Our financial services industry has the potential of becoming a much stronger engine of our economy. Although progress is gradually being made on some fronts of this industry, there is scope for much more significant achievements if all interested parties focus on the critical success factors we need to become a leading financial services centre.

The offshore services side of this industry can grow substantially if we identify the issues that are keeping us back. Let me just mention briefly some of these issues which I hope will be considered by both the regulators and the operators in this industry.

Malta is in competition with a number of well-established financial services centres that specialise in a limited number of services, but with tax benefits being a common characteristic. Thus Luxembourg is best known for fund management services, Bermuda for offshore insurance, and Jersey for wealth management and trusts.

We need to revamp our strategy so that we can then target specific niches in this industry and market our services directly to potential operators. We should not aim to be “all things to all men”. Captive insurance could, for instance, be our specialisation as there already is a strong basis to build on if we decide that this is the way to go.

The small size of our island and the limited resources also presents us with a formidable challenge. We need to build a critical mass of competencies in growing areas in the financial services sector like trusts and pension fund management if we want to establish an unassailable reputation in these fields. Generic qualifications in financial management, accounting, banking and law is not enough for our practitioners to make their mark in this very competitive market. We need to attract local and foreign specialists in the areas of services we want to excel in.

The recent signing of the double taxation agreement with the US is a move in the right direction because operators will no doubt take this in consideration when considering which financial centre offers the best prospects for growth.

Another element we need to address is the designation of a specific area on the island that is clearly identified as the hub of our financial services activities. While the size of our island and the good telecommunications network make the whole of Malta ideal for offshore financial services activity, the concentration of offices for offshore operators in one area will help the branding of Malta as a centre of excellence internationally.

The financial services centre of Dublin, for instance, is an excellent example of the advantages of having a smart and prestigious location for such an industry where a slick image is so essential to inspire confidence.

The financial services activity that caters for the local market is also showing signs of growth and it is inevitable that in the next few years the local banking scenario will be very different from what it is today. The dominance of the local market by BOV and HSBC is still a reality, but this is definitely changing.

New players are entering the market and now that the euro is the local currency more operators will want a slice of the cake. It is too speculative to predict which will be the third force in Maltese local banking in the next 10 years, but there will undoubtedly be a strong third bank.

HSBC’s recent appointment of a new CEO will enable this bank to keep renewing itself and hopefully contribute more to the growth of the real economy in Malta. BOV, which announced that its results would be significantly affected by the turmoil in the international debt markets this year, needs to reinvent itself if it is to remain the dominant force it has always been.

The smaller banks have the option of either continuing to explore niches that exist in the local market, or aim for growth by spreading their branch network and their range of services. The international credit squeeze may not affect local banks as much as it has affected other European and US banks, but prudent management policies will always be important if our banking system is to continue to be robust.

I see a bright future for our financial services sector, as long as we do not rest on our past success and are ambitious for the sake of our country which has so much to benefit from by becoming a vibrant, adaptable, and reputable centre from where to do business.