Malta’s attractive economic landscape continues to draw an increasing number of multinationals to its shores, while its ingrained spirit of innovation has seen the financial services industry expand both geographically and into new sectors, with pension funds the latest target.
Establishing itself in the midst of a global economic downturn in 2007 merely served to bolster Malta’s then-burgeoning financial sector. The backdrop of the crisis endowed an underlying innovation to its approach, which today is helping open up markets far beyond the EU. That creativity, coupled with the country’s political and economic stability and highly-regarded regulatory framework, has helped Malta avoid the worst of the fallout and concentrate on growing steadily in size and credibility, paving the way for a prosperous future.
“We were the last to go into a brief recession,” says Kenneth Farrugia, chairman of FinanceMalta, the non-profit, public-private entity that markets the sector’s financial services industry and champions its critical success factors internationally. Malta was also one of the first countries to emerge from the downturn, relatively unscathed and with its robust banking sector intact.
Year-on-year growth means that the sector now represents a healthy 12 percent of Malta’s GDP, employing over 10,000 people. But FinanceMalta is far from resting on its laurels. To maintain progress, the organisation has been active promoting the country outside of the EU, specifically to finance hubs such as New York and Dubai. The move represents not just a desire to expand geographically, but into the realms of new financial areas and products, including international pensions and Islamic finance, as well as international funds.
“It is a testament to Malta that this is where we have decided to build our business”
Bethell Codrington Global head of pensions at TMF GroupTweet This
This expansion is the obvious next step for the country, which has put itself at the leading edge of financial services, while finding solutions to regulations and creating open dialogue with operators at home has led to new avenues of business. Earlier this year, the retirement pensions act came into force. The culmination of legislation to offer tax relief on HMRC-recognised and UK-registered pensions for non-UK residents, it helped to underline Malta’s mantra as the ‘jurisdiction of choice’ for international pensions.
With its pension schemes undergoing an annual independent audit, coupled with its highly skilled, English-speaking workforce, Bethell Codrington, global head of pensions at TMF Group and chairman of MARSP, agrees with the catchphrase. “When looking at jurisdictions in which to manage its business, TMF International Pensions has the choice of some 80 countries,” he said, “but it is a testament to Malta that this is where we have decided to build our business.”
For multinationals, Malta’s ability to centralise the administration of complex networks of pensions represents an enormous streamlining opportunity. Since the country issued the first licenses to retirement scheme administrators in 2010, the pension scheme business has boomed, and today it manages an estimated €5 billion in assets, all passing through strict licensing and legislation.
“While encouraging and promoting Malta’s financial institutions, we ensured that strong regulatory measures are in place so as to avoid any unnecessary risks,” says finance minister Edward Scicluna. “We are constantly taking the necessary measures to further enhance our
As the island continues to develop, what was once an industry heavily skewed towards the UK market now has a global reputation as a valuable financial centre in Europe. In the decade since joining the EU, Malta has sharpened its own competitive edge by being able to implement new directives quickly and look forward, while many states continue to wrestle with fallout from the global crisis.
According to Joseph Bannister, chairman of the Malta Financial Services Authority, the key to the success of Malta’s financial services industry lies in breaking new ground within the constraints of EU-wide regulatory uniformity. “It is a challenge, and in all instances and within all structures, the funds have to follow European regulation.” But this is Malta, renowned for its creativity. By setting up compliant structures that provide flexibility to operators to set up attractive vehicles for their clients’ assets, the sector has once again shown its flair for innovation through regulation.