfolio management, coupled with daily banking facilitated by our physical and virtual
card capabilities. Through our new corporate services platform, launched in Malta in 2024, we are also addressing the
banking needs of businesses.
Technology is the backbone of our success. Our internal tech teams have developed the critical components of our
platform, allowing us to deploy seamless service aggregation capabilities. Our technology architecture is state-of-the-
art, with scalability and modularity at its core. It has been, built by a talented team recruited from advanced technology
sectors including iGaming, Financial Services and Telecom.
Our strategic priorities reflect our core values:
Autonomy: We empower our customers and give them the tools to manage their money, their way. We encourage our
employees to take ownership of their work and grow their skills.
Innovation: We are results driven and constantly review how we go about delivering on our vision and improving our
value proposition.
Transparency: The financial world isn’t simple, but the MeDirect app is. We communicate clearly with our clients and
our colleagues.
Responsibility: We take our responsibilities to all our stakeholders seriously - customers, employees, regulators,
investors and the broader community.
13Annual Report and Financial Statements 2024
How our vision ties into our core strategy
Our core strategy is based on four main pillars:
1. Scaling up our platform
MeDirect focuses on the affluent customer segment (typically with
€30,000 - €300,000 in wealth) that values convenience, transparency
and choice. MeDirect aims to provide a full range of investment
services from brokerage to investment guidance to discretionary
3. MeDirect Tech Proprietary platform
MeDirect’s technology strategy is a testament to the power of modern software architecture in driving business growth
and maintaining a competitive edge. MeDirect’s cloud-agnostic approach allows for the seamless integration of services
from various third-party providers, enhancing its digital offerings. This strategic selection of partners contributes to a
robust and flexible modular ecosystem, capable of supporting the platform’s scalability.
The transition from a monolithic setup to a containerised platform
was a pivotal move in MeDirect’s tech strategy. This shift not
only facilitated scaling up to accommodate higher volumes
and broader geographies but also ensured cost-efficiency. The
adoption of a modular microservices architecture underlines
MeDirect’s commitment to continuous innovation and its ability
to adapt to evolving business and customer needs.
MeDirect’s proprietary platform design revolves around core elements that prioritise user experience and interfaces,
client experience management, order orchestration, payment execution, and transaction management. These elements
are underpinned by key design principles that ensure a seamless and efficient operation. MeDirect’s in-house software
development team, recognised for its excellence, plays a crucial role in the ongoing development and refinement of this
cutting-edge technology.
Overall, MeDirect’s tech architecture is a strategic asset that enables it to offer a comprehensive and multi-channel
customer experience while optimising operational efficiency and scalability. This positions MeDirect well to respond
swiftly to market demands and to continue its trajectory of innovation and growth.
2. Growing a low risk and capital efficient mortgage lending platform
We have built mortgage offerings in the Netherlands, Belgium and Malta and developed a lending platform that
is both scalable and competitive. In Belgium and the Netherlands, MeDirect operates with a B2B2C approach,
by working with the best servicing and origination partners and
focusing on niche market segments, while still maintaining an
appropriate risk-reward balance. We aim to use this business
line to complement our wealth offering and to build a platform
which maximises the full range of synergies between the two
business lines, including cross-selling mortgages to wealth
customers or vice-versa.
portfolio management, combined with high-quality daily banking functions, including physical and virtual cards and
digital wallets. We bring to market innovative solutions combining our proprietary software with seamlessly aggregated
services from selected partners to create intuitive customer journeys.
MeDirect focuses on the
affluent customer segment
that values convenience,
transparency and choice.
Strategic selection of partners
contributes to a robust and
flexible modular ecosystem,
capable of supporting the
platform’s scalability.
We have built mortgage offerings
in the Netherlands, Belgium and
Malta and developed a lending
platform that is both scalable
and competitive.
14Annual Report and Financial Statements 2024
4. Efficient operating model
MeDirect operates a high-quality service centre in Malta comprising technology, digital channels, operations and other
support teams. These teams drive MeDirect’s vision to be simpler, better and faster for its customers and workforce.
These teams:
• develop software and applications to improve customer experience;
• manage the IT infrastructure and support;
• manage customer operations and change across MeDirect; and
• provide professional services in areas such as finance, risk and treasury.
Each of our banks have dedicated marketing and product teams, as well as robust control functions. This international
set-up means MeDirect can scale up efficiently while remaining flexible and close to local market customer and
regulatory requirements.
15Annual Report and Financial Statements 2024
Group History
June
November
2009
May
July
2023
Geographical expansion of digital wealth products and deposits into the Netherlands
MeDirect Belgium rated 3rd best bank in Belgium by Forbes global survey
Launch of physical and virtual cards contributing to growth in MeDirect customer base
September
2019
Launch of Dutch NHG mortgage business line
May
2020
Successful completion of first Residential Mortgage-Backed Security (“RMBS”)
Launch of retail mobile app
June
2015
Belgian branch obtains banking licence and becomes subsidiary of Maltese bank
January
2016
MDB Group regulated under the Single Supervisory Mechanism
Acquired by AnaCap Financial Partners II L.P.
Launch of online deposits in Malta
April
October
2022
MeDirect launches mortgage products in Belgium in partnership with Allianz
Launch of professional buy-to-let mortgage product in the Netherlands
March
November
2021
Launch of home loans in the Maltese market
Awarded “Best Use of Technology in Business Transformation” by Tech.MT for MeDirect’s
digital onboarding platform
January
July
August
November
December
Launch of upgraded MeDirect Corporate Banking Platform
Partnership with one of Malta’s leading communications services provider
MeDirect makes digital wallets accessible for card users through Google Pay and subsequently
Apple Pay
Medifin Finance Limited, the direct parent company of MeDirect enters into a share purchase
agreement with Banka CREDITAS a.s. subject to regulatory approval
MeDirect Belgium awarded Best Savings Bank award by Spaargids.be
Significant milestone of 150,000 retail customers with more than €5 billion in of financial
assets held with MeDirect
2024
16Annual Report and Financial Statements 2024
Group Board
Bart Bronselaer
Independent Chair and Non-Executive Director
» Joined the MeDirect Group Board on 27 November 2024 as Chair of the Board, while concurrently serving as
Chair of the Board Risk Committee at MeDirect Bank SA through February 2025
Former key positions held:
» Head of Debt Markets - Merrill Lynch International (London)
» Chair of the Board of Directors - Royal Park Investments
» Director - Dexia NV
» Director - Dexia Credit Local
» Chief Executive Officer and Chair of the management committee ad interim of Dexia NV and Director and Chief
Executive Officer ad interim of Dexia Credit Local
External appointments:
» Director - United Pensions OFP
Dina Quraishi
Independent Non-Executive Director
» Joined MeDirect Board on 6 July 2023 and is the Chair of the Risk and Compliance Committee
» 20+ years of experience in risk management covering various sectors including payments, FinTech, engineering
and financial services
Former key positions held:
» Chief Risk Officer – SWIFT (Belgium)
» Global Head of Enterprise Risk Management – Sandvik (Sweden)
» Head of Operational Risk – Zurich Insurance
John Zarb
Independent Non-Executive Director
» Joined the MeDirect Group Board on 17 July 2017 and is the Chair of the Audit Committee, also a Director and
Audit Committee member at MeDirect Bank SA
» 40 years of experience with PwC in Malta, retiring from his role as Partner in 2014
Former key positions held:
» Formerly President of Malta Institute of Accountants and served as Malta’s representative on the EU
Accounting Regulatory Committee and on the Accountancy Board for several years
External appointments:
» Director - Foster Clark Products Ltd
» Board member of Tumas Investments plc and board member and Chair of the Remuneration Committee of its
parent company, Tumas Group Company Limited
Philip English
Non-Executive Director
» Joined MDB Group’s Board on 21 August 2023
» 30+ years of experience focusing on portfolio management, security valuation, financial markets and institutions
and commercial banking
Former key positions held:
» Served on the Board of Directors of the CFA Society Washington, DC
» Served on the Investment Management Committee for Raffa Wealth Management
External appointments:
» Research Associate Professor of Finance at the Fox School of Business, Temple University
» Executive Director of the Fischer-Shain Centre for Financial Services and executive member of its Board
17Annual Report and Financial Statements 2024
Izabela Banas
Director and Group Chief Financial Officer
» Joined MeDirect Group’s Board on 4 September 2024.
» 25 years experience in finance at large corporations, 17 years in financial services.
» Certified Lean Sigma Black Belt
Former key positions held:
» CFO - Bank of Valletta
» CFO - HSBC Private Bank, EMEA
» Various senior management positions in finance at Credit Suisse, Willis Towers Watson and General Electric
Lisa Fergus
Director and Group Chief Risk Officer
» Joined MeDirect Group Board on 19 December 2023 as Group CRO
» Experienced banking professional with over 30 years in depth experience across enterprise risk management,
compliance, financial crime, internal audit and corporate governance
Former key positions held:
» CRO - Ashman Finance, UK
» CRO - Monzo, UK
» CRO - Clear Bank, UK
» CRO - Masthaven Bank, UK
» Leading an audit quality assurance and professional practices programme globally at Barclays Bank
The above is the Board as of the date of this Annual Report. In addition to the above, Jean-Claude Maher was
nominated as Chief Executive Officer and Executive Director of MDB Group Limited and MeDirect Bank (Malta) plc on
9 January 2025, subject to regulatory approval. As of 31 December 2024, Arnaud Denis was a member of the Boards
of MDB Group Limited and MeDirect Bank (Malta) plc. and he resigned effective 31 January 2025.
18Annual Report and Financial Statements 2024
Statement of Compliance with the Principles of Good Corporate
Governance
Introduction
MeDirect Bank (Malta) plc (the “Bank” or “MeDirectMalta”) hereby reports on the extent to which the Code of Principles
of Good Corporate Governance (the “Code”) has been adopted as required by the Capital Markets Rules of the Malta
Financial Services Authority.
The Group acknowledges that the Code does not dictate or prescribe mandatory rules but recommends principles
of good practice. However, the Directors believe that such practices are in the best interests of MeDirect Malta, its
shareholders and other stakeholders, primarily because compliance with principles of good corporate governance is
expected by investors on the Malta Stock Exchange and evidences the Directors’ and the Group’s commitment to a
high standard of corporate governance.
The Directors report that since MeDirect Malta is a company that only issues debt securities and has not issued equity
securities which are traded in a multilateral trading facility, it is exempt from disclosing the information prescribed in
Capital Markets Rules 5.97.1, 5.97.2, 5.97.3, 5.97.6 and 5.97.8 in this corporate governance statement. It is in the light of
these factors that the Directors are herein reporting on the corporate governance of MeDirect Malta.
The Directors are aware that the Code highlights principles which although of general application to listed companies
are adaptable by each company depending on its particular circumstances. Those circumstances are more often than
not determined by two factors: (i) the specific nature of the business of the company; and (ii) the fact that whilst certain
principles in the Code are applicable to companies the equity securities of which are listed on the Stock Exchange, they
are not altogether applicable, or not applicable in the same manner, to companies that fall within the definition of a listed
company by virtue of having issued debt instruments which are listed on the Malta Stock Exchange. In this context,
the Directors believe that the Group’s current organisational set up guarantees the proper and efficient functioning of
MeDirect Malta and provides adequate corporate governance safeguards.
Compliance with the Code
Principles 1 and 3: Board of Directors and composition of the Board
MeDirect Malta’s Board of Directors (the “Board”) included directors with a diverse range of skills and experience
acquired in senior roles with international banks and financial organisations, professional firms and government entities.
At 31 December 2024, the MeDirect Malta Board consisted of four non-executive members and three executive
members, satisfying the rule that one third of the Directors should be Non-Executive Directors, with the majority of the
Non-Executive Directors being independent. The Chair and the Chief Executive Officer of MeDirect Belgium have a
standing invitation to attend discussions as observers; however, they are excluded from any decision-making processes.
Taking into account certain factors such as the size of MeDirect Malta, the size of the Board and the balance of skills
and experience represented by its members, the MeDirect Malta Directors are considered to be appropriate for the
requirements of MeDirect Malta’s business.
All Directors are deemed to be fit and proper to direct the business of MeDirect Malta.
The Board of MeDirect Malta cooperates closely with the Board of its direct subsidiary, MeDirect Belgium, to ensure
consistent application of Group standards and coordination of activities, whilst at the same time respecting the
independence of each Board and their respective needs to meet all applicable statutory and regulatory obligations in
the jurisdictions in which they are organised and do business.
19Annual Report and Financial Statements 2024
Principle 2: Chair and Chief Executive Officer
The offices of MeDirect Malta’s Chair and Chief Executive Officer are held by different individuals, avoiding concentration
of authority and power in one individual and differentiating the leadership of the Board from that of running MeDirect
Malta’s business.
MeDirect Malta’s Chair is responsible for (i) leading MeDirect Malta’s Board, (ii) ensuring that MeDirect Malta’s
Board receives precise, timely and objective information to enable it to take sound decisions and monitor effectively
the performance of the company, (iii) ensure effective communication with shareholders and (iv) encourage active
engagement by all Directors in discussions about key issues.
MeDirect Malta’s Chief Executive Officer (“CEO”) leads the MeDirect Malta Executive Committee, which is responsible
for the execution of the strategy approved by the Board. The MeDirect Malta CEO coordinates closely with the CEO of
MeDirect Belgium and its Executive Committee.
Principles 4, 5 and 8: Responsibilities of the Board, Board Meetings and Committees
The MeDirect Malta Board has the first level responsibility for executing the four basic roles of corporate governance:
accountability, monitoring, strategy formulation and policy development.
Functioning of the Board
The MeDirect Malta Board delegates the management and day-to-day running of the Group to the Group CEO, who
acts in coordination with the CEO of MeDirect Belgium, in accordance with such policies and directions as the Board
may from time to time determine, with the exception of the following matters which require the specific approval of the
Board:
• Overall business strategy;
• Key policies that may have a material impact on the Group;
• Overall risk strategy, including the risk appetite and risk management framework;
• Corporate governance structure, including the proper functioning of Board committees;
• The internal controls framework for the Group, setting forth the responsibilities of the Board and of management
of all business lines and internal units, including internal control functions, outsourced activities and distribution
channels;
• Amounts, types and distribution of both internal capital and regulatory capital with the aim of ensuring adequate
coverage of the risks of the Group;
• Targets for liquidity management of the Group;
• Dividend policy, including recommendation for payment of any dividend;
• Remuneration practices, including remuneration of the members of the Board and senior management;
• Arrangements ensuring that the individual and collective suitability assessments of the Board are carried out
effectively, that the composition and succession planning of the Board are appropriate and that the Board
performs its functions effectively, including the effectiveness of the Board Committees;
• Assessment and evaluation of key function holders;
• Arrangements ensuring the integrity of the accounting and financial reporting systems, including financial and
operational controls designed to ensure compliance with law and regulation as well as relevant standards; and
• A conflicts of interest policy covering conflicts on an institutional level and for staff.
20Annual Report and Financial Statements 2024
The Board is also responsible for setting a framework of values and a code of conduct in which the stated corporate
and risk culture can evolve and thrive. Each member of the Board should reinforce these values through their own
behaviour and decisions. The Board has oversight of the following:
• The process of public disclosures and communications with external stakeholders and competent authorities;
and
• The overall activity, financial and risk situation of the Group, taking into account the economic environment, and
the implementation of sustainable strategic decisions that have a significant impact on the business.
The Board monitors, periodically reviews and addresses any weaknesses identified regarding the implementation of
processes, strategies and policies related to any of their approval and oversight responsibilities.
The Board may delegate some of its responsibilities, in particular its review and monitoring responsibilities, to Board
Committees, however it still retains oversight over these activities and remains responsible for ultimate decision-making.
Notices of the dates of scheduled meetings of MeDirect Malta’s Board together with supporting materials are circulated
to the Directors in advance of such meetings. Advance notice is also given of ad hoc meetings of MeDirect Malta’s
Board to allow Directors sufficient time to arrange their commitments in order to be able to participate. Seventeen
meetings of the Board of MeDirect Malta were held during the 2024 financial year.
As soon as practicable after each Board meeting, minutes that faithfully record attendance, deliberations and decisions
of MeDirect Malta’s Board are prepared and circulated to all Directors.
Where common issues are being discussed, certain Board meetings are held jointly with the Board of MeDirect Belgium.
The following section sets forth details of the members of MeDirect Malta’s Board of Directors and of each of the
committees of MeDirect Malta’s Board.
Board of Directors
The following table sets forth the percentage of meetings attended by each director during the financial year:
Meetings attended
Michael Bussey* Independent Chair and Non-Executive Director 100%
Bart Bronselaer** Independent Chair and Non-Executive Director 100%
John Zarb Independent Non-Executive Director 100%
Dina Quirashi Independent Non-Executive Director 100%
Philip English Non-Executive Director 100%
Arnaud Denis*** Executive Director - Chief Executive Officer 100%
Radoslaw Ksiezopolski**** Executive Director - Chief Financial Officer 100%
Izabela Banas***** Executive Director - Chief Financial Officer 100%
Lisa Fergus Executive Director - Chief Risk Officer 100%
* Michael Bussey resigned on 11 December 2024.
** Bart Bronselaer became an independent non-executive director of MeDirect Malta on 27 November 2024 and Board Chair on 11 December 2024.
*** Arnaud Denis resigned on 31 January 2025. Jean-Claude Maher was nominated as an executive director on 1 February 2025, subject to
regulatory approval.
**** Radoslaw Ksiezopolski resigned on 15 July 2024.
***** Izabela Banas was appointed as an executive director on 4 September 2024.
21Annual Report and Financial Statements 2024
Committees of the Board
Certain responsibilities of the Board are delegated to Board committees. The Board committees play an essential role
in supporting the Board in fulfilling its responsibilities and ensuring that the highest standards of corporate governance
are maintained. Updates from the Chairs of the Board Committees are included as a standing agenda item in all routine
Board meetings.
The Committees coordinate their activities with the equivalent committees of MeDirect Belgium, and where common
issues are being addressed, certain meetings are held jointly with the equivalent committees of MeDirect Belgium.
Board Committees
A. Audit Committee
The purpose of the Audit Committee is to oversee the quality and integrity of the Group’s financial reports, particularly
the key financial judgments, and review the accounting policies. In addition, the Audit Committee oversees the design
adequacy and operating effectiveness of the Group’s internal control framework and governance structure through the
activities of the Internal Audit Function.The primary responsibilities of the Group Audit Committee are the following:
• review accounting policies;
• monitor the Group’s financial and other disclosures, ensuring compliance with legal and regulatory requirements;
• review the qualifications, performance and independence of the external auditor;
• review and approve Internal Audit’s plan and oversee the execution of the plan; and
• assess the effectiveness of Internal Audit, including the adequacy and competence of its staff.
The members of the Audit Committee are:
John Zarb Committee Chair and Independent Non-Executive Director
Bart Bronselaer* Member and Independent Non-Executive Director
Dina Quraishi Member and Independent Non-Executive Director
* Michael Bussey, resigned from the Board of MeDirect Malta on 11 December 2024 and was replaced as a member of the Audit Committee on that
date by Bart Bronselaer.
In terms of Capital Markets Rules 5.117 and 5.118, John Zarb is the non-executive director whom the Group Board considers
as competent in accounting and/or auditing. John Zarb retired from his role as partner at PricewaterhouseCoopers at
the end of 2014 after a career spanning over 40 years in the audit and advisory practices of the firm. He is a past
President of the Malta Institute of Accountants and served for a number of years on the Accountancy Board and as
Malta’s representative on the EU Accounting Regulatory Committee. John Zarb was also the Chair of PG plc and is
currently a director of Tumas Investments plc and director and Chair of the remuneration committee of Tumas Group
Company Limited. He also serves as a director of Foster Clark Products Limited.
During the year ended 31 December 2024, nine meetings of the Audit Committees were held. The Group Chief Internal
Auditor attends the meetings as a standing invitee, unless there are exceptional circumstances. Other officers or
employees may be asked to join the meeting as required.
Since 2024, MeDirect Malta and Belgium have held Joint Board Audit Committees. These sessions have boosted
efficiency, improved information sharing, and fostered better interaction among independent non-executive directors,
all while respecting each committee’s autonomy and legal obligations. Typical agenda items include presentations from
Finance, Internal Audit, and statutory auditors, as well as the approval of financial statements and disclosures. For
matters specific to MeDirect Malta, Belgian representatives excuse themselves to allow independent deliberation by the
Malta members, and a similar arrangement exists for MeDirect Belgium. Conflicts of interest are discussed separately,
and closed sessions with auditors are conducted independently.
22Annual Report and Financial Statements 2024
B. Nominations and Remuneration Committee
The Group’s Nominations and Remuneration Committee prepares and approves the Remuneration Report. The
disclosures in the Remuneration Report reflect the requirements of EU Capital Requirements Regulation (575/2013) to
the extent applicable to the financial year under review.
MeDirect Malta’s Nominations and Remuneration Committee includes only Non-Executive Directors with no personal
financial interest in the Group. The members of the Committee are Bart Bronselaer (Chair) (who replaced Michael
Bussey upon Mr. Bussey’s resignation on 11 December 2024), John Zarb and Philip English. A separate Nominations
and Remuneration Committee exists for MeDirect Belgium.
C. Board Risk and Compliance Committee
The primary purpose of the Board Risk and Compliance Committee is to assist the Group Board of Directors in its
oversight of management’s responsibility to execute an enterprise wide risk management strategy and framework
designed to identify, assess and manage the Group’s strategic, credit and investment, market, and operational risks
within risk appetite. The Board retains overall responsibility for managing risk.
This is performed through an in-depth and detailed oversight of the Group’s risk management and compliance strategy,
policies and practices and monitoring its actual performance against the risk appetite approved by the Board. The Risk
function and the Compliance function both report to the Board Risk and Compliance Committee.
Amongst the primary responsibilities of the Board Risk and Compliance Committee are:
• to ensure that the Group’s risk strategy and Risk Appetite Framework (including its Risk Appetite Statement
and associated thresholds for escalation and related controls) are comprehensive and consistent with the
Group’s business strategy, objectives, corporate culture and values;
• to assess, and report at least annually on, the effectiveness of the Group’s Risk Management Function, the
Compliance Function and the Money Laundering Reporting Officer, including the adequacy of staffing levels
and expertise as well as the completeness of the function’s coverage;
• to ensure the sufficiency and effectiveness of the process of pricing assets and liabilities; and
• to vet and approve related party transactions in accordance with Capital Markets Rule 5.138.
The Board Risk and Compliance Committee has oversight of all the Group’s risk and compliance matters, even if they
arise in its main subsidiary, MeDirect Belgium, which has its own Board Risk and Compliance Committee.
The Board Risk and Compliance Committee coordinates its activities with the Board Risk and Compliance Committee of
MeDirect Belgium, and where common issues are being addressed, certain meetings are held jointly by the committees.
The current members of the Board Risk and Compliance Committee are:
Dina Quraishi Committee Chair and Independent Non-Executive Director
John Zarb Member and Independent Non-Executive Director
Philip English Member and Non-Executive Director
The Group Chief Financial Officer, the Group Chief Risk Officer, MeDirect Malta’s Chief Compliance Officer and the
MeDirect Malta Money Laundering Reporting Officer attend the Board Risk and Compliance Committee meetings by
invitation. The Group’s and MeDirect Belgium’s Board Chairs attend meetings as observers.
The Chair of the Committee reports on all matters to the Group’s Board after each meeting and notifies the Board of
any decisions made. The Committee makes whatever recommendations to the Group Board it deems necessary. The
Board Risk and Compliance Committee met nine times during the financial year.
23Annual Report and Financial Statements 2024
Principal Management Committees
A. Malta Executive Committee (“Malta ExCo”)
The MeDirect Malta Board delegates the execution of MeDirect Malta’s strategy to the Malta ExCo. This committee
serves as a management forum to manage the execution of MeDirect Malta’s business priorities and reinforce the
governance of MeDirect Malta’s activities. It focuses on MeDirect Malta’s growth strategies and new initiatives and
monitors the ability of MeDirect Malta to respond to new regulatory developments. It meets on a monthly basis and is
responsible for the formulation and implementation of Board-approved strategies and plans and for ensuring that the
business is operated in accordance with such strategies and plans.
The Malta ExCo is chaired by the Group CEO and includes the Group Chief Financial Officer and the Group Chief Risk
Officer. The Group Chief Technology Officer, Group Head of Channels and Customer Experience, Head of Legal and
Commercial Strategy and the Chief Internal Audit Officer (as an observer) are standing invitees of the Malta ExCo.
MeDirect Belgium has a similar Executive Committee comprising the MeDirect Belgium CEO, Chief Financial Officer,
and Chief Risk Officer.
B. Enterprise Risk Management Committee (“ERMC”)
The ERMC (formally the Management Risk Committee) is a sub-committee of the Malta ExCo. Its purpose is to provide
executive risk management oversight and steering in Malta and on behalf of the Group, by monitoring, assessing, and
driving enterprise risk management activities and governance. This includes providing executive risk management
oversight of risk strategy, risk policy, risk appetite, risk tolerance, emerging risks and portfolio risk exposure across all
principal risk categories.
The ERMC has 4 sub committees:
1. Management Credit Committee (MeDirect Malta and MeDirect Belgium operate a separate committees)
2. Model Governance Committee (MeDirect Malta and MeDirect Belgium operate a combined committee)
3. Compliance and Financial Crime Committee (MeDirect Malta only)
4. ESG Committee (MeDirect Malta and MeDirect Belgium operate a combined committee).
The following are the main responsibilities of the EMRC:
• Oversee and advise the Malta ExCo and the Board Risk and Compliance Committee across all enterprise risk-
related matters;
• Monitor and oversee compliance with risk appetite limits and risk strategy across all principal risks at the
MeDirect Malta entity level and at the Group level and advise and escalate to the Board Risk and Compliance
Committee on risk appetite and risk tolerance-related matters, where necessary;
• Conduct an annual review of the following documents:
» Internal Capital Adequacy Assessment Process (“ICAAP”);
» Internal Liquidity Adequacy Assessment Process (“ILAAP”);
» Recovery and Resolution Plan;
» Solvent Wind-Down Plan;
» Failing or likely to fail Plan; and
» Climate-related and Environmental Risks (“CER”) Materiality Assessment.
• Monitor and oversee the impact and action plans required to address emerging and strategic risks;
• Review internal control systems to ensure effectiveness and report to the Board Risk and Compliance
Committee on the effectiveness of risk management and internal controls;
• Provide oversight of the annual business continuity and crisis management tests; and
24Annual Report and Financial Statements 2024
• Review how effectively management is embedding and maintaining an effective risk management culture
and a strong internal control environment designed to foster compliance with Group policies and compliance
requirements.
The members of the ERMC are the Group Chief Risk Officer (Chair), MeDirect Belgium Chief Risk Officer (Deputy
Chair), Chief Information Security Officer, Head of Credit Risk, Head of Operational Risk and Business Continuity, Head
of Regulatory Affairs and Sustainability, Head of Data Protection, MeDirect Malta Chief Compliance Officer, MeDirect
Belgium Head of Compliance and Chief People Officer.
The EMRC for MeDirect Belgium is held jointly with the Group EMRC since most of the topics are common to both
entities.
B1. Management Credit Committee (“MCC”)
The MCC is a sub-committee of the Group ERMC. Its purpose is to oversee management of credit activities and
mitigation of credit risks and to ensure an effective credit management process.
The MCC is chaired by the Group Chief Risk Officer who holds the casting vote and a right of veto of all MCC decisions.
The MCC meets monthly or as required for the proper fulfilment of its duties.
Specific matters relating to MeDirect Belgium are covered by the MeDirect Belgium Management Credit Committee,
which is a subcommittee of the MeDirect Belgium ExCo. All other portfolios are discussed in a joint MCC meeting.
B2. Model Governance Committee (“MGC”)
The MGC is a sub-committee of the ERMC. Its purpose is to provide oversight of the implementation of the Model
Risk Management Framework, specifically the validation, monitoring and oversight of the models used in the Group.
The MGC oversees models developed internally and through third parties and aims to ensure that the risk of adverse
consequences from model errors or inappropriate use of modelled outputs is mitigated.
Members of the MGC are fully knowledgeable about the model risk management framework of the Group and have a
broad understanding of the financial and business risks of the Group and the financial and business environment. The
MGC is chaired by the Group Chief Risk Officer and meets at least monthly.
B3. Malta Compliance and Financial Crime Committee (“CFCC”)
The CFCC is a sub-committee of the MeDirect Malta ERMC. Its purpose is to provide risk management oversight
for MeDirect Malta in relation to compliance and financial crime risk by assessing and monitoring such risks and by
ensuring compliance with regulatory requirements, industry standard, and internal controls relating to such risks. This
includes providing risk management oversight of the strategy, policies, risk appetite and risk tolerance in respect of
compliance and financial crime risk, monitoring and addressing emerging risks and managing overall compliance and
financial crime risk exposure.
The CFCC has a functional reporting line to the BRCC. The committee is chaired by the Chief Compliance Officer, with
the MLRO acting as deputy chair. The committee meets at least monthly.
25Annual Report and Financial Statements 2024
B4. Environmental, Social and Governance (“ESG”) Committee
The ESG Committee is a sub-committee of the ERMC. It acts as an advisory body that provides preliminary validation
of ESG actions and reports. It also oversees the implementation of ESG-related initiatives and reporting, corporate
social responsibility engagement and monitoring of ESG- and CER-related risks and opportunities.
The Committee members include key representatives of business units and control functions critical to the management
of initiatives related to CER and ESG. The committee is chaired by the Head of Sustainability.
C. Asset and Liability Committee (“ALCO”)
The Asset Liability Management Committee (ALCO) is a key governance body within the Group responsible for
overseeing the management of the assets and liabilities to ensure an optimal balance between risk and return, whilst
maintaining adequate liquidity and regulatory compliance.
ALCO monitors and evaluates, at an integrated and consolidated exposures level, the liquidity, funding and capital
position of the Group on a continuous basis to ensure that business and regulatory requirements are met and to
provide tactical and strategic direction. On annual basis, ALCO evaluates and approves all core documents supporting
the Group’s liquidity, funding and capital positions.
Furthermore, the Committee oversees and exercises executive authority, in each case in accordance with the risk
appetite statement set by the Board of Directors, for:
• market risk positions (including foreign exchange) and hedging activities;
• interest rate risk and credit spread risk;
• loan and deposit pricing, fund transfer pricing and trading activities;
• adherence with the approved investment strategy; and
• relevant policies and procedures
ALCO meets at least once a month to review the most current financial and market information and to ensure cautious
management of balance sheet and market-related risks. The Committee is chaired by the Head of Assets and Liabilities
Management and is composed of members of Executive Management.
D. Operations Committee
The purpose of the Group Operations Committee is to ensure that the Group has in place and operates effectively and
appropriately robust change management, project management, outsourcing and vendor management processes and
procedures. The Group Operations Committee also oversees ICT strategy implementation and monitoring, operational
and cyber security risks and data governance initiatives and ensures that arrangements related to business continuity
and disaster recovery are in place. The Group’s Operations Committee is a sub-committee of the Malta ExCo and the
MeDirect Belgium ExCo and is the decision-making body for matters described above under the delegated authority
from the Malta ExCo and the MeDirect Belgium ExCo.
The Operations Committee’s terms of reference are to oversee and take any necessary decisions in the following areas:
• Feasibility of the business and regulatory change requests;
• Operational feasibility of the new products and services;
• Governance of the onboarding and monitoring of key third party vendors;
• Governance of the arrangements related to budgeted spending on change initiatives, business continuity and
disaster recovery and data retention and archiving; and
• Awareness and oversight of the arrangements related to ICT strategy and its implementation, operational risk
26Annual Report and Financial Statements 2024
and cyber security and organisational design of the Group from the point of view of efficiency and change
sustainability.
The members of this committee include the Group Chief Technology Officer (Chair), Group Chief Executive Officer,
Group Head of Channels and Customer Experience, Chief Information Security Officer, Head of Dutch Retail Market,
Group Chief Risk Officer, MeDirect Belgium Chief Risk Officer, Group Chief Financial Officer, MeDirect Belgium Chief
Financial Officer, Head of Commercial Strategy and Legal, and the Supply and Procurement Senior Manager.
Code Provision 4.2.7 - Succession planning
MeDirect Malta has established a list of Key Personnel Substitutes to cover instances in which executive directors, key
personnel and managers are temporarily incapacitated or otherwise unable to complete their duties for a significant
period of time.
If such individuals are permanently unable to re-assume their duties, MeDirect Malta’s management, in consultation
with the Board, will designate permanent successors, either from MeDirect Malta’s existing management team or, if
appropriate, by selecting an outside candidate.
As part of succession planning and talent management, MeDirect Malta’s and MeDirect Belgium’s Boards and CEOs
ensure that MeDirect implements appropriate schemes to recruit, retain and motivate high quality executive officers.
They also encourage members of management to progress to higher levels, seek to maintain high morale amongst
MeDirect’s Malta’s personnel and identify high performing employees with the potential to take on more responsibilities.
The succession plan ensures that MeDirect is empowering and developing its employees, with the aim of ensuring that
there is a pool of talent ready for advancement and promotion into increasingly challenging roles when they arise.
Principle 6: Information and professional development
Board members of MeDirect Malta and MeDirect Belgium receive regular updates on MeDirect’s strategic, operational,
corporate governance, compliance, risk management and financial plans and objectives.
MeDirect Malta’s and MeDirect Belgium’s Boards appoint their respective CEOs, taking into account the views of the
ultimate controlling shareholder and MeDirect Malta, respectively. The Boards’ training programmes aim to improve
Board members’ awareness of risk, regulation and compliance developments in the financial services sector, covering
topics ranging from ESG and sustainable finance to information technology and cyber security.
Directors of MeDirect Malta and MeDirect Belgium Directors are given opportunities to update and develop their skills
and knowledge through briefings by senior executives and externally run seminars. Moreover, directors have access to
independent professional advice relating to their roles as directors, at MeDirect’s expense.
The Company Secretary reports directly to the Board and is responsible for ensuring adherence to the Board procedures
and dissemination of information amongst the Board, its Committees and senior management.
Principle 7: Evaluation of the Board’s performance
Periodically, MeDirect Malta’s Board carries out an evaluation procedure whereby Board members are requested to
complete a questionnaire on the performance of the Board and its committees. The evaluation is co-ordinated by the
Board’s Chair, and all directors participate in the process. Feedback from the evaluation is presented to the Nominations
and Remuneration Committee. An external evaluation took place most recently during the financial year ended 31
December 2023.
27Annual Report and Financial Statements 2024
Principles 9 and 10: Relations with shareholders and with the market and institutional shareholders
MeDirect Malta and MeDirect Belgium maintain ongoing communication with its shareholders and the market in respect
of its strategy and performance. During the year under review, MeDirect Malta issued various company announcements
and media releases to explain ongoing corporate developments, material events and transactions and their impact on
MeDirect Malta’s financial position. Through public announcements, MeDirect Malta’s website, financial reports and
interaction with the media in Malta, MeDirect Malta provides the market with regular, timely, accurate, comprehensive
and comparable information in sufficient detail to enable investors to make informed investment decisions in respect of
MeDirect Malta’s listed securities.
MeDirect Malta’s ultimate controlling shareholder is represented on its Board of Directors and actively monitors its
investment in MeDirect Malta.
The Chairs of MeDirect Malta’s and MeDirect Belgium’s Audit, Nominations and Remuneration and Risk and Compliance
Committees are available to answer questions at the Annual General Meeting. In accordance with the provisions of the
Malta Companies Act, the directors shall, at the request of members of MeDirect Malta holding not less than one-tenth
of its paid-up share capital, convene an Extraordinary General Meeting of MeDirect Malta.
Principle 11: Conflicts of interest
MeDirect Malta’s Articles of Association and the Belgian Code of Companies provide that any director of MeDirect
Malta and MeDirect Belgium respectively who is in any way, whether directly or indirectly, interested in a transaction
or proposed transaction with MeDirect must (i) declare to the other directors the nature of such interest, (ii) unless
otherwise determined by the unconflicted Directors, not participate in or be present for any discussion of any such
transaction or proposed transaction and (iii) not vote on any such transaction or proposed transaction.
On joining the MeDirect Malta Board and regularly thereafter, directors are informed and reminded of their obligations
relating to dealing in MeDirect Malta’s securities under applicable law and regulation, including the Malta Capital
Markets Rules.
Principle 12: Corporate social responsibility
MeDirect Malta remains committed to supporting the community. MeDirect Malta supported cultural, sporting, charitable
and educational organisations and initiatives throughout the year ending 31 December 2024.
In fulfilling its role as a responsible corporate citizen, MeDirect actively encourages its employees to engage with
and volunteer for causes they about which they care. This approach has led to successful fundraising efforts for
Puttinu Cares, Hospice Malta and Inspire, as well as staff volunteering with organisations such as the Foodbank Lifeline
Foundation and Gozo SPCA, amongst others.
MeDirect actively supports individual initiatives throughout the year, such as a mission to HopeXChange in Ghana. In
2024, MeDirect introduced a Volunteering Time Off policy, allowing employees to take two additional paid leave days
annually to volunteer with a non-profit organisation, charity, or community group.
MeDirect’s commitment to its employees also extends to their wellbeing and mental health. Through an ongoing
partnership with The Richmond Foundation, employees have access to counselling services to support their personal
and professional lives.
Promoting financial literacy is another key focus area for MeDirect, aligning with its mission to democratise finance and
empower individuals with the tools and knowledge needed to build their wealth confidently and independently. In 2024,
MeDirect supported various initiatives, including employees volunteering to educate students on personal finance
28Annual Report and Financial Statements 2024
and backing the launch of a finance toolkit. This toolkit equips teachers and coaches with resources to discuss financial
topics with young people, particularly those from disadvantaged backgrounds. Additionally, MeDirect sponsored and
participated in Malta’s first national financial capability and wellbeing conference, organised by Junior Achievement
Malta.
Throughout the year, MeDirect regularly shared articles offering personal financial management tips through its website,
social media channels, and email newsletters. As part of its commitment to financial education, MeDirect also launched
the Ask the Advisor video series, in which expert advisors provide tips and insights into the world of investing.
MeDirect’s financial contributions to charitable causes continued during 2024, including a donation to L-Istrina, Malta’s
annual national fundraiser in support of the Malta Community Chest Fund Foundation. Beyond charitable donations,
MeDirect remained a prominent supporter of Malta’s cultural scene. The national dance company ŻfinMalta and Soċjetà
Filarmonika La Stella A.D. 1863 continued to receive backing from MeDirect Malta. MeDirect reaffirmed its dedication to
promoting excellence and a healthy lifestyle by renewing sponsorship agreements with the Island Car Club and Otters
ASC water polo club.
In 2024, MeDirect Belgium also participated in various community initiatives. Highlights included employee participation
in Clean up Brussels and Mobility Week, during which staff cleaned the streets around the office and opted for sustainable
commutes by public transport, bike or on foot. Employees also participated in the 20km of Brussels, with MeDirect
Belgium giving a donation to Think Pink, an organisation dedicated to raising breast cancer awareness and funding
research. Additionally, MeDirect Belgium staff collected school supplies, which were sent to a school in Morocco.
In the Netherlands, MeDirect entered into a partnership with the Amsterdam Tennis Club – Sloterplas and The Pink
Panthers rugby team. These partnerships enabled the tennis club to provide training for underprivileged children and
supported the rugby team in developing its youth programme, with a focus on initiatives that helped teens and young
adults build self confidence.
Other disclosures
There were no material contracts to which MeDirect Malta or its subsidiary were a party and in which any one of
MeDirect Malta’s directors was directly or indirectly interested.
Management’s internal controls over financial reporting
MeDirect Malta’s and MeDirect Belgium’s Boards are responsible for ensuring that senior management develops
and implements a sound system of internal controls and for reviewing its effectiveness. The system is designed to
manage, rather than eliminate, the risk of failure in order to achieve business objectives and can only provide reasonable
and not absolute assurance against material misstatement or loss. MeDirect operates a system of internal controls
that provides reasonable assurance of effective and efficient operations, including controls relating to financial and
operational matters and compliance with laws and regulations. Processes are in place for identifying, evaluating and
managing the significant risks facing MeDirect Malta and the Group.
The management of MeDirect is responsible for instituting and preserving sufficient internal control over financial
reporting. Internal control over financial reporting is a process designed under the supervision of the Group Chief
Financial Officer and the MeDirect Belgium Chief Financial Officer to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance
with IFRS as adopted by the European Union.
29Annual Report and Financial Statements 2024
Internal control over financial reporting includes policies and procedures that relate to:
• maintaining records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of
assets;
• providing reasonable assurances that transactions are recorded as necessary to permit preparation of financial
statements in accordance with IFRS as adopted by the EU;
• ensuring that receipts and expenditures are made only in accordance with authorisations of management and
the relevant Directors; and
• providing reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or
disposition of assets that could have a material effect on the financial statements.
30Annual Report and Financial Statements 2024
Remuneration Report
Remuneration governance
The primary purpose of the Group Nominations and Remuneration Committee (that also covers MeDirect Malta) and
the Nominations and Remuneration Committee of MeDirect Belgium (“NRCs”) is to review remuneration levels in the
Group and to consider whether to approve performance-related and other variable bonus awards that may be delivered
in cash or share- linked instruments. A list of Material Risk Takers is revised and approved at least on an annual basis.
The NRCs are charged with aligning the Group’s remuneration policy and in particular performance-related elements of
remuneration, with the Group’s business strategy and risk tolerance, objectives, values and long-term interests. The key
objectives of the NRCs in this regard are the following:
• annual review of the proposals put forward by management relating to the principles of the remuneration policy
and verification with management that they are effectively implemented;
• monitoring of the budgets allocated to the fixed salary increases for the forthcoming year and the variable
remuneration pools for the previous financial year; and
• annual review of the individual remuneration of senior management and staff members who are employed in
control functions, as well as that of staff with total remuneration above a threshold fixed by the NRCs.
One of the NRCs primary functions of the NRCs is to ensure that the Group is able to attract and retain suitable
employees at all levels at an acceptable cost. It may request market-related information from time to time, to verify
the recommendations made by management. On an annual basis, the NRCs review the budgets allocated to the fixed
salary increases for the forthcoming year and the variable remuneration pools for the previous financial year and review
the individual remuneration of senior management and staff members who are employed in control functions such as
Risk and Compliance, as well as that of staff with total remuneration above a threshold fixed by the relative NRC.
Membership and meetings
The members of the Group’s NRC are:
Bart Bronselaer * Committee Chair/Independent Non-Executive Board Chair
John Zarb Independent Non-Executive Director
Philip English Non-Executive Director and Shareholder representative
*replaced Michael Bussey on the 11th December
The Group’s Chief People Officer acts as a secretary to the Committee, whilst the following were attendees throughout
the year, except where it was deemed that there may be a conflict of interest: the Chief Executive Officer, the Chief
Administration Officer, the other non-executive director, Dina Quraishi and the Chair of MeDirect Belgium, Marcia De
Wachter.
During the year ended 31 December 2024, the Group’s NRC met seven times. One meeting was held jointly with the
Belgian NRC. These meetings were attended by all members of the Group’s NRC.
31Annual Report and Financial Statements 2024
Remuneration policy statement
The Remuneration Policy is owned by the Chair of the Group’s NRC and is approved by the Group’s Board of Directors.
The policy was developed in conjunction with the Group’s principal shareholder and the NRCs. The policy is reviewed
on an annual basis by the NRCs or when significant changes occur in related directives, guidance, best practice and
technical standards. The policy is also reviewed on an annual basis by the Internal Audit function to ensure that it
complies with all applicable legal and regulatory requirements. The NRCs may also require review of this policy by
external advisors to the extent deemed necessary or appropriate.
The purpose of the Remuneration Policy is to set out the overall principles that MeDirect Malta and MeDirect Belgium
must follow when determining the remuneration and compensation of its management and staff. This policy establishes
an effective framework for determining role descriptions, performance measurement, risk adjustment of compensation
and linkages to reward. The Group Board and the MeDirect Belgium Board are responsible for ensuring that remuneration
practices are based on sound governance processes that take into account the Group’s risk strategy and profile.
The Boards, directly and through the NRCs, carry out effective monitoring and evaluation of adherence to the
remuneration policy and of the Group’s remuneration system on an ongoing basis. The NRCs and the Boards monitor
the ongoing performance by executive directors and senior management and determine the design and implementation
of an effective remuneration system. They also ensure that remuneration policies and practices are consistent with
a prudent, forward-looking approach, aimed at maintaining a sound capital base, and that all awards of variable
remuneration to Material Risk Takers are subject to malus and clawback arrangements and are otherwise consistent
with the Remuneration Policy.
Material Risk Takers, comprising members of staff whose actions have a material impact on the risk profile of the Group,
are identified on the basis of the qualitative and quantitative criteria set out in the Commission Delegated Regulation
(EU) 2021/923. Material Risk Takers are also identified on the basis of additional criteria developed internally. This
category includes members of the Board of Directors, members of senior management and business heads and key
personnel of independent control functions such as the internal audit, compliance and risk management.
Material Risk Takers also include:
• Staff members authorised to approve or veto the introduction of new products;
• Staff members authorised to take decisions on material credit risk exposures or is a member of a committee
which has authority to take decisions on material credit risk exposures; and
• Staff members who were awarded total remuneration in the previous financial year equal to or in excess of other
material risk takers (excluding non-executive, support function and control function roles).
The list of Material Risk Takers is reviewed and reconsidered by the Group’s and MeDirect’s Belgium’s NRCs at least
annually.
Remuneration consists of base salary and, where applicable, performance based or other variable compensation.
Performance-related compensation is determined both on (i) a Group basis, and (ii) an individual employee basis.
Compliance with the Group’s rules and requirements and ongoing involvement in risk management are taken into
account when determining performance-based remuneration for employees. Other non-financial factors are considered
such as skills acquired, personal development, commitment to the Group’s business strategies and policies and
contribution to the performance of the team. Performance is measured in relation to non-financial and financial goals
and, where appropriate, failure to perform in non-financial areas of responsibility outweighs success in profit generation
in determining compensation. The remuneration of staff in control functions is designed to allow the Group to employ
qualified and experienced personnel in those functions and to take into account the nature of their responsibilities.
32Annual Report and Financial Statements 2024
The Group Risk function provides advice in respect of the definition of suitable risk-adjusted performance measures, as
well as in assessing how the variable remuneration structure affects the risk profile and culture of the Group. The Risk
function also provides input into the process for determining bonus pools and the allocations of variable remuneration
awards to ensure that all relevant factors are considered in determining awards. The Risk function also validates and
assesses risk adjustment data, and a member of the Risk Committee provides input to the NRCs.
The Group Compliance function analyses how the Remuneration Policy affects the Group’s compliance, in all jurisdictions
in which the Group operates, with legislation regulations and internal policies and conducts an annual review of the
implementation of the Remuneration Policy. The Compliance function reports on identified compliance risks and issues
of non-compliance, and its findings are taken into account in the review and oversight of the Remuneration Policy.
The Internal Audit function carries out an independent annual review of the design adequacy, control effectiveness
and sound monitoring of the Remuneration Policy. The Internal Audit function also informs the NRC of any negligent
or unacceptable behaviour of key staff and management members which should be considered during the review of
remuneration levels and approval of performance-related and other variable bonus awards.
The Group’s Remuneration Policy includes malus and clawback provisions applicable to all material risk takers and key
personnel in control functions, including variable compensation paid in cash. Clawback, if applied, requires employees
to pay back an amount already received. It can be applied for five years from the date of award or until the end of the
applicable retention period, as applicable. Malus, if applies, permits reduction of incentive awards before they become
payable or vest. Malus may be applied at any time during the applicable deferral period.
The Group can apply malus and clawback to variable remuneration if the affected employees were responsible for
significant losses to the Group or if standards of fitness and propriety were not met during the period for which the
variable remuneration was awarded.
Variable remuneration is paid or vests only if it is sustainable in relation to the financial and regulatory capital situation
of the Group as a whole. Subject to national contract and labour law, total variable remuneration may be reduced in the
event of negative financial performance of the Group. Reductions may affect , both current remuneration and payouts
of amounts previously earned.
Conflicts of interests relating to the Remuneration Policy and the award of remuneration under teh policy are identified
and appropriately addressed.
In 2024 the Group reviewed the remuneration policy and the Deferred Bonus plan, but there were no material changes.
The Group’s reward strategy
The quality and long term-commitment of employees is fundamental to the Group’s success. The Group aims to attract,
retain and motivate highest quality employees who are would like a long-term career with the Group and will perform
their role at a high level. The Group’s compensation package provides for fixed and variable remuneration.
Fixed remuneration
Fixed remuneration reflects the individual’s role, experience and responsibilities. It comprises base salary and in some
cases a fixed allowance relating to extra hours or work on public holidays, for example. Base salaries are expected to
comprise the majority of the Group’s overall compensation, are benchmarked regularly and are paid monthly by direct
credit to an employee’s personal account. Allowances are also paid monthly by direct credit.
Fixed remuneration also includes fixed benefits. Benefit packages are determined based on market practice and
include medical and life insurance for all employees across the Group. In Belgium and the United Kingdom the Group
contributes to defined contribution pension schemes.
33Annual Report and Financial Statements 2024
Employees of MeDirect Malta are also entitled to the following benefits:
Staff savings account
All Malta-based employees are entitled to make monthly after tax deposits of a specified amount to an employee
savings account, benefiting from a favourable interest rate and payable in December.
Home loan subsidy
Home loans are offered to staff at favourable interest rates.
Variable remuneration
Variable remuneration may consist of performance bonuses and other variable bonuses and can be awarded in cash or
share linked instruments. Guaranteed sign on payments and severance payments are awarded in cash. In accordance
with Article 92(1) (q) of directive 2013/36/EU (“CRD”), variable remuneration is not paid through vehicles or methods
that facilitate non-compliance with CRD or Regulation (EU) No 575/2013. In Belgium, a number of employees opted to
be paid the performance bonus in warrants or options rather than in cash.
Performance bonuses represent additional remuneration, payable to employees as a reward for achieving specific
goals or meeting predetermined targets. All variable remuneration is discretionary, irrespective of performance, and
the amount of variable remuneration is not determined in advance. The Group may also award ad hoc bonuses that are
linked to pre-determined KPIs in relation to specific projects.
Retention bonuses can be awarded on the condition that employee remains at a Group company for an agreed period.
Retention bonuses can be used to retain critical employees who are key to success of the realisation of the strategic
plan of the Group.
Grants of retention bonuses, guaranteed remuneration and/or severance payments are made in accordance with
applicable regulatory requirements, and any such remuneration is awarded in such form as is determined by the NRCs,
taking account of applicable regulatory requirements and Group policy.
Determination of variable remuneration pools
A variable remuneration pool is established for the Group as a whole and is calculated at Group level based on the
success of the Group in meeting its business objectives. In determining the variable remuneration pool, the Group
applies a prudent, forward-looking approach, consistent with maintaining a sound capital base. The Group expects that
in aggregate variable remuneration will not materially affect the capital position or ability to strengthen the capital base
of the Group or either of its banking subsidiaries.
The variable remuneration pool is determined based on the following factors:
• Financial results of the Group, the relevant subsidiary and/or the relevant business line, after taking into account
the cost of risk, capital and liquidity, with the aim of ensuring that the total amount of variable remuneration does
not undermine the Group’s or the subsidiary’s capacity to meet its objectives in terms of capital requirements;
and
• Qualitative factors such as market practices, conditions under which activities are carried out and risk
management.
34Annual Report and Financial Statements 2024
The pool will be further adjusted to reflect all relevant identified current and future risks and the Group’s capital position.
Such an adjustment may include the NRCs reducing pools of variable remuneration in the event of a breach (or
unacceptable risk of a breach) of any key regulatory ratios and/or reducing or not paying variable remuneration to any
employee (whether or not a Material Risk Taker) who the NRC determines has caused or contributed to any such breach
(or risk of a breach).
The variable remuneration pool is split between entities by taking into consideration the pools allocated in the previous
financial period, as well as other factors such as change in composition of staff and senior management and market
benchmarks.
The variable remuneration pool is approved by the NRC of MeDirect Malta and MeDirect Belgium.
Measures of performance as basis for awarding of bonuses
All personnel are compensated from the variable remuneration bonus pool based on their contribution to the achievement
of the Group’s business objectives as well as personal objectives. The allocations of individual variable remuneration
awards are correlated to the staff member’s formalised annual individual appraisal, that takes into consideration
quantitative and qualitative objectives known to the employee, as well as risk management considerations.
Individuals are compensated from that bonus pool based on their contribution to the achievement of the Group’s and/
or the subsidiary’s business objectives. Individual criteria will also depend on the role of the individual. For example,
portfolio managers are judged on factors such as risk management, overall continuing performance of the portfolio
and contribution to development of the Group’s systems, whereas members of the Treasury function are assessed on
effectiveness in managing liquidity as well as interest rate risk. The amount of variable remuneration will vary depending
on the performance of the staff member, as well as of the staff member’s business unit and the institution as a whole.
The appraisal process for all employees involves the following stages:
• Objective setting at the beginning of the year
Goals are set for the development of the employee. Objectives may be technical (related to area of expertise and day-
to-day role) or behavioural (related to personal objectives).
• End of year appraisal
Employees prepare a self-appraisal, and the employee’s manager prepares an appraisal. The employee and the
manager meet to discuss performance and rating.
Individual allocation of the variable remuneration
All staff (including material risk takers)
The Chief People Officer initiates the process of gathering recommendations for salary revisions, bonuses and
promotions from heads of departments. A variable remuneration pool is allocated per department based on the bonus
pool of the Group. The individual departments then allocate the pool amongst their employees based on performance.
All staff are eligible for performance-related variable remuneration, although the Group has full discretion as to whether
or not to pay variable remuneration on a Group-wide or an individual basis.
The amount payable to any individual under the annual variable remuneration plan is based on the following:
• The Group’s financial performance ( profits before tax after cost of capital adjustments, cost to income ratio and
maintenance of all regulatory ratios across the Group (including CET1) within established risk appetite levels;
35Annual Report and Financial Statements 2024
• Customer satisfaction (if applicable) based on the subjective assessment of the NRC;
• Conduct risk (after the Risk function has shared its reports with the Board Risk Committee and based on the
Board Risk Committee’s recommendation to the NRC); and
• Personal performance against qualitative objectives and at least one quantitative objective.
Variable remuneration may not be linked directly to individual sales or revenues generation targets.
In exceptional circumstances, the allocation of variable remuneration may differ from the above procedure, as
determined on a case-by-case basis. The Chief Administration Officer together with the Chief People Officer ensure that
recommendations for salary revisions and bonuses do not exceed the allocated pool. The Group Chief Risk Officer and
the Chief Risk Officer of MeDirect Belgium must confirm that the bonus allocation is consistent with sound and effective
risk management practices and does not adversely affect the capital adequacy of both entities. Final recommendations
are discussed with the Group Chief Executive Officer and the Chief Executive Officer of MeDirect Belgium for approval
before presentation to the NRC of the relevant entity.
Internal control functions
Whilst the overall bonus pool of the Group is based on the Group’s financial results, compensation of control functions
is not directly tied to the results of any business unit but should provide incentives for such staff to deliver the highest
level of performance. Control functions are judged on success in developing and implementing appropriate policies,
developing effective risk management controls and procedures, monitoring risk and building control systems. The
Group’s remuneration practices shall ensure that no material conflicts of interest arise in respect of remuneration for
staff in the Group’s control functions.
The methods used for determining the variable remuneration of control functions are designed to encourage staff
not to compromise their objectivity and independence. When control function staff receive variable remuneration, it
is determined separately from the business units they control, including the performance which results from business
decisions in which the control function is involved. The criteria used for assessing performance and risk is based
exclusively on internal control objectives.
Other matters on variable remuneration
In accordance with applicable remuneration regulations, the ratio between the variable components of remuneration and
the fixed components is limited to 100% (200% with shareholders’ approval subject to certain conditions being met) for
variable remuneration paid to MeDirect Malta staff and 50% for variable remuneration paid to MeDirect Belgium staff.
Where variable remuneration is more than €50,000 both for MeDirect Malta and MeDirect Belgium employees or
in certain other circumstances, a portion of the variable remuneration will be deferred and/or payable in the form of
instruments. During the financial year, no variable remuneration paid exceeded 100% of fixed remuneration (or 50% in
the case of MeDirect Belgium).
Variable remuneration may be paid in the following forms: 1) upfront cash; 2) an upfront share-linked award and/or 3)
a deferred award of cash or share-linked instruments subject to deferral. An award of share-linked instruments entitles
the material risk taker to a cash payment based on the market value of a specified number of shares of the Group at a
given date but does not entitle the employee to shares or any interest in or right over such shares. Upfront and deferred
share-linked awards linked to a retention bonus are subject to a retention period of not less than one or more than five
years as determined by the relevant NRC,. Any tranche of a deferred award which has not yet been paid will lapse if
the recipient leaves employment before the end of the deferral period, except in the case of specific reasons described
in the Deferred Bonus Plan and if approved by the relevant NRC. All share-linked instruments awarded to date were
issued to current and previous material risk takers.
36Annual Report and Financial Statements 2024
Variable remuneration awarded in cash is normally paid in the first quarter of the subsequent financial year as determined
by the NRCs. Variable remuneration paid to Material Risk Takers is subject to malus and clawback provisions. The
clawback provisions state that the bonus may have to be repaid if the recipient of an award participated in or was
responsible for conduct which resulted in significant losses to the Group and/or a business unit, in case of failure
to meet appropriate standards of fitness and propriety, including cases of fraud, dishonesty or gross negligence, or
in the case of significant reputational damage to the Group or a business unit or where such conduct would lead to
regulatory actions.. Clawback provisions may be applied ex post to variable remuneration paid in cash and share-linked
instruments.
Malus may be applied at the discretion of the relevant NRC, and examples of the circumstances in which such discretion
to impose malus may be exercised are included in the Group’s Remuneration Policy. Malus provisions may be applied
ex ante to share-linked instruments.
Subject to regulatory de minimis limits, for Material Risk Takers, deferral will apply to at least 40% of annual variable
remuneration (and up to at least 60% in certain circumstances as determined in accordance with applicable regulations
by the relevant NRC), including both cash and instrument payments. The deferral period is five years, with one-fifth of
the deferred amount vesting at the end of each of the first five anniversaries of the award date.
37Annual Report and Financial Statements 2024
Financial Statements
38Annual Report and Financial Statements 2024
Statements of financial position
Group Bank
2024 2023 2024 2023
Notes €000 €000 €000 €000
ASSETS
Balances with central banks and cash 4 206,870 265,453 64,618 88,766
Derivative financial instruments 5 175,310 207,950 797 512
Loans and advances to financial institutions 6 316,179 358,393 37,074 46,378
Loans and advances to customers 7 2,927,475 2,753,672 413,821 407,103
Investments
- Securities portfolio 8 698,866 710,930 262,219 284,602
- Securitisation portfolio 8 514,669 610,706 120,714 160,825
- Asset-Backed Securitisation portfolio 8 145,285 - 13,699 -
- Subsidiaries 9 - - 196,028 192,513
Property and equipment 10 4,624 6,091 3,497 4,788
Intangible assets 11 16,366 15,955 13,299 12,301
Non-current assets classified as held for sale 12 - 1,785 - 1,785
Investment property 13 17,042 - 17,042 -
Current tax assets 1,040 205 98 208
Deferred tax assets 14 17,512 17,525 9,910 9,923
Prepayments and accrued income 15 5,437 4,747 4,034 3,407
Other assets 16 25,543 23,017 8,127 8,765
Total assets 5,072,218 4,976,429 1,164,977 1,221,876
EQUITY
Called up issued share capital 17 117,450 117,450 117,450 117,450
Share premium 17 13,464 13,464 13,464 13,464
Shareholders’ contributions 17 133,196 133,196 133,196 133,196
Other reserves 17 880 716 1,522 3,340
Accumulated losses 17 (16,327 ) (10,285 ) (17,102) (12,045)
Total equity 248,663 254,541 248,530 255,405
LIABILITIES
Derivative financial instruments 5 32,681 25,464 833 816
Amounts owed to financial institutions 18 179,777 374,959 6,744 101,779
Amounts owed to customers 19 3,880,035 3,310,469 827,626 778,368
Debt securities in issue 20 641,673 916,747 - -
Subordinated liabilities 21 67,358 66,871 67,358 66,871
Current tax liabilities 2 980 - -
Deferred tax liabilities 14 196 342 - -
Provisions for liabilities and other charges 22 202 298 82 218
Accruals and deferred income 23 11,683 12,256 6,642 7,462
Other liabilities 24 9,948 13,502 7,162 10,957
Total liabilities 4,823,555 4,721,888 916,447 966,471
Total equity and liabilities 5,072,218 4,976,429 1,164,977 1,221,876
Memorandum items
Commitments to extend credit, guarantees and other commitments 34 -35 212,551 260,017 156,299 128,705
The notes on pages 42 to 234 are an integral part of these financial statements. The financial statements on pages 37 to 234 were approved and authorised for
issue by the Board of Directors on 12 March 2025. The financial statements were signed on behalf of the Board of Directors by Bart Bronselaer (Chairman), Izabela
Banas (Chief Financial Officer) and Lisa Fergus (Chief Risk Officer) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with
the Annual Financial Report.
39Annual Report and Financial Statements 2024
Statements of comprehensive income
Group Bank
2024 2023 2024 2023
Notes €000 €000 €000 €000
Interest income * 194,674 173,755 38,820 49,394
Interest expense (117,621 ) (91,434 ) (17,724) (16,933)
Net interest income 25 77,053 82,321 21,096 32,461
Fee and commission income 12,464 9,694 6,835 5,068
Fee and commission expense (5,302 ) (4,593 ) (3,132) (3,078)
Net fee and commission income 26 7,162 5,101 3,703 1,990
Net trading income 27 1,600 547 1,585 506
Net (loss)/gain from financial instruments measured at fair value
through profit or loss
(125 ) 447 (125) 447
Share of results of subsidiary undertakings 9 - - 3,515 7,914
Other operating income
– Realised losses on disposal of other investments measured at amortised cost - (30 ) - (30)
– Realised gains on disposal of loans and advances 3 82 1 82
– Other income 71 77 1,041 1,097
Total operating income 85,764 88,545 30,816 44,467
Personnel expenses 28 (26,828 ) (24,291 ) (12,633) (11,591)
Depreciation and amortisation 10-11 (5,741 ) (5,572 ) (3,918) (4,580)
Other administrative expenses 29 (38,885 ) (43,382 ) (12,379) (15,840)
Total operating expenses (71,454 ) (73,245 ) (28,930) (32,011)
Net operating profit before changes in expected credit losses 14,310 15,300 1,886 12,456
Change in expected credit losses and other credit impairment charges 30 (19,332 ) (945 ) (8,580) (1,561)
(Loss)/profit for the year before tax (5,022 ) 14,355 (6,694) 10,895
Tax expense 31 (856 ) (2,408 ) (181) (408)
(Loss)/profit for the year - Total comprehensive (loss)/income (5,878 ) 11,947 (6,875) 10,487
- Attributable to equity holders of the parent
Group
| 2024 | 2023 | ||
| Note | € | € | |
| Earnings per share (Basic and diluted) | 32 | ( |
* All interest income is calculated using the effective interest rate (EIR) method.
The notes on pages 42 to 234 are an integral part of these financial statements.
40Annual Report and Financial Statements 2024
Group | Share capital | Share premium | Shareholders' contributions | Reserve for general banking risks | Other reserves | Accumulated losses | Total |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
| Balance at 1 January 2023 | | | | | ( | ||
Total comprehensive income | |||||||
| Profit for the year | | | | | | | |
| Total comprehensive income, net of tax | | | | | | | |
| Transfer to legal reserve (Note 17) | | | | | ( | | |
| Release of reserve (Note 17) | | | ( | | | | |
| Balance at 31 December 2023 | | | | | ( | |
| Balance at 1 January 2024 | | | | ( | | ||
Total comprehensive income | |||||||
| Loss for the year | | | | | ( | ( | |
| Total comprehensive income, net of tax | | | | | | ( | ( |
| Transfer to legal reserve (Note 17) | | | | | | ( | |
| Balance at 31 December 2024 | | | | ( |
Statements of changes in equity
Bank
Share
capital
Share
premium
Shareholders'
contributions
Reserve for general
banking risks
Other
reserves
Accumulated
losses Total
€000 €000 €000 €000 €000 €000 €000
Balance at 1 January 2023 117,450 13,464 133,196 3,226 2,959 (25,377) 244,918
Total comprehensive income
Profit for the year - - - - - 10,487 10,487
Total comprehensive income, net of tax - - - - - 10,487 10,487
Realisation of previously recognised fair
value reserve upon merger of subsidiary
with Bank (Note 17)
- - - (111) 111 -
Transfer to legal reserve (Note 17) - - - - 492 (492) -
Transfer from Statutory legal reserve
(Note 17)
- - - (3,226) - 3,226 -
Balance at 31 December 2023 117,450 13,464 133,196 - 3,340 (12,045) 255,405
Balance at 1 January 2024 117,450 13,464 133,196 - 3,340 (12,045) 255,405
Total comprehensive income
Loss for the year - - - - - (6,875) (6,875)
Total comprehensive income, net of tax - - - - - (6,875) (6,875)
Realisation of previously recognised fair
value reserve upon merger of subsidiary
with Bank (Note 17)
- - - - (1,982) 1,982 -
Transfer to legal reserve (Note 17) - - - - 164 (164) -
Balance at 31 December 2024 117,450 13,464 133,196 - 1,522 (17,102) 248,530
The notes on pages 42 to 234 are an integral part of these financial statements.
41Annual Report and Financial Statements 2024
Group Bank
2024 2023 2024 2023
Notes €000 €000 €000 €000
Cash flows from operating activities
Interest and commission receipts 200,840 172,220 45,492 45,740
Interest and commission payments (121,801 ) (62,223 ) (20,525) (15,739)
Payments to employees and suppliers (66,270 ) (68,660 ) (25,612) (26,336)
Operating cash flows before changes in operating assets/liabilities 12,769 41,337 (645) 3,665
(Increase)/decrease in operating assets:
- Reserve deposit with central banks (7,087 ) (1,804 ) (693) 155
- Loans and advances to financial institutions and customers (108,760 ) (192,894 ) (23,835) 106,991
Increase/(decrease) in operating liabilities:
- Amounts owed to financial institutions and customers 506,289 401,388 (12,938) (27,118)
- Other payables (2,504 ) 2,654 (286) 1,260
Tax (paid)/refunded (2,798 ) (1,061 ) (54) 5
Net cash from/(used in) operating activities 397,909 249,620 (38,451) 84,958
Cash flows from investing activities
Acquisition of property and equipment 10 (464 ) (242 ) (377) (233)
Acquisition and development of intangible assets 11 (4,508 ) (6,257 ) (4,383) (5,597)
Acquisition of investments measured at amortised cost 8 (259,454 ) (231,750 ) (23,684) (63,900)
Redemption of investments measured at amortised cost 8 221,715 183,606 71,933 82,237
Repayment/redemption of investments measured at fair value
through profit and loss
8 893 5,292 893 4,473
Net cash (used in)/from investing activities (41,818 ) (49,351 ) 44,382 16,980
Cash flows from financing activities
Redemption/repurchase of debt securities 20 (272,049 ) (58,688 ) - -
Principal element of lease payments 24 (1,203 ) (1,177 ) (1,340) (1,514)
Net advances (to)/from immediate parent company (1,080 ) 611 (7) 611
Net advances from other group companies 26 - 390 2,549
Net cash (used in)/from financing activities (274,306 ) (59,254 ) (957) 1,646
Net increase in cash and cash equivalents 81,785 141,015 4,974 103,584
Cash and cash equivalents at beginning of year (22,313 ) (163,328 ) 75,951 (27,633)
Cash and cash equivalents at end of year 33 59,472 (22,313 ) 80,925 75,951
The notes on pages 42 to 234 are an integral part of these financial statements.
Statements of cash flows
42Annual Report and Financial Statements 2024
Notes to the Financial Statements
43Annual Report and Financial Statements 2024
1. Summary of material accounting policy information
1.1 Reporting entity
incorporated in Malta with its registered address at The Centre, Tigne’ Point, Sliema, Malta, TPO 0001 . Since the last
The consolidated financial statements of MeDirect Malta as at and for the financial year ended 31 December 2024
comprise the financial statements of MeDirect Malta and its subsidiaries, together referred to as “the Group”. Therefore,
these financial statements report the consolidated financial results of MeDirect Malta for the financial year ended 31
December 2024, including the financial results of MeDirect Bank SA (“MeDirect Belgium”); Bastion 2020-1 NHG B.V.
(“Bastion 2020-1”), Bastion 2021-1 NHG B.V. (“Bastion 2021-1”) and Bastion 2022-1 NHG B.V. (“Bastion 2022-1”), three
controlled special purpose entities utilised as part of the Group’s funding strategy in respect of the Dutch Mortgage
business; Grand Harbour I B.V. (“GH I”), a controlled special purpose entity that used to be utilised as part of the Group’s
funding strategy in respect of the International Corporate Lending portfolio and is in the process of being liquidated;
MeDirect Tech Limited (“MeDirect Tech”) that leases computer hardware and software to MeDirect Malta and MeDirect
Belgium; and Medifin Estates, a property leasing partnership.
The separate financial statements of MeDirect Malta reflect the financial results of the Bank.
MeDirect Belgium is a credit institution licensed in Belgium and is carrying out all of the Group’s activities in Belgium.
The principal customer-related activities of MeDirect Malta and MeDirect Belgium include an easy-to-use wealth
platform with access to fund houses and mutual funds, a suite of wealth products available through digital channels
MeDirect Belgium invests in Dutch residential mortgages via an established third-party mortgage originator in the
Netherlands and Belgian residential mortgage loan product in partnership with Allianz Benelux S.A/N.V.. This offering is
underpinned by a robust credit risk framework and will continue to diversify the asset base of MeDirect Belgium into the
residential mortgage sector. MeDirect Belgium also invests in Dutch buy-to-let mortgage business whereas MeDirect
Malta offers innovative and attractive home loan products in a client-oriented process.
MeDirect Malta continues to support the Maltese real economy through convenient banking services such as payment
services and foreign exchange and through lending to Maltese corporates on projects and to small and medium-sized
enterprises through fully collateralised lending facilities. MeDirect Malta also holds a consumer finance receivables
portfolio.
Both MeDirect Malta and MeDirect Belgium still hold a portfolio of senior secured loans and revolving credit facilities
to finance the business of European corporates.
The Group has retained substantially all risks and rewards pertaining to the activities of Bastion 2020-1, Bastion
2021-1 and Bastion 2022-1 and hence to assets, liabilities and related income and expenditure attributable to these
entities, and as such, all assets, liabilities and related income and expenditure have been reflected within the Group’s
consolidated financial statements.
MeDirect Belgium, in line with article 6 of the Securitisation Regulation (EU) No 2017/2402 of the European Parliament
and of the Council of 12 December 2017, undertook to retain, on an ongoing basis, a material net economic interest in
the Bastion securitisation transactions. This implies that the Group retains substantially all risks and rewards pertaining
to the activities of these securitisation structures and hence to the assets, liabilities and related income and expenditure
attributable to the structures and as such, all assets, liabilities and related income and expenditure of the securitisation
special purpose entities are reflected in the Group’s financial statements.
44Annual Report and Financial Statements 2024
Medifin Estates, a property leasing partnership, was set up to lease property which is then leased back to the Group.
MeDirect Tech owns the key rights and licences, including software solutions that are utilised by both MeDirect Malta
and MeDirect Belgium. It leases out amongst other equipment, software and motor vehicles and provides related
support services to the other Group entities.
1.2 Basis of preparation
The Bank’s consolidated financial statements have been prepared in accordance with the requirements of International
Financial Reporting Standards as adopted by the European Union.
These financial statements have also been drawn up in accordance with the provisions of the Maltese Banking Act
(Cap. 371) and the Maltese Companies Act (Cap. 386).
These financial statements have been prepared on the basis of the historical cost convention, except for:
• financial investments measured at fair value through profit or loss;
• derivative financial instruments which are measured at fair value;
• recognised financial assets designated as hedged items in qualifying fair value hedge relationships which are
measured at amortised cost adjusted for changes in fair value attributable to the risk being hedged; and
• investment in subsidiary in the Bank’s separate financial statements that are measured using the equity method.
The principal accounting policies adopted in the preparation of these financial statements are set out below. Unless
otherwise stated, these policies have been consistently applied to all the years presented.
The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the use of certain
accounting estimates. It also requires the Directors to exercise their judgment in the process of applying the Group’s
accounting policies (see Note 3.1 – Critical accounting estimates and judgments in applying the Group’s accounting
policies).
Standards, interpretations and amendments to published standards effective in 2024
During the financial year ended 31 December 2024, the Group adopted the following amendments to existing standards
but the adoption of these revisions to the requirements of IFRSs as adopted by the EU did not result in significant
changes to the Group’s accounting policies impacting the Group’s financial performance and position.
• Lease Liability in a Sale and Leaseback - Amendments to IFRS 16;
• Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants - Amendments
to IAS 1; and
• Disclosures: Supplier Finance Arrangements – Amendments to IAS 7 and IFRS 7.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected
to significantly affect the current or future periods. The Group has not early adopted any standards, interpretations or
amendments that have been issued but are not yet effective.
Interest Rate Benchmark Reform
The ‘Interest Rate Benchmark Reform Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16’ issued
in August 2020 represents the second phase of the IASB’s project on the effects of interest rate benchmark reform,
addressing issues affecting financial statements when changes are made to contractual cash flows and hedging
45Annual Report and Financial Statements 2024
Under these amendments, changes made to a financial instrument measured at other than fair value through profit or
loss that are economically equivalent and required by interest rate benchmark reform do not result in the derecognition
or a change in the carrying amount of the financial instrument, but instead require the effective interest rate to be
updated to reflect the change in the interest rate benchmark. In addition, hedge accounting is not discontinued solely
because of the replacement of the interest rate benchmark if the hedge meets other hedge accounting criteria.
Interbank offered rates (‘Ibors’) are used to set interest rates on hundreds of trillions of different types of financial
transactions and are used extensively for valuation purposes, risk measurement and performance benchmarking.
The 2016 EU Benchmark Regulation, which aims to ensure the accuracy, robustness and integrity of interest rate
benchmarks, has led various national working groups to actively discuss the mechanisms for an orderly transition of
five Libor currencies (US dollar, Euro, Pound sterling, Japanese yen and the Swiss franc) and the Euro Overnight Index
Average (‘Eonia’) to their chosen replacement near risk-free rate (‘RFR’).
Since 31 December 2021 representative Libor rates are no longer available in the case of all sterling, euro, Swiss franc
and Japanese yen rates, and the 1-week and 2-month US dollar rates. Meanwhile, the benchmark in the case of the
remaining US dollar settings (one, three, six and 12 month), ceased on 30 June 2023. In addition, the Eonia benchmark
ceased on 3 January 2022.
As a result, the Group embarked on an IBOR transition programme, under the governance of the Chief Financial Officer,
to facilitate an orderly transition from Iibors to RFRs. During the financial year ended 31 December 2021, the Group
successfully transitioned its GBP Libor and Eonia exposures to SONIA and ESTR, respectively, and completed its
transition of all remaining exposures with USD Libor dependency by June 2023.
In this respect, as at 31 December 2021, leveraged loans to customers with a gross carrying amount of €161.9 million
were transitioned from underlying GBP Libor reference rates to SONIA rates. The amendments to all such contracts
were deemed to be necessary as a direct consequence of the IBOR reform. In addition, the new basis for each contract
was also deemed to be economically equivalent to the previous basis, which was achieved through the inclusion of
credit spread adjustments to each contract.
Meanwhile, during 2021, model changes were also made to the valuation of interest rate derivative instruments with a
notional value of €1.7 billion by replacing the Eonia with the ESTR discount curve. This change resulted in an adjustment
to the carrying amount of derivatives amounting to €0.3 million which had been recognised in profit or loss during that
year.
As a result, as at 31 December 2021, all financial instruments with a contractual maturity date after 31 December 2021
and for which the benchmark had ceased, were transitioned to RFRs accordingly.
The Euribor administrator has used its prerogatives to reinforce Euribor governance and the calculation methodology
to comply with the requirements of the benchmark reform (“BMR”). This benchmark can therefore continue to be used
with no time limit unless it ceases to be published and is replaced by an alternative or is no longer representative. To this
effect, the Group’s working group will continue to review and monitor the regulatory landscape, as like any benchmark,
in time, Euribor could transition to an alternative rate.
Standards, interpretations and amendments to published standards issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of
the Group’s financial statements are disclosed below. The Group intends to adopt these standards and interpretations,
if applicable, when they become effective. These standards and interpretations are not expected to have a material
impact on the Group in the current or future reporting periods and on foreseeable future transactions.
46Annual Report and Financial Statements 2024
• Amendments to IAS 21: Lack of Exchangeability, effective 1 January 2025;
• Amendments to IFRS 9 and IFRS 7: Disclosures - Classification and Measurement of Financial Instruments,
effective 1 January 2026;
• Amendments to IFRS 9 and IFRS 7: Disclosures - Contracts Referencing Nature-dependent Electricity, effective
1 January 2026;
• Annual Improvements to IFRS Accounting Standards - Volume 11, effective 1 January 2026;
• IFRS 18 Presentation and Disclosure in Financial Statements, effective 1 January 2027;
• IFRS 19 Subsidiaries without Public Accountability: Disclosures, effective 1 January 2027; and
• Amendments to IFRS 10 and IAS28: Sale or Contribution of Assets between an Investor and its Associate or
Appropriateness of going concern assumption in the preparation of the financial statements
The Group’s business, profitability projections, funding and capital plans under base and stress scenarios, together with
a range of other factors such as the economic outlook along with ongoing developments in EU economies indicate
that the Group will have sufficient capital, under both the base and stress scenarios, to meet not only the regulatory
capital requirements but also any internal risk buffers and any buffers recommended by the regulators throughout
the forthcoming financial period. The projections confirmed that the Group will have an adequate level of funding
and liquidity that will allow the relevant minimum regulatory requirements to be satisfied. Furthermore, these financial
projections do not consider the additional capital that may be invested by Banka CREDITAS a.s. into MDB Group
Limited and its subsidiary companies, as stated in the company announcement issued by MeDirect, once the share
purchase agreement is approved by the regulatory authorities.
The financial statements are therefore prepared on a going concern basis, as the Directors are satisfied that the Group
has the resources to continue in business for the foreseeable future, and that accordingly no material uncertainty exists
that may cast significant doubt about the Group’s ability to continue as a going concern and that may require disclosure
in terms of IAS 1. In making this assessment, the Directors have considered a wide range of information relating to
present and future conditions, including future projections of profitability, cash flows and the capital resources of the
Group.
1.3 Consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity where the group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power to direct the activities of the entity. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are
fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date
that control ceases.
Consistent accounting policies are applied throughout the Group for the purposes of consolidation.
Accounting for business combinations between entities under common control
Business combinations between entities under common control, which do not fall within the scope of IFRS 3, are
accounted for using the predecessor method of accounting. Under the predecessor method of accounting, assets and
of the acquired entity from the financial statement amounts of the acquired entity.
No new goodwill arises in predecessor accounting, and any difference between the consideration given and the
aggregate book value of the assets and liabilities (as of the date of transaction) of the acquired entity, is included in
47Annual Report and Financial Statements 2024
equity in retained earnings. The financial statements incorporate the acquired entity’s results only from the date on
which the business combination between entities under common control occurred and reflect the acquirees assets and
liabilities as from that date.
Accounting for investments in subsidiaries in the parent company’s separate financial statements
In the separate financial statements of the Bank, the investment in subsidiaries are accounted for using the equity
method.
1.4 Foreign currency transactions and balances
a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (the functional currency). The functional currency of all
Group entities is the euro. The financial statements are presented in euro, which is also the Group’s presentation
currency. The amounts are rounded to the nearest thousand euro, unless otherwise stated.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in profit or loss.
1.5 Financial assets
Initial recognition and derecognition
The Group recognises a financial asset in its statement of financial position when it becomes a party to the contractual
provisions of the instrument.
The Group initially recognises loans and advances to customers at the date of transfer of beneficial ownership or when
cash is advanced to borrowers. Investments and transactions in all other financial instruments consisting of regular way
purchases and sales are recognised on settlement date.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all risks and rewards of ownership or the Group has not
retained control of the asset.
When assets are sold to a third party with a concurrent total return swap on the transferred assets, the transaction is
accounted for as a secured financing transaction, retaining the asset on the statement of financial position because the
Group retains all or substantially all the risks and rewards of ownership of such assets.
Similarly, when assets are sold to a structure through which the Group is deemed to have retained all, or substantially
all, risks and rewards, the transferred assets are not derecognised.
In transactions in which the Group neither retains nor transfers substantially all the risks and rewards of ownership of
continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.
48Annual Report and Financial Statements 2024
In certain transactions the Group retains the obligation to service the transferred financial asset for a fee. The transferred
asset is derecognised if it meets the derecognition criteria. An asset or liability is recognised for the servicing contract
if the servicing fee is more than adequate (asset) or is less than adequate (liability) for the performance of the servicing.
Modifications of terms
If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new
one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should
be derecognised. If the cash flows of the renegotiated asset are substantially different, then the contractual rights
to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is
derecognised, and the new financial asset is recognised at fair value.
When a loan is restructured as part of forbearance strategy and the restructuring results in derecognition of the existing
loan, the new loan is disclosed as forborne.
The accounting treatment in respect of the modification of terms of financial assets, including considerations made
to determine whether the terms of the renegotiated asset are substantially different, is described in more detail in the
‘Modified financial assets’ sub-section.
Classification and measurement
The classification and measurement criteria under IFRS 9 are driven by the entity’s business model for managing the
financial instruments and the contractual cash flow characteristics of the financial instruments.
In line with the provisions of IFRS 9, the Group classifies and measures all financial assets under any one of the
following categories:
• Amortised cost; or
• Fair value through profit or loss (“FVTPL”).
The Group determines the classification and measurement basis for financial assets based on an assessment of both
the business model within which the financial assets are held and a review of the contractual terms of each financial
asset to determine if cash flows are solely payments of principal and interest (SPPI).
In this regard, subsequent to initial recognition, financial instruments are measured at:
(i) amortised cost if the financial asset is held within a business model whose objective is to hold financial assets in
order to collect contractual cash flows (‘Hold to Collect’) and the contractual terms of the financial asset give rise to
cash flows that are SPPI; or
(ii) FVTPL if the financial asset does not pass the business model assessment referred to above and SPPI criteria.
In performing the SPPI assessment, the Group considers the following contractual terms to determine whether these
introduce variability in contractual cash flows that is inconsistent with a basic lending arrangement, amongst others:
(i) variable interest rates, which typically consider the time value of money, credit risk and other basic lending risks and
costs;
(ii) leverage, which is a contractual cash flow characteristic that results in increased variability in contractual cash
flows;
(iii) modifications of the time value of money; and
(iv) contractual features that could alter the timing or amount of contractual cash flows of a financial asset, such as
49Annual Report and Financial Statements 2024
The Group has identified the following separate portfolios which require separate business model assessments due
to the fact that these are managed separately and by different business units / management teams, namely (i) the
International Corporate Lending portfolio; (ii) the Dutch Mortgage portfolio (including the buy-to-let mortgages portfolio);
(iii) the Belgian Mortgage portfolio; (iv) the Maltese Business Lending portfolio; (v) the Maltese Mortgage portfolio; (vi)
the Consumer Finance receivables portfolio; (vii) the Securities Investment portfolio; (viii) the Securitisation Investment
portfolio; and (ix) the Asset-Backed Securitisation Investment portfolio.
Financial assets measured at amortised cost
Financial assets that are held to collect the contractual cash flows and which contain contractual terms that give rise on
specified dates to cash flows that are solely payments of principal and interest are measured at amortised cost. These
financial assets are initially measured at fair value, which is generally the cash consideration to originate or purchase the
asset including any direct and incremental transaction costs, upon recognition. The Group’s financial assets measured
at amortised cost comprise primarily loans and advances to banks, loans and advances to customers, comprising the
International Corporate Lending portfolio, the Dutch Mortgage portfolio, the Belgian Mortgage portfolio, the Maltese
Business Lending portfolio, the Maltese Mortgage portfolio and the Consumer Finance receivables portfolio, and a
portfolio of debt securities classified under the Securities, Securitisation Investment and Asset-Backed Securitisation
Investment portfolio.
In addition, financial assets measured at amortised cost comprised the Group’s investments in the Grand Harbour CLO
2019-1 Designated Activity Company (“GH1-2019”) structured note tranches, with the exception of the equity tranche
which was measured at FVTPL. Both investments were previously classified under the Securitisation Investment
portfolio and were repaid during the financial year ended 31 December 2024.
Financial instruments at fair value through profit or loss
Financial instruments, other than those held for trading, are classified in this category. As at 31 December 2024, the
Group also held equity instruments acquired as part of debt restructuring arrangements entered into with borrowers
experiencing financial difficulties classified within the International Corporate Lending portfolio.
Impairment of financial assets measured at amortised cost
IFRS 9 requires the measurement of credit loss allowances on financial instruments using the expected credit loss
(“ECL”) impairment model using a forward-looking approach that emphasises shifts in the credit risk attached to a
financial instrument, and consequently the probability of future credit losses, even if no loss events have yet occurred.
Since movements in the fair value of financial instruments measured at FVTPL are recognised directly in profit or loss,
no credit loss allowances are deemed necessary for these financial instruments.
In contrast, financial assets measured at amortised cost, are subject to impairment requirements using the general
impairment model stipulated by IFRS 9. This is due to the fact that, since an integral aspect of both business models is
to collect contractual cash flows, the effects of changes in credit risk are more relevant to a user’s understanding than
the effects of other changes, such as changes in market interest rates.
IFRS 9 impairment requirements are also applicable to loan commitments that are not measured at FVTPL (if the terms
and conditions of the arrangement give rise to an enforceable contract to extend credit), financial guarantee contracts
and recognised lease receivables to which IFRS 16 Leases applies. None of these are within the scope of IFRS 9 but
are still subject to impairment requirements in accordance with IFRS 9.
50Annual Report and Financial Statements 2024
Expected credit losses may be recognised for loans and advances to banks and customers, other financial assets
measured at amortised cost, debt instruments measured at amortised cost, and certain loan commitments and financial
guarantee contracts. The Group may commit to underwrite loans on fixed contractual terms for specified periods of
time. When the Group intends to hold the loan, the loan commitment is included in the impairment calculations set out
below.
Three stage expected credit loss approach
IFRS 9 outlines a ‘three-stage’ model for impairment based on changes in credit quality since initial recognition. The
key driver of the measurement of ECLs therefore relates to the level of credit risk for each exposure and, as a result, an
assessment of the change in credit risk over the expected life of an asset is a core element in determining the staging
criteria under IFRS 9. The three stages under IFRS 9 are as follows:
• Stage 1 - Financial instruments that have not had a significant increase in credit risk (SICR) since initial
recognition, or that have “low credit risk” at the reporting date are classified in Stage 1. 12-month ECLs are
recorded to measure the expected losses that result from default events that are possible within 12 months
after the reporting date;
• Stage 2 - Financial instruments that have experienced a SICR since initial recognition are classified in Stage 2.
Lifetime ECLs are recorded to measure the expected losses that result from all possible default events over the
expected life of the financial instrument; and
• Stage 3 / POCI - Financial instruments that demonstrate an increase in likelihood of default and which are
considered to be in default or credit-impaired (also at origination), are classified in Stage 3, also requiring the
measurement of lifetime ECLs. Financials instruments that provide evidence of being credit-impaired at initial
recognition, are classified as Purchase-Originated Credit Impaired (POCI), also requiring the measurement of
lifetime ECLs.
Non credit-impaired and without significant increase in credit risk (Stage 1)
ECL resulting from default events that are possible within the next 12 months (12-month ECL) are recognised for
financial instruments that remain in Stage 1.
Financial instruments are all classified within Stage 1 upon initial recognition, unless a financial instrument is purchased
or originated credit-impaired (POCI) in which case the exposure is classified as POCI upon initial recognition and
will remain classified as such until derecognition. Therefore, the Group calculates a credit loss allowance based on
12-month ECL. Subsequent changes in credit risk will be reflected in the staging of the exposure, with a transfer of the
exposure to Stage 2 or 3 conditional upon the identification of a SICR or impairment respectively.
The provisions of IFRS 9 include a practical expedient to measure credit loss allowances using 12-month ECL for
financial instruments having low credit risk as at the reporting date. In practical terms, this means that, in those cases
where a financial instrument is deemed to have low credit risk, management is not required to perform an assessment
to determine whether a SICR has occurred. The Group considers “low credit risk” to exist in case of selected financial
instruments, for example listed bonds with an investment-grade credit rating by at least one major rating agency.
For all Stage 1 and 2 financial assets, interest income is recognised by applying the effective interest rate to the gross
carrying amount, prior to deduction of credit loss allowances.
Significant increase in credit risk (SICR) or Stage 2
The concept of default risk is central to IFRS 9. Therefore, a key risk parameter used by the Group in its credit risk
management activities is the probability that the obligor defaults, either within the next 12-month period (in case of
51Annual Report and Financial Statements 2024
An assessment of whether credit risk has increased significantly since initial recognition is performed at least at each
reporting date by considering the change in the risk of default occurring over the remaining life of the financial instrument.
The assessment explicitly or implicitly compares the risk of default occurring at the reporting date compared with that
at initial recognition, taking into account reasonable and supportable information, including information about past
events, current conditions and future economic conditions.
To assess a SICR event, the Group considers both actual and forward-looking information relating to external market
indicators, internal factors and borrower-specific information. The assessment is unbiased and to the extent relevant,
uses forward-looking information consistent with that used in the measurement of ECL. The analysis of credit risk is
based on multiple factors, and their relevance is driven by product type, characteristics of the financial instrument
and the obligor. Therefore, it is not possible to provide a single set of criteria that will determine what is considered to
be a significant increase in credit risk, and these criteria will differ for different types of lending. The internal credit risk
management framework comprises the use of both qualitative and quantitative SICR triggers.
The Group’s credit risk rating processes are designed to highlight exposures which require closer management attention
because of their greater probability of default and potential loss.
In this respect, the Group adopts a five-point credit quality classification system in order to rate the credit quality
of its key financial assets. Further detail on internal credit risk management is outlined in Section 2 (Financial Risk
Management, Credit Risk). Typically, an internal risk grade is assigned to each obligor by the business which is then
reviewed by both the Credit Risk Team, and the Management Credit Committee responsible for the oversight of the
Group’s respective portfolios. The following are the internal risk grades:
• Regular - No material credit concerns.
• Focus - No immediate prospect that a credit loss will ultimately be suffered, but worthy of closer credit oversight.
(This risk grade is not used for the International Corporate Lending portfolio).
• Under Surveillance - Significant increase in credit risk with identified concerns and some prospect that a credit
loss may ultimately be suffered.
• Doubtful - Likely that the contractual terms of the debt will not be met and that a credit loss will be suffered
(Impaired).
• Write-off - Full or partial write-down of exposures with little prospect of recovery.
An overview of the Group’s qualitative SICR assessment is provided below. However, the quantitative assessment
performed by the Group to identify a SICR varies across each of the Group’s portfolios of financial instruments and is
disclosed in the relevant sub-sections below.
It is possible for multiple instruments to the same customer to be classified under different stages. This may occur
when the Group holds exposures originated at differing points in time thereby potentially giving rise to differing default
risk at initial recognition, causing a variation in the relative increase in credit risk since origination between the different
instruments.
Other than for the ‘days past due’ trigger, the Group does not expect to observe a single qualitative SICR trigger to
signal a SICR event in normal circumstances, unless where the event is material. Therefore, the Group has defined
likely SICR triggers that are deemed most relevant in the Group Credit Risk policy. However, triggers are not treated
as exhaustive and are subject to robust credit risk management assessments. Qualitative SICR trigger assessments
are undertaken at least quarterly for each instrument and any identified SICR trigger events are presented to the
appropriate Management Credit Committee.
• International Corporate Lending portfolio
Financial instruments within the Group’s International Corporate Lending portfolio are managed on an
individual basis for credit purposes, whereby the Group’s credit analysts have access to the obligors
52Annual Report and Financial Statements 2024
and their financial information, the latter comprising both historical and forecasted financial information.
The SICR assessment for the International Corporate Lending portfolio comprises the following:
• Use of qualitative SICR triggers, including for example evidence of past due information, significant changes in
the operating or borrowing performance of the borrower;
• Use of quantitative SICR assessment based on a ratings-based approach using lifetime ‘Point in Time’ (PiT)
Probabilities of Default (PDs) (i.e. PD in current economic conditions); and
• Hard trigger (Internal credit classification) - financial asset that has a credit quality classification of “Under
surveillance” is Stage 2, classification of “Impaired” is Stage 3.
For the purposes of the quantitative SICR assessment, the Group has adopted a ratings-based approach (i.e. based on
notch deterioration) for its SICR assessment.
Due to the lack of sufficient internal history of defaults, the Group uses a credit risk modelling solution developed by an
external vendor to estimate unconditional PiT PDs by: (i) benchmarking the obligor’s financial statements with those of
the underlying model dataset; and (ii) applying a qualitative scorecard to adjust the quantitative unconditional PiT PDs
to better reflect obligor-specific peculiarities.
A forward-looking, probability weighted PiT PD estimated by the model is mapped to an implied default rating, which
adopts Moody’s public ratings agency scale terminology from C up to Aaa. When performing the SICR assessment,
the Group compares the implied rating at origination to the implied rating at the reporting date and determines the
difference in notches between them. The Group’s staging criteria is therefore deemed to be based on a ratings/notch
deterioration approach.
The quantitative SICR staging decision uses both a relative and an absolute threshold approach. The relative threshold
approach involves calculating the magnitude of the difference between the reporting date rating and the origination
date rating based on the deterioration in the number of notches between the two ratings. The appropriate stage is
determined based on the magnitude of this difference.
Although the Group has adopted a ratings-based approach (i.e. based on notch deterioration) for its SICR assessment,
each implied rating is represented by an underlying PD. A two notch rating downgrade from origination is considered a
SICR trigger.
Lifetime PDs are determined by estimating the marginal PD for each year over the life of the financial instrument. For
example, for a five-year loan, PDs are calculated for each of the five years. The year-1 PD is calculated as the probability
of the loan defaulting within the first year of it being issued, whereas the year-2 PD is calculated as the probability of the
loan surviving the first year but defaulting in the second year. The same principle of survival applies to the PDs for the
remaining years. The summation of marginal PDs results in the derivation of the cumulative lifetime PD term structure.
Cumulative lifetime PDs increase at a diminishing rate as the residual life of the loan shortens.
PDs are determined upon origination date and at each subsequent reporting date at an obligor level rather than at
a facility level. Therefore, at any given date, multiple facilities attributable to the same obligor are assigned the same
PD, reflecting the borrower’s financial condition as at the date of the assessment. In this regard, different facilities with
the same obligor originated at the same time are expected to have an identical PD both at origination date as well as
subsequent reporting dates. However, facilities with the same obligor originated at different time intervals can have
different PDs upon origination, reflecting the borrower’s financial condition and credit risk at each respective origination
date, whereas identical PDs are determined at each subsequent reporting date in respect of all such facilities.
In this regard, a simple or absolute comparison of PDs at initial recognition and at the reporting date is not appropriate
to determine the stage of an exposure. All other things kept constant, the PD of a financial instrument is expected to
reduce with the passage of time. Thus, in order to take this into consideration, the Group estimates the annualised PD
53Annual Report and Financial Statements 2024
over the remaining life of the financial asset as at the origination date and the annualised PD over the remaining life of
the financial asset as at the reporting date. The annualised PD measure is the cumulative PD for a given period, stated
on a per-year basis. These are then mapped to implied ratings which are used to determine potential SICR events and
consequently the credit stage of a financial instrument through a combination of relative and absolute thresholds using
the implied credit ratings.
Hard Trigger based on Internal Risk Classifications
The quantitative assessment through the Group’s implied credit rating staging criteria is considered alongside qualitative
SICR triggers and forms part of the overall SICR trigger assessment. In this regard, when qualitative SICR triggers are
observed by credit analysts, the Group applies a hard trigger based on the internal credit classification (Stage 2 for all
borrowers classified as “Under surveillance”, and Stage 3 for all borrowers classified as “Doubtful”).
• Dutch Mortgage portfolio
In respect of the Dutch national-guaranteed residential mortgage assets (for which losses are capped at 10% of
expected losses through the ‘Nationale Hypotheek Garantie’ or NHG, capping the LGD) classified within the Group’s
Dutch Mortgage portfolio, the primary determinant of SICR is a quantitative rule based on the change in PD between
origination and reporting date, and based on absolute PD thresholds. SICR is determined at “loan part” level – i.e. each
facility (even where the source of repayment is the same) is assessed for SICR.
The quantitative SICR trigger compares residual lifetime PD at reporting date versus residual lifetime PD at origination.
To identify whether an account experienced a SICR since initial recognition, a lifetime PD threshold is used.
In this respect, the following SICR triggers and backstops are applied and would result in a shift of these exposures to
Stage 2:
• Change in Probability of Default: lifetime PD of the exposure on the reporting date exceeds its lifetime PD at
initial recognition by more than 200%; or
• Absolute level: 12-month PD of the exposure on the reporting date exceeds 20%.
The following are also deemed to give rise to SICR:
1. Forbearance events where exposures are not 30 days past due (“DPD”);
2. Where payments in respect of the exposure are 30 DPD or more.
Quantitative SICR triggers are not applied to mortgages / loan parts with a PD of 0.03% or below at reporting date.
Such exposures are deemed to qualify for the low credit risk exemption (Stage 1 without further staging assessment)
in IFRS 9. The appropriateness of the application of this exemption is periodically tested for portfolios on which it is
applied.
• Belgian Mortgage and Dutch Buy-to-Let Mortgage portfolio
Staging for the Belgian Retail Residential Mortgages and Dutch Buy-to-Let Mortgage portfolios are similar as for Dutch
Residential Mortgages where primary determinants of SICR are delinquency, forbearance, and other quantitative rules
relating to the relative and absolute change in PD.
• Maltese Business Lending portfolio
For Maltese Business Lending assets, the Group is unable to use external credit ratings as all exposures are unrated,
nor rely on risk-modelling for quantifying credit risk for each asset, as no robust database exists for the asset class.
54Annual Report and Financial Statements 2024
The Group therefore uses the evidence of past-due information as the primary driver of SICR triggers alongside other
qualitative SICR metrics.
Payments in respect of exposures within this portfolio that are more than 30-days past due are considered as evidencing
a SICR trigger.
Similar to the approach taken for the International Corporate Lending portfolio, the other identifier of SICR within the
Maltese Business Lending portfolio is the review by respective relationship managers which takes into consideration
qualitative SICR triggers such as a deteriorating risk classification with other banks (through the Central Credit Register),
requests for concessions and other financially related triggers as described previously in respect of the International
Corporate Lending portfolio.
Exposures within the Maltese Business Lending portfolio are therefore managed at an individual exposure level for
credit purposes, through relationship managers who have access to the customers and their financial information on
a regular basis. Such qualitative SICR trigger assessments are undertaken at least quarterly and any identified SICR
trigger events are presented to the appropriate Management Credit Committee. These SICR assessments could lead
to changes in the internal risk grade assigned to each borrower.
• Maltese Mortgage portfolio
Staging for the Maltese Retail Residential Mortgages portfolio is similar as for Dutch Mortgages where primary
determinants of SICR are Delinquency, Forbearance, and other quantitative rules relating to the relative and absolute
change in PD.
• Consumer Finance receivables portfolio
To identify a SICR, the following triggers in the Group Credit Policy have been identified as the most relevant to the
Consumer Finance receivables portfolio.
• Quantitative triggers based on PD movements
• Hard triggers based Days Past Due
• Forbearance
Any debtor exposure that is more than 30-days past due is considered as evidencing a SICR trigger.
• Securities Investment portfolio
In order to monitor SICR in relation to its Securities Investment portfolio, the Group refers to external credit ratings from
at least one of the following rating agencies: Moody’s, Fitch or Standard & Poor’s. In this regard, an exposure is deemed
to have low credit risk if it is assigned an investment-grade status by one of these three external credit rating agencies.
Should the credit rating of a financial instrument fall below the investment-grade threshold, i.e. BBB (or equivalent) the
financial instrument is deemed to have suffered a SICR. As a result, the financial instrument will be re-classified as a
Stage 2 exposure, which will impact the measurement of the ECL charges, moving from a 12-month ECL calculation to
a lifetime ECL calculation.
• Securitisation Investment and Asset-Backed Securitisation Investment portfolios
Due to the unique characteristics of Collaterised Loan Obligation (“CLO”) and Asset-Backed Security (“ABS”) vehicles,
the definitions for SICR differ from the Group’s Credit Policy.
In respect of tranches (or notes) of CLOs and ABSs to which an investment-grade Implied Rating is assigned, the
Group makes use of the low credit risk exemption. As a result, the Group assumes that no SICR has occurred since
initial recognition as long as the tranche retains an investment-grade Implied Rating. Hence, the Group assumes that
55Annual Report and Financial Statements 2024
the credit risk attributable to tranches to which the low credit risk exemption is applied has not increased significantly
since initial recognition.
Similar to the Securities Investment portfolio criteria, investment-grade rating is an example of a financial instrument
that may be considered as having low credit risk. Therefore, the Group measures 12-month ECL for publicly rated
investment-grade tranches of CLOs.
Notwithstanding the above, the following triggers in the Group Credit Policy have been identified as the most relevant
to the Group’s investments in both AAA-rated CLO and ABS notes.
1. Quantitative trigger based on a material reduction in the secondary market price of the notes in which MeDirect
invested (where feasible). Active trading of the note in which MeDirect is invested at or below 90c in the Euro should
trigger consideration of SICR.
2. Quantitative triggers based on CLO / ABS vehicle performance triggers such as cash re-direction and/or
outstanding uncleared principal deficiency ledgers (or similar concept) and/or use of liquidity and/or reserve funds
to support the interest payment and amortisation of the debt tranche in which MeDirect invested.
3. Hard trigger based on any external rating agency downgrade for the Class A CLO Senior notes (i.e. AAA rated at
origination), in which MeDirect has invested, by four or more notches.
Throughout 2024, the Group’s investment in tranches within GH1-2019, a Collateralised Loan Obligation Structured
Entity (“CLO SE”) originated and managed by the Group, was repaid.
Credit impaired (Stage 3)
The Group defines a financial asset as credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have occurred.
IFRS 9 introduces a rebuttable presumption that default does not occur later than when a contractual repayment relating
to a financial asset is 90 days past due, unless reasonable and supportable information is available to demonstrate
that a more lagging criterion is more appropriate. This presumption has not been rebutted by the Group for its lending
portfolios, meaning that default is deemed not to have occurred later than when a financial asset is 90 days past due.
Although this presumption is applicable to all lending portfolios managed by the Group, it is much more relevant for
identifying defaulted exposures within the Maltese Business Lending portfolio and the Dutch, Belgian and Maltese
Mortgage portfolios.
The definition of default is addressed in more detail by guidelines issued by the European Banking Authority (EBA)
and the Basel Committee on Banking Supervision (BCBS). These guidelines provide detailed definitions of what should
be considered in the determination of defaulted exposures for regulatory purposes. As a result, the Group aligned the
IFRS 9 definition of default, used for accounting purposes, to the definitions provided in the EBA and BCBS guidelines,
thereby ensuring that a single consistent view of credit risk is applied for internal risk management, regulatory capital
and the measurement of ECLs.
In this regard, defaulted exposures are those that satisfy either or both of the following criteria:
(i) material exposures which are past due by more than 90 days;
(ii) the debtor is assessed as unlikely to pay its credit obligations in full without realisation of collateral, regardless of the
existence of any past-due amount or of the number of days past due.
Therefore, since the criteria for credit-impaired under IFRS 9 can be interpreted consistently with the definition of
default for regulatory purposes, all defaults in terms of regulation are deemed to be credit-impaired, and vice versa.
Defaulted exposures are therefore classified under Stage 3 for IFRS 9 purposes.
56Annual Report and Financial Statements 2024
In order to define which events trigger “unlikeliness to pay”, the Group takes into account the situations and events
listed in the Capital Requirements Regulation (“CRR”) definition of default and in the IFRS definition of impairment
requirements.
IFRS 9 provides a list of events that may indicate that a financial asset is credit-impaired. The criteria that the Group
uses to determine that there is objective evidence of an impairment loss include:
• Significant financial difficulty of the issuer or borrower;
• A breach of contract, such as default or past due event;
• The lender(s) of the borrower having granted a concession(s) to the borrower for economic or contractual
reasons relating to the borrower’s financial difficulty (this would not have otherwise been considered);
• It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
• The disappearance of an active market for that financial asset because of financial difficulties; or
• The purchase or recognition of a financial asset at a deep discount that reflects the incurred credit losses.
For all Stage 3 financial assets, interest income is recognised by applying the effective interest rate to the amortised
cost or carrying amount of the financial instrument, i.e. gross carrying amount less credit loss allowances.
Write-offs
Financial assets and the associated credit loss allowances are normally written off, either partially or in full, when there is
no realistic prospect of recovery. In the case of international corporate loans, the determination is made after considering
facts and circumstances relating the borrower’s financial position, typically following a distressed restructure. Where
loans are secured, this is generally after receipt of any proceeds from the realisation of security. In circumstances
where the net realisable value of any collateral has been determined and there is no reasonable expectation of further
recovery, write-off may be earlier (see Note 2.2.5). In this respect, the Group writes off financial assets when the relevant
Management Credit Committee of MeDirect Malta and MeDirect Belgium determines that the balance is uncollectible,
but this does not constitute that the debt has been cancelled.
Modified financial assets
In accordance with IFRS 9, the modification of contractual cash flows of a financial instrument could result in one of
two possible outcomes:
(i) If the modification is not considered to be significant, the modified cash flows are considered to pertain to the original
financial asset; or
(ii) If the modification is considered to be significant, the original asset is considered to be extinguished and accordingly
the original asset is derecognised and replaced by a new financial asset.
The assessment of whether a modification is considered to be significant is critical in determining the accounting
implications of modifications to an asset’s contractual cash flows. The Group applies judgement in assessing whether
a change in contractual terms (such as a change in interest rates, currency or the remaining term of the loan) is
substantial enough to represent an expiry of the original instrument.
In this regard, when considering a change in the contractual terms, the Group evaluates how the cash flows under
the revised terms compare with the cash flows under the original terms of the loan and also takes into consideration
qualitative factors. Qualitative considerations include extension of terms, insertion of credit enhancements, changes
in interest rates, etc. When a number of such considerations are present, in conjunction with the assessment of the
difference between the original and revised cashflows, a modification could be deemed to be substantial, resulting in
the derecognition of the financial instrument.
57Annual Report and Financial Statements 2024
When the modification is not substantial enough to result in the derecognition of that financial asset, the Group
recalculates the gross carrying amount of the financial asset as the present value of the modified contractual cash
flows discounted at the original effective interest rate (or credit-adjusted effective interest rate for POCI financial assets).
The difference is recognised as a modification gain or loss in profit or loss.
When there is a substantial modification to the terms of a financial asset resulting in the derecognition of the existing
financial asset and the subsequent recognition of the modified financial asset, the modified asset is considered a ‘new’
financial asset. Any new financial assets that arise following derecognition events as a result of substantial modification
to the terms of the instrument are classified as Stage 1 assets, unless the new financial asset is credit-impaired on initial
recognition, in which case it will be classified as a POCI financial asset. A loss is booked in profit or loss (normally as a
write-off) since the new instrument is recognised at fair value.
When the modification is not substantial enough to result in the derecognition of the financial asset, renegotiated
loans within the International Corporate and Maltese Business Lending portfolios are considered credit-impaired and
accordingly classified as Stage 3 assets unless no unlikeliness-to-pay events are deemed to have occurred. Assets
that are credit-impaired at the time of renegotiation remain in Stage 3 post renegotiation. When evidence suggests that
the renegotiated loan is no longer credit-impaired, the asset is transferred out of Stage 3. This is assessed on the basis
of historical and forward-looking information and an assessment of the credit risk over the expected life of the asset,
including information about the circumstances that led to the renegotiation. A full assessment from the appropriate
Management Credit Committee is required for approval that the exposure is no longer considered as credit-impaired.
With respect to loans within the Dutch and Maltese Mortgage portfolios, when the modification is not substantial
enough to result in derecognition, renegotiated loans are classified as credit impaired, and accordingly as Stage 3
assets, when the exposure is 90 DPD. In all other instances, renegotiated loans within these portfolios are initially
classified as Stage 2 assets.
Other than originated credit-impaired loans, all other modified loans could be transferred out of Stage 3 if they no
longer exhibit any evidence of being credit-impaired and, in the case of renegotiated loans, there is sufficient evidence
to demonstrate a significant reduction in the risk of non-payment of future cash flows over the minimum observation
period, and there are no other indicators of impairment. These loans could be transferred to Stage 1 or 2 based on
the mechanism as described below by comparing the risk of a default occurring at the reporting date (based on the
modified contractual terms) and the risk of a default occurring at initial recognition (based on the original, unmodified,
contractual terms). Any amount written off as a result of the modification of contractual terms would not be reversed
but recorded as a recovery under cost of risk.
Purchased or originated credit-impaired
Originated credit-impaired financial assets are those assets that are credit-impaired on initial recognition. The Group
the Group originates new assets following a renegotiation or restructure for reasons relating to a borrower’s distressed
financial circumstances that otherwise would not have been considered, and which may result in the new assets to be
deemed POCI. The amount of change in lifetime ECL is recognised in profit or loss as an impairment gain or loss until
the POCI is derecognised, even if the lifetime ECL are less than the amount of ECL included in the estimated cash flows
on initial recognition.
Movement between stages
Financial instruments are transferred out of Stage 2 if their credit risk is no longer considered to be “significantly
increased” since initial recognition.
58Annual Report and Financial Statements 2024
For IFRS 9 purposes, the Group has determined the below guideline approach to determine whether movement from
Stage 2 to Stage 1 is appropriate:
• Where qualitative triggers were used to determine SICR: Stage transfer from Stage 2 to Stage 1 is subjective.
Where implied rating SICR triggers were not a determinant for reclassification in the first instance, it is expected
that any qualitative SICR triggers that were observed that derived the SICR event must be fully resolved and
evidenced for a 90-day period prior to any reclassification.
• Where quantitative triggers were used to determine SICR, the financial asset must evidence an improvement
and return to the external or implied default risk rating at the point of inception (instrument should evidence an
implied default rating in line or better than the original inception rating in order to trigger a reclassification from
Stage 2 to Stage 1).
• Any instrument that is no longer 30-days past due can only be reclassified to Stage 1 when: (i) all contractual
arrears have been remediated (Nil days past due); and (ii) no further non-payment has been observed for a
minimum of 90 days. This is subject to regulatory materiality thresholds defined in the Group Credit Risk policy.
In addition, for exposures within the International Corporate and Maltese Business Lending portfolios, curing of Stage
2 exposures is governed by the Management Credit Committee Quarterly Portfolio Review process where supportive
evidence of improved performance and thereby stage transfer is reviewed and approved by the committee.
Similarly, for movement of Stage 3 corporate loans to either Stage 2 or Stage 1, a full assessment from the appropriate
Management Credit Committee is required for approval that unlikeliness to pay criteria are no longer present, the
exposure is no longer considered as impaired and there is no past due amount on the exposure (through settling of
amounts in a regular manner).
Stage transfer in respect of corporate exposures is also subject to a 12-month probation period where defaulted
(Stage 3) exposures are classified as NPEs before they can be upgraded to Stage 2. Meanwhile, stage transfer of
defaulted retail exposures is subject to a 3-month probation period, unless the default/NPE classification is the result
of forbearance measures for which a 12-month probation period applies.
For loans that are assessed for impairment on a portfolio basis, the evidence to support the stage transfer assessment
typically comprises a history of payment performance against the original or revised terms, as appropriate to the
circumstances. For loans that are assessed for impairment on an individual basis, all evidence is determined on a case-
by-case basis.
Movement between stages is aligned with the Group Credit Risk policy, and any exceptions are governed by the
Measurement of expected credit losses
The Group first determines whether there is an increased likelihood of default present for an individually assessed
financial asset, and then measures credit loss allowances using different models for non credit-impaired and credit-
impaired financial assets, as follows:
• If no evidence of impairment exists (Stage 1 and Stage 2 assets), the Group uses statistical models developed
by an external vendor to measure ECLs for exposures within the International Corporate Lending portfolio and
Maltese Business Lending portfolio at facility level.
• For credit-impaired exposures (Stage 3 assets), the Group generally models ECLs based on an internally
developed methodology to estimate the expected cash flows by reference to borrowers’ enterprise values
and forecasted operating cash flows for exposures within the International Corporate Lending portfolio and
the individual valuation of the underlying asset / collateral for exposures within the Maltese Business Lending
portfolio.
59Annual Report and Financial Statements 2024
With respect to the Dutch Mortgages, Securitisation Investment and Securities Investment portfolios, the ECLs on all
assets (irrespective of staging) are modelled using statistical models developed by an external vendor. For the Belgian
and Maltese Mortgage Lending portfolios, the ECL for the mortgage portfolios is determined using internally developed
statistical models. For the Asset Backed Securitisation Investment portfolio and the Consumer Finance receivables
portfolio, ECLs are determined utilising historical information and applying applicable credit enhancements.
ECLs are defined as the probability-weighted estimate of credit losses over the expected life of a financial instrument.
Credit losses are in turn defined as the present value of all expected cash shortfalls between contractual and expected
cash flows, discounted using the original effective interest rate (EIR).
Lifetime ECLs refer to the ECLs that result from all possible default events over the expected life of a financial instrument,
whilst 12-month ECLs are a portion of lifetime ECLs and represent the lifetime cash shortfalls that result if a default
occurs in the 12 months after the reporting date, weighted by the probability of the default occurring.
For each portfolio, the Group calculates ECLs on its financial instruments based on three key inputs, namely: probability
of default (“PD”), loss given default (“LGD”) and exposure at default (“EAD”). The 12-month ECL is calculated by multiplying
the 12-month PD, LGD and EAD. Lifetime ECL is calculated on a similar basis for the entire residual life of the exposure.
Non credit-impaired financial assets (Stage 1 & 2)
This section provides a detailed description of the methodology used by the Group to measure credit loss allowances in
respect of exposures classified as Stage 1 and Stage 2 assets using statistical models developed by an external vendor
(for the Dutch Mortgages, Securitisation Investment and Securities Investment portfolios) and internally developed
models (for the Belgian and Maltese Mortgages).
Probability of Default
One of the key risk parameters used by the Group in its ECL calculation is the probability that the obligor defaults either
within the next 12-month period (in case of Stage 1 exposures) or over the lifetime of the exposure (in case of Stage 2/3
exposures).
Since the PD is a probability measure used to capture the likelihood that a customer will default over a defined period
of time, this is estimated at a customer level.
PDs for the Group’s portfolios are estimated based on statistical models developed by external vendors. In particular, the
models used for the International Corporate Lending, Maltese Business Lending, and Securities Investment portfolios
use rating scale to PD matrices calibrated based on historical default data observed in the market and compiled by
the external vendor. In respect of the International Corporate Lending portfolio, PDs and implied ratings are modelled
by benchmarking borrower-specific characteristics, including financial performance and qualitative characteristics
captured through a scorecard, with the underlying dataset. In respect of the Maltese Business Lending portfolio, PDs are
estimated through rating scale to PD matrices by mapping internal risk grades to public ratings. In respect of exposures
within the Securities Investment portfolio, PDs are generally estimated using public ratings through rating scale to PD
matrices. With regard to the Dutch Mortgage portfolio, PDs are generated using models based on historical default
rates observed in the Netherlands for similar assets. With regards to the Belgium and Malta Residential Mortgages
portfolio, PDs are also generated using models based on proxies for historical default rates using external, publicly
available sources for similar assets. Asset-Backed Securitisations and Securitisation portfolios are allocated a nominal
PD due to their low credit risk, whilst the Consumer Finance receivables portfolio takes the lifetime PD based on the
lifetime expected loss of this portfolio.
60Annual Report and Financial Statements 2024
Loss Given Default
The second key risk parameter used by the Group relates to the estimation of the recovery rate expected to be observed
in the event that a ‘default’ occurs. In this regard, the Group uses the LGD to capture this element within the ECL
calculation.
The LGD of an exposure measures the size of the estimated loss (as a proportion of the total EAD) that is expected
to materialise in the event of default. It is based on the difference between the contractual cash flows due and the
cash flows that the Group expects to receive, whether from cash flows or from any collateral. It takes into account the
mitigating effect of collateral value at the time it is expected to be realised and the time value of money. LGD for ECL
measurement includes the expected impact of future economic conditions and discounting back from estimated time
of default to reporting date using the original EIR.
In contrast with PDs, LGDs are estimated at a facility level. Whilst linked to the general credit risk of the obligor, recovery
rates are also impacted by the relative ranking of a particular facility within the obligor’s debt structure.
For assets within the Group’s International Corporate Lending portfolio, estimated recovery rates are measured using
statistical models developed by external vendors by benchmarking exposure-specific characteristics with the underlying
dataset.
The Group’s Securities Investment portfolio consists of covered bonds, bonds issued by supranational organisations,
sovereign bonds and corporate bonds. For its supranational exposures and sovereign exposures, the Group uses the
LGD values obtained from the statistical model developed by an external vendor while for covered bonds the LGD is
aligned with regulatory standards. The LGD for corporate bonds is modelled using the same methodology as for the
International Corporate Lending portfolio.
The LGD used for the Maltese Business Lending portfolio is driven by the loan-to-value ratio of the individual facilities,
whilst also taking into consideration other factors such as costs to sell, valuation haircuts and the time value of money.
The LGD for the Dutch Mortgage portfolio is modelled using the loan-to-value ratio of individual loan parts. Expected
recoveries are used to determine the expected loss and are modelled by reference to assumptions in relation to
valuations of different property types, haircut to sale proceeds and the time value of money. The LGD is then estimated
at 10% of expected losses, since the NHG absorbs 90% of losses, adjusted for assumptions on expected NHG pay-outs
and claim rejection rates.
With regards to the Belgium and Malta Residential Mortgages portfolios, as the Group has no internal loss data, LGD
parameters are based on external, publicly available sources of loss data for similar assets.
For the Securitisation Investment portfolio, as for PDs, the LGDs are determined by taking a nominal amount of the
investment made considering the low credit risk of the investment.
For the Asset-Back Securitisation Investment portfolio, the LGDs are determined by considering the value security
within the overall structure considering the low credit risk of the investment.
For the Consumer Finance receivables portfolio, a scorecard has been developed utilising historical loss data and
applicable credit enhancements.
Exposure at Default
The EAD is used to estimate the Group’s expected exposure at the time of default of an obligor, taking into account
expected changes in the exposure after the reporting date, including repayments of principal and interest, and any
expected drawdowns on committed facilities.
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The maximum period over which ECLs are measured is the maximum contractual period over which the Group is
exposed to credit risk.
• International Corporate Lending portfolio
For the Group’s International Corporate Lending portfolio, the Group makes use of behavioural rather than contractual
maturity, thereby reflecting expectations on the exercise of prepayment or extension options. In this regard, for Revolving
Credit Facilities and Term Loans containing a prepayment option which is expected to be exercised by the obligor, the
Group adjusts the contractual maturity date to reflect the expected maturity date, thereby reflecting the expected
payment profile. Expected maturities are assessed quarterly, on a case-by-case basis, in order to determine any change
to the expected maturity.
To measure the EAD of off-balance sheet exposures, including loan commitments, the Group aligns the expected
drawdown on committed facilities with the credit conversion factors (CCFs) as set out in the Standardised Approach
to Credit Risk under the CRR.
• Dutch Mortgage portfolio
The EAD for the Dutch Mortgage portfolio is based on amortisation per the contractual payment profiles, taking into
account modelled prepayments. The maturity date is deemed to be equal to the contractual maturity of the mortgage.
To measure the EAD of off-balance sheet assets, the Group applies a 75% CCF.
• Belgian Mortgage portfolio
The EAD for the Belgian Residential Mortgage portfolio is based on the outstanding exposure amount as at reporting
date. To measure the EAD of off-balance sheet assets (commitments to lend), the Group applies an 80% CCF.
• Maltese Business Lending portfolio
For the Maltese Business Lending portfolio, the maturity date is deemed to be equal to the contractual maturity of the
exposure.
To measure the EAD of Revolving Credit Facilities the Group applies a 100% CCF, whereas the EAD for Term Loans is
assumed to be equivalent to the drawn amounts as at reporting date.
• Maltese Mortgage portfolio
The EAD for the Maltese Residential Mortgage portfolio is based on the outstanding exposure amount as at reporting
date. To measure the EAD of off-balance sheet assets (commitments to lend), the Group applies a 90% CCF.
• Consumer Finance receivables portfolio
For the Group’s Consumer Finance receivables portfolio, the EAD is assumed to be the full committed exposure.
• Securities Investment portfolio
For the Group’s Securities Investment portfolio, the maturity date is deemed to be equal to the contractual maturity of
the exposure, and the EAD assumed to be the full committed exposure.
• Securitisation Investment and Asset-Backed Securitisation Investment portfolios
For the Group’s Securitisation Investment and Asset-Backed Securitisation Investment portfolios, the EAD is based on
the outstanding exposure amount as at reporting date.
62Annual Report and Financial Statements 2024
Credit-Impaired financial assets (Stage 3)
For Stage 3 assets in the International Corporate Lending and Maltese Business Lending portfolios, the Group estimates
ECL on an individual basis. When assessing impairment for these assets, the recoverable amount corresponds to
the present value of estimated future cash flows. In the case of collateralised exposures, typically within the Maltese
Business Lending portfolio, the estimation of the recoverable amount reflects the cash flows that may result from the
liquidation of the collateral discounted at the original effective interest rate.
For exposures in the International Corporate Lending portfolio, the Group deems these assets as very rarely secured by
assets whose value is easily observable. Therefore, recoverable amounts are usually calculated by projecting expected
cash flows using a discounted cash flow (“DCF”) approach to determine the Enterprise Value (“EV”) under multiple
scenarios. The recoverable amount under each scenario is estimated as the EV, plus available cash, less exit fees,
discounted using the estimated weighted average cost of capital (“WACC”) at a borrower level. The latter is determined
using multiple assumptions in respect of the cost of debt and cost of equity. The recoverable amount is then compared
to the EAD in order to determine any expected shortfalls / credit losses.
Hence for Stage 3 exposures the individual impairment allowance is measured as the difference between the asset’s
outstanding exposure, which is measured as the sum of the carrying amount and the expected future drawdown on
off-balance sheet commitments estimated by reference to CCFs, and the recoverable amount. The recoverable amount
is the weighted average of the base case and the downside case, with recoveries under each case capped separately
at 100%. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the
loss is recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the
previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is
recognised in profit or loss.
For exposures in the Maltese Business Lending portfolio, these are typically secured by real estate assets, cash
collateral or tradeable equities whose value is more easily observable. In this respect, the recoverable amount is usually
calculated on the basis of