The benefits of a well regulated environment

Looking at Malta’s fortunes as a financial centre over the last 15 years, do you feel that accession to the EU was the turning point? EU accession in 2004 was indeed a turning point for financial services in Malta. It provided the country’s legal and regulatory framework, which had been transformed to meet EU criteria during the previous 10 years, with instant recognition. Five years down the line Malta has also been confirmed as the EU member state with the best record when it comes to the implementation of internal market directives, and hence one of the most highly integrated economies in the EU looking at it from this aspect. On the business level, the ‘single passport’ has allowed Malta to transform its financial services industry from one that was mainly geared towards the local market into a truly European finance centre for cross-border business. The size of the fund industry has grown beyond recognition while the volume of insurance business has already trebled as a result. How important do you consider the wealth management arena in Malta’s expansion as a financial centre? While in the initial phases the orientation of international business tended to be institutional in nature, the rapid expansion that started taking place on the service provision side in the last three years has extended into the wealth management arena. There are a number of banking groups providing high net worth individuals with portfolio management services through local subsidiaries, while the number of fund administrators servicing professional investor funds has been growing with the recent arrival of TMF, Apex, Praxis, Custom House and SGGG Fexco. Trust management has also been growing at an impressive rate with the number of authorised trustees now over seventy in number. These include a number of international operators such as the Butterfield Group, Dominion, Dixcart, Maitland and BSI among others. Several hedge fund administrators and trust companies have moved their operations from Dublin and the Channel Islands to Malta. In your discussions, did you find that cost or regulation was the main issue? Although costs would have been an important factor particularly in view of the excellent human resource coming through our university and training institutions, the major driver seems to be the client investor side. As Malta’s reputation as a stable and serious jurisdiction continues to grow, so too is the attention it is being given by the quality end investor. I would like to believe that the quality of the regulation here has something to do with it! The forthcoming EU directive on hedge funds is likely to hugely disadvantage Carribean centres and play into the hands of EU centres with expertise in fund support services. Is there a significant opportunity for Malta in the hedge funds world? Despite the controversy that the proposed EU directive on alternative investment fund managers has been met with and the great number of issues that have now got to be ironed out in the various EU forums, it is clear that a measure of regulation of hedge funds would be a good thing for the industry. Malta’s experience shows that having a licensing and supervisory regime for hedge funds has its benefits. I am sure that an appropriate solution will be found and that everyone – whether it is an EU, Caribbean or other jurisdiction – stands to benefit if we all pull on the same rope. The ultimate aim should be that of ensuring a level playing field in regulatory standards, thus giving investors more peace of mind. The attack by the G20 and US authorities on offshore financial centres and Swiss banking secrecy may have wide ranging effects on capital flows. Where does Malta stand in the new order of international financial centres? While it has always striven to provide investors with a fair and tax efficient legal framework, Malta has long adopted a policy of full transparency and tax certainty in these matters. Malta has been engaged with the OECD in the latter’s fight against harmful tax competition since the late nineties. Since then its tax system has been able to withstand the most stringent economic tests both at EU and international level. Malta also featured on the OECD White List published following the conclusion of the G20 summit earlier this year. Professor Joe Bannister, Chairman, Malta Financial Services Authority