Ivan Grech, Head of Business Development at FinanceMalta, shares his insights about the Maltese financial services sector, how this has developed over the years and which is the way forward, in an interview given to The Times of Malta.
What is your role at FinanceMalta?
FinanceMalta is a relatively young organisation, having been established in 2007 as a public-private partnership set up to promote Malta as an international financial centre.
As business development manager, my role is to represent the interests of our members by promoting and communicating Malta’s financial services industry value proposition as well as create networking opportunities and long-term value for our members and for the country.
How has the local financial services sector grown in recent years?
The sector has seen some remarkable and robust growth over recent years and is now a major force in the country’s economy, contributing approximately 13 per cent to the GDP in 2014.
The asset management sector has seen fast growth driven by new fund set-ups and company redomiciliations from non-EU jurisdictions to a total of nearly 600 investment funds with a combined net asset value of approximately €10bn. Key international insurance operators in Malta now number 60, while there were a total of 27 credit and 33 financial institutions as at 2014.
In fact, statistics just released by the National Statistics Office show that 98 per cent of all foreign direct investment in 2014 resulted from financial services and insurance. That’s a staggering €139bn out of €142bn.
What are the elements that make Malta attractive to financial services operators?
Malta has some significant strengths to offer the industry. As a member of the European Union and eurozone, Malta offers significant advantages that include passporting rights to international business as a business domicile.
Operators benefit from: an excellent, professional services infrastructure; a respected and well-regulated legal jurisdiction; a well-trained, motivated workforce; a lower-cost environment; and an advantageous tax regime backed up by more than 60 double taxation agreements.
To these, we also offer a world-class information and communications technology infrastructure, English as an official language, an enviable climate, and a strategic location. I must also mention the presence of an accessible yet rigorous regulator which has been pivotal to ensure the industry positioning as a well-regulated domicile.
How can these elements be further developed?
It is important for Malta to be innovative and focus on its strengths. For instance, Malta is the only EU member state with Protected Cell Company legislation. This provides numerous advantages compared to stand-alone insurance companies or captives, whereby the insurer can write business through the ownership of a protected cell, using the core’s capital.
Another innovative and important legal act relating to wealth management that will soon be presented as a white paper is that pertaining to family businesses. This is a first and will encourage the regulation of family businesses, their governance as well as the transfer of business from one generation to the next.
Is there potential for further growth in the financial services sector?
There is potential for further growth and we are working to strengthen Malta’s reputation as an international centre serving global business.
We want to build on the success that has been achieved so far in the financial services industry. Consequently, FinanceMalta is at the forefront in marketing Malta to extend its reach to both new areas of business as well as new markets. Our focus for the coming 12 months is to explore the markets of Asia, Middle East and New York to the west, while simultaneously developing areas that show great potential for growth including international pensions, Islamic finance and Malta’s capital markets.
Is the education system catering for the financial services sector’s HR needs?
Well-trained and available human resources are an essential part of the service offering to operators looking to relocate to Malta. However the recent rapid and ongoing growth of the financial services sector has resulted in an unprecedented demand for certain skills namely accountancy, compliance, fund administration and other general regulatory requirements.
There has been a sustained effort across a number of areas to address this need both by the authorities but also by stakeholders within the industry. This includes raising awareness of the career opportunities in the financial services sector, starting from the secondary education level when students are making crucial career choices, all the way to University, MCAST and beyond. For instance, the university’s Faculty for Economics, Management and Accountancy has a student population of nearly 2,000 and makes it one of the largest faculties at University.
Additionally, specific training and continuous professional development in the sector is now being offered by an increasing number of institutions. However, when gaps cannot be filled locally, then recruitment from overseas, predominantly from within the EU, is facilitated.
How does FinanceMalta collaborate with financial services operators to improve the sector?
FinanceMalta brings together and harnesses the resources of the industry and government to ensure Malta maintains a modern and effective legal, regulatory and fiscal framework in which the financial services sector can continue to grow and prosper.
Not only is our board of governors made up of equal representation between the Government and founding members who represent the industry, but any strategic decision making for future planning is dependent upon input we receive from the founding associations among whom are: the Malta Funds Industry Association, the College of Stockbroking Firms, the Malta Bankers Association, the Malta Insurance Association, the Association of Insurance Brokers, the Malta Insurance Managers Association and the Institute of Financial Services Practitioners as well as our corporate and affiliate members.
We operate in an increasingly regulated environment and in this respect it is important for FinanceMalta to provide its members with initiatives to reflect the evolution and changing servicing demands of the industry. Organising regular educational clinics is therefore critical for our members to keep abreast of an ever-changing regulatory framework. So are the various initiatives and events that are organised or coordinated by FinanceMalta each year – these are aimed at promoting Malta’s financial services industry and creating invaluable networking opportunities for our members.
There have recently been allegations that a number of Malta-based companies were involved in illegal gaming activities and money laundering. Does this give bad press to the local financial services sector?
The excellent reputation that Malta has as an optimum environment for international business has been enhanced by the strength, transparency and adoption of best practice of its regulatory regime. Despite the presence of a robust regulatory framework as well as regulatory bodies that are accessible yet very rigorous and meticulous, such incidents do unfortunately occur. This happens not only in Malta but also in other developed European financial services jurisdictions. It is however pertinent to point out that in Malta administrative systems and controls are constantly under review in order to effectively mitigate any new risks that may arise as the industry continues to evolve.
One consequence of the success of the financial services sector and the resulting growth in the number of companies now operating out of Malta is that despite the presence of a thorough screening process for new business applicants and the ongoing supervisory oversight, the occurrence of such incidents cannot be completely avoided. Nonetheless, any allegations of irregularity are taken very seriously by the Maltese authorities, who swiftly and decisively ensure that the applicable rules and regulations in such instances are efficiently, effectively and strongly enforced.
