5,544 New Companies in Two YearsMEDIA ROOM
According to The Times of Malta, despite the global recession, the Malta Financial Services Authority registered 5,544 new companies over the last two years – 2,800 in 2008 and 2,744 in 2009 – and there was a one per cent increase in the deposits in the Maltese banking sector last year to €14.6 billion.
Introducing the second reading of the Financial Institutions and other Financial Services Laws (Amendment) Bill, Parliamentary Secretary Jason Azzopardi said this had been possible because both sides of the House had acted in unison on financial services legislation and the government had understood the economic tempo while being sensitive to people’s needs.
He said the Bill would give the MFSA wider discretion on issuing and revoking licences to safeguard consumers and investors. It also sought to transpose an EU directive on payment services in the internal market, amend a number of directives and introduce amendments to the Financial Services Authority and the Banking Acts.
Dr Azzopardi said that the European Union had striven to override the financial crisis with the European Central Bank offering €120 billion for a period of 30 days to increase liquidity in the eurozone.
The EU had made a number of proposals to strengthen the supervision of financial markets and institutions to ensure financial stability. The turmoil in financial markets over the last two years had led to a loss of 13 per cent in GDP in the EU. For this reason the EU was proposing a pan-European supervisory body as part of a wider plan.
The EU plan included guarantees on bank deposits, as happened also in Malta. The World Economic Forum considered the Maltese banking sector as the 13th strongest in the world. Malta also ranked in 13th place among 133 countries on financial market sophistication for 2009-2010.
Dr Azzopardi said the EU directive aimed to provide a legal basis for payment services in the internal market. Payments across frontiers would be simpler, more efficient and secure. The directive aimed at strengthening competitiveness by increasing efficiency through a number of rules and obligations. It provided the legal framework establishing the single European payment area.
Malta was participating in this ambitious EU process where the consumer was better protected and technological innovation was encouraged.
Calling for more agility and stronger competitiveness, opposition finance spokesman Charles Mangion spoke on Malta’s financial and economic development in the last 15 years and said that, despite the financial and economic crisis, Malta’s economy was still going strong.
Consequently, one needed to work at strengthening the country’s financial sector and react in an agile manner to the ongoing changes. Taking the dockyards negotiations as an example, Dr Mangion referred to compensation given to workers by the Exchequer, saying these affected the economy and Malta’s maritime industry.
Malta needed to look into new ways of attracting new investment through various means, such as new employment opportunities and new openings brought by Palombo, the new dockyard owners.
Returning to the financial and economic sector, Dr Mangion said that Malta had suffered more in the economic sphere than in the financial one as a result of the international crisis.
Despite the crisis, local banks had made considerable profits and other financial sectors, such as insurance and hedge fund operations, had continued to increase. Statistics indicated this was a growing sector. This was also manifested by the fact that five per cent of private sector employment was equivalent to two thirds of the workforce and that number was increasing. This meant a greater demand for skilled and multi-skilled workers.
Dr Mangion said tax revenue from the financial sector amounted to €120 million and it was crucial to maintain an element of competitive tax. He stressed the fact that the Maltese government needed to be careful and stand its ground, as there was currently an attack in EU countries in this sector.
Caution was needed as Malta’s smaller economy would suffer more than other EU members. The main sources of income for Malta were services, exportation and tourism.
Referring to the Central Bank Governor’s report published on Monday, Dr Mangion said that inflation in 2009 had been the highest in the eurozone, and steps needed to be taken to arrest it as this would impact on foreign investment.
Productive foreign investment made for added value. Dr Mangion claimed the inflation rate in Malta had increased due to the administrative burden, which was among the highest in the EU.
Malta’s share of services and product exports had dwindled and economic enlargement was the result of internal consumption. Only exports allowed for sustainable enlargement.
Dr Mangion said the financial sector was important for the Maltese economy, and therefore one should protect it for it to flourish. Other countries, such as Luxembourg, which depended highly on their financial sectors, strengthened administrative efficiency and competitiveness.
Meanwhile, the government needed to control Malta’s rate of inflation. Since the financial sector was increasing, one should increase its efficiency.
He proposed the setting up of a specialised unit to foster personnel training and training modules for children interested in the financial sector.
Dr Mangion said that Malta was not affected by the financial crisis, which was also characterised by fraud. But Malta was affected by the financial crisis’s secondary effects.
Certain states in Germany had enacted legislation which would make German companies’ operation in Malta not that attractive.
Concluding, Dr Mangion said that, while Malta was an EU member state, it was still a country that should look after its own interests. It had to create its own competitive edge and needed to react immediately to training needs, educational levels, administrative costs and inflation, all of which had an impact on the financial sector.
Robert Arrigo (PN) said both sides of the House were transmitting the right message to investors when they agreed on the Bill, which would help reduce illegal individual borrowing and lending.
The banking sector had had 5,676 employees up to last year, and 25 credit system institutions had been registered since 2006.
Loans and advances in the domestic banking sector had increased by five per cent. Deposits had totalled €10 million last year. Security and investment services and collective investment services had also increased in 2009.
There was great interest in the insurance sector because it had increased substantially during the last six years, with the number of companies in the sector increasing from eight to 45. Gross premia had generated €650 million in 2008. All this showed that Malta was ready to do business with others in this sector.
Winding up the debate, Dr Azzopardi said that, over the last five years, the domestic banking sector had increased its share in the economic sector by 41 per cent. This showed that Malta’s entry into the EU had been crucial. Referring to the Central Bank’s annual report, he said that Malta’s rate of inflation was one of the lowest in the eurozone.
Companies which were working on a three- or a four-day week because of the recession had resumed a normal working week, although they still needed support. Malta was the first among EU states to be officially declared as being out of the recession. This was the result of the government’s direction.
The situation was still fluid, and sensitive and external factors such as Iceland’s volcanic ash could negatively affect the tourism sector.
The Bill was unanimously given a second reading and passed through committee stage.
At one point, Dr Mangion asked the government to keep an eye on bank charges as sometimes these were unreasonable. Dr Azzopardi said that the MFSA had some 400 annual complaints, of which 50 concerned banking practices. All were investigated and, where the consumer was right, talks had been held between the MFSA, the Malta Bankers Association and the bank concerned to seek redress.