Malta’s role as a financial services centre has often been touted as a pillar of the local economy and this sector has been supported with particular attention to ensure that it flourishes exponentially. This effort has particularly paid off with Malta achieving increasing recognition on an international level and a series of presentations made recently by FinanceMalta chairman, Kenneth Farrugia, it was explained that Malta’s financial services have continued to grow, registering year-on-year growth despite the financial crisis.
Underpinning that growth as a financial centre is the investment fund, insurance management and the banking and trusts sectors that have been attracted to these shores, a comprehensive legal and regulatory framework and a competitive fiscal regime. As a result, Malta’s financial services industry is set to grow again in 2011 where its GDP contribution is expected to rise to 12% with employment for more than 8,900 people.
The specialisation of this sector is also being aided by the authorities and a case in point is the law passed recently with the aim of attracting top level personnel to administer funds which are relatively new to Malta. In Parliament, the Finance Minister explained the importance of growth in the various areas of the financial services sector, and expressed the need to continue investing in education and attracting more young people to take up jobs in the sector.
Nevertheless, uttermost care is required to safeguard the excellent image that Malta’s financial services sector has garnered throughout the relatively short period of time. Viewing the sector from a holistic point of view the perceived image is untarnished but two particular incidents over the past few months require delicate handling to ensure that this image remains intact.
The most recent incident, uncovered a few weeks ago, was a Danish scheme which saw around €14m being lost by investors, of which around €6m were invested by Maltese individuals or companies. Investigations are in their initial stages both in Denmark and Malta, with the Malta Financial Services Authority doing its part.
Another incident concerns the judicial protests filed by several investors against Bank of Valletta, Valletta Fund Management, Valletta Fund Services and other persons over alleged irregularities in the administration of the La Valette Multi Manager Property Fund. This particular case has dragged on for several months while the Malta Financial Services Authority carries out its investigation. The first inquiry was completed earlier this year and the findings presented to Bank of Valletta and its subsidiary companies involved in the fund. The authority is also expected to investigate other claims depending on the replies by Bank of Valletta, Valletta Fund Management and Valletta Fund Services.
The crux of the issue, however, is the potential damage that the financial services sector could incur while these investigations are ongoing. The alleged claims by investors remain unconfirmed until the results of the investigations are made public to confirm any wrongdoing or otherwise.
Perhaps the authority will argue that prudence is required due to the sensitivity of the case and the rights of the shareholders involved but for the sake of preserving the integrity of the financial services sector, the Malta Financial Services Authority has to be somewhat more forthcoming in its approach to put minds at rest.