Malta’s financial services sector grew by 9.5% in 2018, according to the latest MFSA annual report tabled in Parliament on Wednesday.
The MFSA said that, despite a challenging and highly competitive environment, it registered 144 new entities in 2018, “as more businesses sought to make Malta their jurisdiction of choice, bringing the number of entities licensed by the MFSA up to over 2,300.”
When taking the ancillary services linked to the financial services sector into account, the sector now contributes 11.6% of Gross Value Added (GVA), making it one of the highest-ranking contributors to the Maltese economy.
At the end of 2018, the sector employed more than 12,000 people, 1,000 of which were new jobs generated last year. This brings the share of local employment within the financial services sector up to 5.3%, almost double that recorded for other member states of the European Union, which stands at 2.9%.
According to the report, the compensation of employees in the sector rose from about €224 million in 2009 to €395 million by 2018.
Financial Services - 2018 in numbers
In 2018, deposits within domestic banks grew by 6.1%. These were mainly concentrated in current account deposits, with the share of such deposits amounting to around 70.3%.
The amount of bank loans and advances grew for domestic banks: 6.3% for Core and 18.0% for non-core.
Total assets of Securities and investment services sector in Malta grew by 8.3%, amounting to €11.7 billion in 2018.
Corporate bonds trading reached €93.7 million in 2018, up 22.5% from 2017.
The aggregate net asset value of Funds Domiciled in Malta totalled to €11.7 billion, up 8% from 2017.
Locally managed assets of non-Malta domiciled funds grew by 9.1%, amounting to €24 billion.
The number of retirement pension schemes grew by 11.5%, with a total of €5.35 billion in assets.
During the year under review, the authority investigated 63 breach cases investigated and issued 7 public warnings.
11,000 hours of training were provided to MFSA employees, 19% more than in 2017. The MFSA issued 15 consultation documents and 7 feedback statements to industry and the general public.
It also published over 600 regulatory notifications and corrected 26 adverts. The authority also revised promotional material published by 9 investment firms, 5 insurance intermediaries and 12 credit and financial institutions to safeguard consumers.
Key elements of MFSA’s activity
In 2018, the authority took regulatory action against Pilatus Bank and Satabank plc for prudential and AML/CFT breaches.
It carried out a major restructuring exercise to strengthen the Authority’s organisational capability and prepare it for future challenges.
The Virtual Financial Assets (VFA) Act came into force in November 2018 which meant that Malta was a trailblazer in the world of distributed ledger technologies and digital assets.
The MFSA worked closely with the International Monetary Fund (IMF) on a Financial Stability Assessment Programme (FSAP) on Malta, which found that the banking system remains resilient even under severe stress test scenarios.
It signed a Memorandum of Understanding (MoU) with the Financial Intelligence Analysis Unit (FIAU) to enhance collaboration and improve the intensity of AML/CFT on-site inspections.
Mystery shopping exercises were carried out to gain first-hand evidence of the retail customer experience.
The Registry of Companies was demerged from the MFSA, allowing the authority to focus better on its regulatory role and duties. The Registry has established itself as a standalone agency and is now known as the Malta Business Registry (MBA).
CEO's comments
MFSA Chief Executive Officer Joseph Cuschieri explained that the Authority’s work, during 2018, focused on four specific areas: a restructuring and reform exercise in the organisational structure with the express aim of strengthening the Authority’s governance, culture and conduct; combating money laundering and terrorist financing; embracing technological innovation; and re-positioning the authority as a leading employer.
Cuschieri remarked that, in view of the wide-ranging impact of money laundering and terrorist financing, an issue which has international ramifications, “the Authority will be strengthening its supervisory engagement, with the purpose of achieving our statutory objectives better, and this will, in turn, safeguard the reputation of Malta as a jurisdiction of choice for financial services. Whilst supervisory engagement shall be enhanced across the board, emphasis shall be placed on AML/CFT Supervision, in line with our AML/CFT Supervisory Strategy”.
PS Schembri’s reaction
Parliamentary Secretary for Financial Services, Digital Economy and Innovation Silvio Schembri expressed satisfaction over the results published in the MFSA’s annual report.
“Despite the fact that last year proved to be challenging for the financial services sector on an international level, Malta managed to consolidate and further grow this industry in a very significant and notable manner. In fact, as the results show, the financial services sector employed more than 12,000 people meaning that 1,000 new jobs were created last year”, Silvio Schembri said.
He explained that these successful results happened due to a restructuring process, which was set in motion 2 years ago within the Malta Financial Services Authority, which is transforming itself into an agile and dynamic regulator to reflect and adapt to today’s reality.
“As part of the continuous restructuring plan and the reform within the financial services sector, in the coming weeks, a consultative body will be launched which will serve as the forum of discussions between the government, the regulator and the industry to formulate a 10-year strategy for our financial services sector. Our ultimate aim is to make Malta a centre of excellence for the financial services sector”, concluded Silvio Schembri.