June 23, 2023
In Malta, the financial sector has grown consistently and rapidly during the past few decades and in particular since membership in the European Union (EU) in 2004. In terms of Gross Value Added (GVA), the industry contributed €1.24 billion to the Maltese economy in 2021 and has grown at a compound rate of 8.3% since 2010, with a 2021 sectoral share of 9.1%, making it the sixth largest sector in the Maltese economy.
To date Malta has over 500 investment funds with over €17 billion in assets under administration domiciled on the island, with Maltese investment management companies overseeing over 200 additional funds domiciled in other jurisdictions having a net asset value of over €5 billion.
Based on figures from the Malta Financial Services Authority (MFSA), the country has 21 credit institutions, a total of 52 financial institutions of which 38 provide payment services and 24 of which are authorised to issue electronic money.
On the insurance front, Malta has 71 active insurance licences, including 17 Protected Cell Companies with 73 protected cells and 10 enrolled insurance management companies. The Maltese jurisdiction has over 550 practising insurance intermediaries as either managers, agents, brokers or tied insurance intermediaries.
Malta also hosts extensive business service providers, including over 300 registered Company Service Providers and a representation of all of the top international audit and advisory firms as well as a strong cadre of local, internationally affiliated law firms with specialist departments relating to financial services.
The Malta Financial Services Advisory Council (MFSAC) was formed in 2021 in part to develop a long-term strategy for the Financial Services sector in Malta: thanks to a plan which includes 175 concrete initiatives, this ambitious vision will now transformed in reality and Malta will seek to significantly and measurably improve its service delivery and brand experience against key indicators by leveraging a strengthened and reinvigorated foundation as a Financial Services destination.
The key drivers that will support such strategy are:
1. Speed: delivered through efficiency permeating all aspects of servicing, licensing, regulating, implementing and supporting, as well as bolstering the underlying technology systems and infrastructure
2. Standards: innovative legislation, clarity and defined standards for all agencies and regulators, consistency in compliance and handling of irregularities, and transparency in all areas
3. Simplification: logical and standardised business processes that are technology enabled for ease of use, seamless workflow and aligned entities
4. Specialisation: identifying specific areas where Malta can have a competitive advantage and developing an ecosystem around fully servicing these areas
5. Sustainability: the strategy is one that the island, including Government, industry and all stakeholders, are committed to deliver on and realise. It needs to ensure that it is both realistic, in terms of recognising
There are key strategic thrusts that underpin this change effort and are at the forefront of each of the key initiatives, supporting the strategy, regardless of sector or focal point:
STREAMLINE REGULATION: This thrust consists of an effort to align and integrate to the largest extent possible Malta’s regulatory institutional architecture across the MFSA, Malta Business Registry (MBR) and Financial Intelligence Analysis Unit (FIAU) to facilitate timeliness, consistency, proportionality and certainty across all processes, including approval, compliance, supervision, regulatory adherence and enforcement. In addition, sector specific guidance from the regulators will also be streamlined to enable a more consistent approach throughout each sector.
STANDARDISE PAYMENTS: Leverage work already initiated on the Central Bank Payments Hub to create a more efficient national system of money transfers, with greater transparency over end-to-end funds flows, increasing security and simplifying linkages with other international payment hubs and systems.
CONSOLIDATE IDENTITY: At a time of heightened security and anti-money laundering regulation, it is essential for Malta to facilitate due diligence processes via a consistent and foolproof identity system that captures shareable data, ensuring consistency and a single point of reference to be shared by entities doing business in Malta with subject persons.
MODERNISE TAXATION: Use technology to design a tax system better able to limit abuse and facilitate effective enforcement, with a focus on simplification and driving compliance. Identify further opportunities for simplified and reduced tax rates to drive up participation and develop a culture of voluntary compliance.
REFORM FINANCIAL LAW: A critical requirement is the transformation of the legal framework relating to Financial Services and the renewal of existing practice to make it consistent with today’s economic and commercial requirements, including corporate, commercial and bankruptcy law, and the administrative enforcement framework.
BUILD TALENT: Talent is an essential underpinning for success, especially given the tight labour market and the skill base required by the industry. Solving this challenge requires both short-term and longer-term solutions with active roles for Government and the private sector.