Banking on a Safe Future

Malta’s economy has certainly been internationalised in a relatively brief time. An open and booming economy, it’s banking in Malta and the financial sector which has remained buoyant and strongest, suffering no economic hangovers from the financial crisis. Maltese banks are now considered among the safest and best-run financial institutions in the EU being rated repeatedly as the 10th soundest banking system in the world.

Exante’s Communication Director Patrick J O Brien interviewed John Cassar White, ex-Chairman of Bank of Valletta (BOV), for a The Times UK supplement on ‘Why Malta’. Responsible for steering BOV into significant growth during his time in office, Cassar White presently acts as consultant to BOV and sits on the board of directors for numerous entities.

Banking on a Safe Future
John Cassar White

You stepped down as BOV chairman last year after spending most of your career serving the bank in various senior roles. How would you presently describe the banking in Malta and how it has evolved?  Would you agree, for instance, that the financial turmoil and consequent credit crunch faced by most EU countries was not so visible in Malta, due to the fact that the banking system is primarily funded through a stable domestic deposit base?

The banking sector in Malta has two aspects. The local banks cater for the local economy mostly by providing credit facilities to service industries and also manufacturing. The Maltese economy has been performing very well in the last few years partly thanks to the availability of cost-effective credit from the local banking community. Tough challenges face the industry as regulation is becoming tighter. Banks have to keep updating their business model to ensure that their profitability is sustainable in the long term. I believe that local banks should stick to the conservative banking policies that helped them avoid finding themselves in trouble when the financial crisis hit international banking.

The banks that are mainly engaged in serving overseas clients have little impact on local businesses. But they also face major challenges as anti-financial crime regulation is becoming very intense. It is important that all those in the financial services sector do what needs to be done to safeguard Malta’s reputation as a sound financial services centre.

You have reiterated the fact that compliance and regulatory requirements are constantly evolving, and in the process becoming more onerous for the banking industry? Can you explain this?

The financial crisis of 2007 made it mandatory that taxpayers should no longer be expected to bail out banks that were too important to fail. EU political leaders mandated the European Central Bank to devise processes that would ensure that banks are well managed at all times and that they had sufficient capital for any possible downturn in their business. I do not believe that this regulatory tightening will end any time soon… certainly not in the EU. Long-term sustainability will be the guiding principle of all well-manged banks in the EU and the US for decades to come.

The increase in inward FDI in all productive sectors of our economy is boosting investment in Malta, positively impacting economic growth and employment; is this the direct result of this Government’s commitment to make Malta more attractive to FDI?

Malta has been very successful in attracting a number of service industries from other countries. Financial services and iGaming are just two examples. I believe that the time has come to consolidate these industries while attracting new industries in order to diversify our economic base. We need to concentrate more on the quality of the investment we attract and less on the sheer volume. This will make our economy more resilient if and when a particular sector encounters some difficulties.

For businesses like EXANTE, which is based in Malta, how important do you think it is for banks to be more open to FDI and entrepreneurs on the island?

It is the very essence of banking for banks to support their clients in their endeavours to grow. Today, a number of foreign-owned companies are operating in Malta and local banks need to understand the business models of these new clients in order to give them the kind of financial support that they need. Once local banks complete their due diligence of new clients, whether they are local or foreign, they should ensure that their service is effective and competitive. I believe that there is still room for improvement in this area.

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