Banking in Malta
Malta’s international banking centre has been gaining considerable ground in establishing itself as a finance hub in the Mediterranean region. Over the past decade or so, the banking sector has transformed itself from one having four retail banks serving the local population to a reputable international banking centre.
This influx, which includes several leading banking groups, has added dynamism to Malta’s thriving financial services industry, and the expectation is that many other banking institutions will follow this lead.
Scope of Banking Activities
As growth continues, so do the range of banking products and services being offered in and from Malta. These include retail banking, private banking, trust business, investment banking, trade finance, treasury operations and syndicated loans.
Malta joined the European Union in May 2004, and successfully adopted the euro in January 2008. This inspires confidence, and also allows operators to have easy access to European markets. At the same time, the island’s strategic location in the centre of the Mediterranean makes it a convenient gateway to North African markets, and an ideal base for financial institutions wishing to tap into the ever-increasing wealth being generated in the region.
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A Robust Regulatory and Legislative Framework
The Malta Financial Services Authority (MFSA) is the country’s single regulator for all banking, investment and insurance business. Its high regulatory standards are modelled on EU legislation and best practice, whilst at the same time allowing for the flexibility necessary in a modern and dynamic banking environment, without imposing undue bureaucratic burdens on operators.
Banking business in Malta is regulated by the Banking Act. A “Guide to the Authorisation of Credit Institutions in Malta” can be accessed on the MFSA’s website www.mfsa.com.mt, on which the Authority has also posted details of the relative procedures and requirements for authorisation, as well as all the applicable Banking Rules on capital requirements, large exposures, own funds, etc.
Closely supervised by the MFSA, Maltese banks remain well capitalized, and have high liquidity ratios as well as sound, well diversified portfolios. Their funding is sourced mainly from customer deposits, and their prudent business model has enabled them to emerge largely unscathed from the turmoil of the 2008 banking crisis, as evidenced by the World Economic Forum’s October 2008 report on global competitiveness, which ranked Malta amongst the top ten countries insofar as soundness of the banking system is concerned.
Customer confidentiality is adequately safeguarded by the provisions of the Banking Act, the Professional Secrecy Act and the Data Protection Act, whilst the 3rd EU Directive on the Prevention of Money Laundering and Funding of Terrorism has been fully transposed into Maltese Legislation to guard against abuse of the financial system for criminal purposes.
Investment services business is likewise underpinned by the Investment Services Act and the Financial Markets Act, which transpose the provisions of the Markets in Financial Instruments Directive (MiFID) into domestic legislation.
An Advantageous Business Domicile
Apart from its ideal geographical location, the benefits of EU membership and euro adoption, and a prompt, efficient and accessible Regulator, Malta offers many other advantages as a domicile for international banking business.
The island has a good source of well-educated people and a cadre of qualified professionals in law, accounting, taxation, IT and other disciplines required by the financial services industry. The workforce possesses good language skills – English is an official language – and a positive work ethic prevails.
Costs are also measurably lower than in other European centers, with salaries averaging one-third to one-half of the EU Level. Other operating costs are likewise competitive, and excellent office space and housing are available at reasonable rents.
The Maltese fiscal regime has also been one of the main drivers in creating an attractive investment environment. Malta’s tax system has been deemed by the European Commission to be compliant with EU non-discrimination principles, and with proper planning and structuring, investors can achieve considerable fiscal efficiency using Malta as a base.