The Evolution of Malta as a Financial Services Centre
The financial crisis turned the economies of many countries upside down. Greece was in such a bad state that it literally threatened the Euro’s very existence. Spain, Portugal, Italy, Ireland and Cyprus had grievous problems of their own. Yet, lying quietly in the middle of the Mediterranean Sea, the island of Malta showed great resilience to the crisis.
An IMF report confirmed that Malta’s financial sector withstood the global financial turmoil quite well. The conservative policies adopted by Maltese financial institutions, especially in the lending policies of banks, safeguarded Malta’s financial stability. The financial crisis firmly established Malta as a European hub of commercial excellence.
Malta ranked 34th out of 133 countries for financial market sophistication in the World Economic Forum’s 2009-2010 Competitive Index. Furthermore, its banking system was rated 13th soundest in the world.
The question is: why did this happen? Why did Malta’s financial sector not only survive but thrive, when bigger countries with more resources failed? It all happened gradually, but no one today can question the success and stability of Malta’s financial sector.
In fact, just a few decades ago, Malta’s financial sector was inexistent. However, having served as a naval base to so many European powers, especially during the British era, Malta was no stranger to the role of a commercial hub.
In 1994 and 1995 new financial services laws were introduced. These included legislation governing financial services businesses. Bringing Maltese legislation with European standards was the biggest challenge. A mammoth step was made when the Malta Financial Services Authority (MFSA) was set up in 2002. This fully autonomous institution took over all supervisory functions and is now the single regulator for financial services in Malta.
The key moment was certainly Malta’s accession to the EU in 2004. Investment opportunities on the island soared. Investment in Malta even benefitted from passporting rights as UCITS schemes can be registered in Malta and passported to any EU country.
There are many reasons why many are choosing Malta’s financial services centre: • Security • Cost-effectiveness • Encouragement of Foreign Investment • Commendable Workforce
Security is a much sought benefit. And the financial sector in Malta is sound. The MFSA’s membership in the European Security and Markets Authority (ESMA) guarantee a regulatory legislative framework that inspired confidence in investors. Furthermore, the Euro adaptation in 2008 removed the exchange trade risks.
Malta’s low cost environment and its ability to offer a cost-effective and tax-efficient base for financial services operators is a key factor. Its financial sector is backed by approximately 70 double-tax agreements.
The Maltese Government has keenly encouraged foreign investment. Favourable policies for an open economy and direct investment have been supported by various Maltese governments.
The Maltese workforce is commendable. It is formed by a large pool of professionals full of motivation to work and with brilliant work ethic, and whose salaries are lower when compared to other European countries.
And of course, it goes without saying that the enviable climate that Malta possesses, its strategic location right between Europe and North Africa, and its first-rate communications technology infrastructure, are further reasons why many are choosing Malta’s financial services centre.