Malta’s financial services sector is the nation’s pride as it has propelled the small Mediterranean island into the ranks of the leading finance centres of Europe. Financial services have become one of the country’s most important economic generators, registering impressive year-on-year growth and attracting international attention – all achievements made against the backdrop of one of the worst financial crises in history.
EU membership provided the island with the stimulus it needed to become one of Europe’s most dynamic and fastest growing finance centres. By introducing a strong regulatory framework and a competitive, transparent fiscal regime approved by both the EU and the OECD, Malta sought to distance itself from secrecy jurisdictions and tax havens. Some of the world’s top-rated financial firms now base their operations in Malta.
The finance sector has expanded by around 25 per cent annually in recent years and accounts for 13 per cent of the island’s GDP, providing almost 10,000 jobs. Unlike many larger economies, Malta’s finance sector has been given a clean bill of health by rating agencies, the EU Commission and the International Monetary Fund (IMF). The country’s banks did not require government assistance, and enjoy strong capital reserves and liquidity ratios. Prudently managed growth of the sector is a government priority, and Malta is increasingly regarded as an alternative to more established financial centres like Dublin, London and Luxemburg.
A Range of Activities
Malta has a diverse financial services portfolio. More than 25 banks have established operations in Malta. The insurance sector has also experienced an upsurge due to the presence of expert insurance management services and EU passporting rights. Gross written premiums surpassed the €2.8 billion mark in 2014. The fund sector began expanding soon after the introduction of a specialist regime for alternative investment funds, or professional investor funds (PIFs), in addition to EU-certified UCITS funds. Malta now hosts over 600 funds with a combined net asset value of €9.7 billion at the end of 2014. Corporate formation is another important area of activity, and the island’s register today lists around 60,000 companies. Malta has also developed into an important wealth management location. High-net-worth individuals, wealth managers and family offices increasingly avail of the country’s wide range of investment vehicles including trusts and foundations.
Boutique Operations & Multinationals
The island has gained a reputation as a jurisdiction for smaller financial services companies and startups, which offer clients more personalised services than those provided by the bigger firms. But as Malta’s status as a financial centre has grown, the island has also attracted international credit institutions such as Deutsche Bank, HSBC, Banif Bank and FIMBank. The island hosts nearly 30 fund administrators and 60 insurance companies, ranging from well-known international names to smaller, niche establishments. Fund administrators such as Apex, TMF and Custom House all have a presence in Malta, along with insurance managers such as Munich Re, Aon and Marsh. In addition, a number of Fortune 100 companies have set up captives on the island, including multinationals such as BMW, Peugeot, Citroen and Vodafone. Malta also boasts considerable expertise in the field of trusts and foundations, including many legal firms with in-house trust companies along with international organisations.
A pro-business environment, minimal bureaucracy, an approachable financial regulator and a robust regulatory regime are pillars of Malta’s reputation. The Malta Financial Services Authority oversees all financial services. The island’s young population is highly educated and English speaking, and a comprehensive network of associated professional service providers is firmly embedded. Malta’s EU membership is complemented by a series of 70 tax treaties with countries including the US and China.
Rising to the Top
Despite its strengths, Malta’s finance sector is facing challenges. In the funds market, a limited number of custodians inhibit growth while rapidly increasing levels of business could lead to a shortage of expertise. Malta’s greatest challenge is maintaining its reputation as a robust yet benign jurisdiction in the face of the damage that the reputation of the financial services sector in general has sustained.
But with its track record of recent achievements, Malta has developed ambitious plans for the future. The financial sector is also expanding into other potentially lucrative markets like currency trading, intellectual property and international pensions. The opportunity is there to ensure that Malta will not only be seen as a financial centre of the Mediterranean but as part of the global financial system.