Malta Financial Services Authority Malta as a finance centre: A Model Of Stability in a Changing...

Malta Financial Services AuthorityMalta Financial Services Authority

Malta as a finance centre: A Model Of Stability

in a Changing Landscape

MALTAMALTAFramework for the Development of Financial Services

Primary LegislationPrimary Legislation• Banking ActBanking Act• Financial Institutions ActFinancial Institutions Act• Insurance Business ActInsurance Business Act• Insurance Insurance Intermediaries ActIntermediaries Act• Investment Services ActInvestment Services Act• SpecialSpecial Funds Act [Retirement Funds Act [Retirement

Pensions Act]Pensions Act]• Trustees and Trusts ActTrustees and Trusts Act• Malta Financial Services Authority Malta Financial Services Authority

ActAct• Central Bank of Malta ActCentral Bank of Malta Act

Financial Services LegislationFinancial Services Legislation

Financial Services Legislation

Supporting Legislation:-Supporting Legislation:-

• Companies (includes Limited Companies (includes Limited Partnerships) ActPartnerships) Act

• NettingNetting upon upon Insolvency Act Insolvency Act

• Securitisation ActSecuritisation Act

• Prevention of Financial Market AbusePrevention of Financial Market Abuse ActAct

• Professional Secrecy ActProfessional Secrecy Act

• Prevention of Money Laundering ActPrevention of Money Laundering Act

Regulation

Malta Financial Services Authority (MFSA)Malta Financial Services Authority (MFSA)

• Single regulator for financial services• Regulates banking, financial institutions, insurance

companies, investment services companies, securities, stock exchanges and listing, trust management companies, pension schemes

• Autonomous public institution, self-funded

Avoidance of Prescriptive Regulation to Avoidance of Prescriptive Regulation to allow promoters the flexibility to operateallow promoters the flexibility to operate

Main Objectives of the MFSA

• to regulate, monitor and supervise financial services to regulate, monitor and supervise financial services in Malta; in Malta;

• to promote the general interests and legitimate to promote the general interests and legitimate expectations of consumers of financial services, and expectations of consumers of financial services, and to promote fair competition practices and consumer to promote fair competition practices and consumer choice;choice;

• to advise the Government generally on the to advise the Government generally on the formulation of policies in the field of financial formulation of policies in the field of financial services, and to make recommendations to services, and to make recommendations to Government as to any action which in the opinion of Government as to any action which in the opinion of the Authority, it would be expedient to take in the Authority, it would be expedient to take in relation to matters in respect of which the Authority relation to matters in respect of which the Authority has such duties;has such duties;

MFSA - StructureMFSA - Structure

MFSAMFSA

Board of GovernorsLegal & Int Affairs Unit

ChairmanChairman

Co-ordination Committee

Supervisory CouncilBoard of Management

and Resources

Director GeneralDirector General Chief Operations OfficerChief Operations Officer

Company Registry

Registrar of CompaniesRegistrar of Companies

Board SecretaryBoard Secretary

Functions – Board of Functions – Board of GovernorsGovernors

• Board of Governors is composed of seven Board of Governors is composed of seven members including the Chairman. Chairman members including the Chairman. Chairman and Governors appointed for a period of up and Governors appointed for a period of up to five years and their appointment may be to five years and their appointment may be renewed for further periods of five years;renewed for further periods of five years;

• Board of Governors sets policy;Board of Governors sets policy;

• The Legal and International Affairs Unit The Legal and International Affairs Unit acts as Secretary to the Board of Governors acts as Secretary to the Board of Governors and the Co-Ordination Committee.and the Co-Ordination Committee.

Composition of the Supervisory Composition of the Supervisory CouncilCouncil

Remit of the Supervisory Remit of the Supervisory CouncilCouncil

• Art 10. (1) of the MFSA Act states:-Art 10. (1) of the MFSA Act states:-

– The Supervisory Council shall be The Supervisory Council shall be responsible for the approval of and for responsible for the approval of and for the issuing of licences and other the issuing of licences and other authorisations, for the processing of authorisations, for the processing of applications for such licences and applications for such licences and authorisations, and for the monitoring authorisations, and for the monitoring and supervision of persons and other and supervision of persons and other entities licensed or authorised by the entities licensed or authorised by the Authority in the financial services Authority in the financial services sector.sector.

Board of Management & Board of Management & ResourcesResources

MFSA Act Art 11 statesMFSA Act Art 11 states ““.....responsible for carrying out the day-to-day management and finances of the .....responsible for carrying out the day-to-day management and finances of the Authority, including business development and ancillary services and for the Authority, including business development and ancillary services and for the general co-ordination of the Authority’s administrative affairs and shall be general co-ordination of the Authority’s administrative affairs and shall be composed of the persons responsible for such activities as may be designated by composed of the persons responsible for such activities as may be designated by the Board of Governors”the Board of Governors”

Remit - Board of Management & Remit - Board of Management & ResourcesResources

Co-Ordination CommitteeCo-Ordination Committee

Chief Operations Officer - Board of Development and

Resources

Membership of International Membership of International OrganisationsOrganisations

• New EU Supervisory Architecture:-New EU Supervisory Architecture:-

• European Securities & Markets Authority (ESMA)European Securities & Markets Authority (ESMA)

• European Banking Authority (EBA)European Banking Authority (EBA)

• European Insurance and Occupational Pensions European Insurance and Occupational Pensions Authority (EIOPA)Authority (EIOPA)

• International Association of Insurance Supervisors International Association of Insurance Supervisors (IAIS)(IAIS)

• International Organization of Securities Commissions International Organization of Securities Commissions (IOSCO)(IOSCO)

• International Organisation of Pensions Supervisors International Organisation of Pensions Supervisors (IOPS) (IOPS)

Memoranda of Understanding Memoranda of Understanding currently in force currently in force

MFSAMFSA Human Resources

Number of EmployeesNumber of Employees

Males and FemalesMales and Females

Employee Age BracketEmployee Age Bracket

Qualified PersonnelQualified Personnel

International Evaluation International Evaluation

• FATF – Financial Action Task ForceFATF – Financial Action Task Force (1999)(1999)

• OECD – Organisation for Economic OECD – Organisation for Economic

Co-operation and DevelopmentCo-operation and Development (2000)(2000)

• Council of Europe Money Laundering Council of Europe Money Laundering CommitteeCommittee (2001) (2001)

• EU Peer ReviewEU Peer Review (2002) (2002)

• International Monetary Fund – full International Monetary Fund – full FSAP (2003)FSAP (2003)

International EvaluationInternational Evaluation

• ““Malta embraces international tax standards Malta embraces international tax standards for transparency and exchange of information for transparency and exchange of information and has joined OECD member countries in and has joined OECD member countries in committing to eliminate harmful tax committing to eliminate harmful tax practices.”practices.”

((OECD Official News Release, June 2000OECD Official News Release, June 2000))

• “ “ a comprehensive and robust legal framework a comprehensive and robust legal framework and a particularly well-regulated financial and a particularly well-regulated financial sector” sector”

((Report of the Council of Europe Money-laundering CommitteeReport of the Council of Europe Money-laundering Committee, , April 2003)April 2003)

International EvaluationInternational Evaluation

• The World Economic Forum Report on The World Economic Forum Report on Competitiveness (2010-2011) Report places:Competitiveness (2010-2011) Report places:

1.1.Malta in the 11Malta in the 11thth position in financial market position in financial market development. Key performance indicators for the development. Key performance indicators for the financial services sector also confirm the sector’s financial services sector also confirm the sector’s standing as a leading innovator in the Maltese standing as a leading innovator in the Maltese economy. economy.

2.2.Soundness of Maltese banks has been ranked in Soundness of Maltese banks has been ranked in 1010thth position. position.

3.3.Malta is in the 12Malta is in the 12thth position in the assessment position in the assessment carried out on the regulation of securities carried out on the regulation of securities exchanges. exchanges.

4.4.88thth position on the strength of auditing and position on the strength of auditing and reporting standards. reporting standards.

International EvaluationInternational Evaluation

• ““Malta’s financial system appears to be Malta’s financial system appears to be healthy and well supervised …. Malta has a healthy and well supervised …. Malta has a comprehensive legal framework and strongly comprehensive legal framework and strongly adheres to most of the international standards adheres to most of the international standards and codes…. The authorities have undertaken and codes…. The authorities have undertaken major efforts in strengthening the supervisory major efforts in strengthening the supervisory framework”framework”

(International Monetary (International Monetary Fund, Financial System Stability Fund, Financial System Stability Assessment (FSSA), September 2003)Assessment (FSSA), September 2003)

Independent Assessment based on:Independent Assessment based on:

Basel Core Principles (BCP)Basel Core Principles (BCP)

International Organisation of International Organisation of Securities Commission (IOSCO) Securities Commission (IOSCO)

International Association of International Association of Insurance Supervisors (IAIS)Insurance Supervisors (IAIS)

Assessors:-Assessors:-

Piero Ugolini (former Assistant Director – IMF and Piero Ugolini (former Assistant Director – IMF and mission Chief of the IMF/World Bank team that mission Chief of the IMF/World Bank team that conducted the 2002/3 FSAP exercise)conducted the 2002/3 FSAP exercise)

Richard Nun (former Deputy Director – Texas Richard Nun (former Deputy Director – Texas Banking/Finance Commission, Austin-Texas; and Banking/Finance Commission, Austin-Texas; and currently peripatetic expert in banking Supervision currently peripatetic expert in banking Supervision – IMF and Centennial Group – Washington D.C., USA– IMF and Centennial Group – Washington D.C., USA

Michael Kehr, Senior Advisor International Michael Kehr, Senior Advisor International Policy/Affairs, Bafin, Bundesanstalt fur, Policy/Affairs, Bafin, Bundesanstalt fur, Finanzdienstleistungsaufsicht, Federal Financial Finanzdienstleistungsaufsicht, Federal Financial Supervisory Authority, Germany Supervisory Authority, Germany

• Malta’s financial sector is sound and Malta’s financial sector is sound and well supervised but very well supervised but very concentrated concentrated

• Very concentrated sector and strong Very concentrated sector and strong reliance on real estate properties reliance on real estate properties collateralcollateral

• Insurance and Securities : not Insurance and Securities : not systemically important systemically important

• Insurance companies are healthyInsurance companies are healthy

2002/3 FSAP Overall 2002/3 FSAP Overall OutcomeOutcome

What’s new?What’s new?

• World wide dissemination of World wide dissemination of international standards and best international standards and best practicespractices

• Entry into EU – 2004Entry into EU – 2004

• Concentration of Supervision in MFSAConcentration of Supervision in MFSA

• Expansion of financial sector and Expansion of financial sector and reputational risk/benefitreputational risk/benefit

The 2010 Assessment: The 2010 Assessment: BCP-IAIS-IOSCOBCP-IAIS-IOSCO

• Positive : progress noted in all Positive : progress noted in all assessmentsassessments

• Banking sector : the most clear Banking sector : the most clear progressprogress

• Insurances : recent extensive Insurances : recent extensive changes in the Principles do not changes in the Principles do not allow a proper comparison with 2003allow a proper comparison with 2003

• Securities : progress from an Securities : progress from an already relatively 2002/3 positive already relatively 2002/3 positive assessmentassessment

2010 Overall Outcome2010 Overall Outcome

BCP Comparison BCP Comparison • 2002/3 2002/3

AssessmentAssessment

• Compliant : Compliant : 1111

• Largely Largely Compliant: 12Compliant: 12

• Materially NC: Materially NC: 11

• 2010 2010

AssessmentAssessment

• Compliant :21Compliant :21

• Largely Largely Compliant: 5Compliant: 5

• Materially NC : Materially NC : 00

• October 2000 methodology : 17 October 2000 methodology : 17 PrinciplesPrinciples

• October 2003 methodology : 28 October 2003 methodology : 28 PrinciplesPrinciples

Insurance - IAISInsurance - IAIS

IAIS Principles - IAIS Principles - Broad Comparison 2002/3-Broad Comparison 2002/3-20102010

3232

• 2002/3---17 ICP2002/3---17 ICP

• Observed: 12Observed: 12

• Broadly observed: Broadly observed: 33

• Materially non Materially non observed: 2observed: 2

• 2010 ---28 ICP2010 ---28 ICP

• Observed : 22Observed : 22

• Largely observed: Largely observed: 44

• Partly observed : Partly observed : 22

• Non observed : 0Non observed : 0

IOSCO 2002/3- 2010IOSCO 2002/3- 201030 Principles30 Principles• 2002/32002/3

• Implemented : 22Implemented : 22

• Broadly Broadly implemented:0implemented:0

• Partly Partly implemented: 6implemented: 6

• Non-Non-implemented: 0implemented: 0

• Not applicable: 2Not applicable: 2

• 20102010

• Implemented: 24Implemented: 24

• Broadly Broadly implemented: 4implemented: 4

• Partly Partly implemented: 0implemented: 0

• Non Non implemented: 0implemented: 0

• Not applicable: 2Not applicable: 2

Overall progress and strong Overall progress and strong frameworkframework

-- Entry in EU -- Entry in EU

-- Implement international -- Implement international standards and best practicesstandards and best practices

-- Reorganization at the MFSA-- Reorganization at the MFSA

-- Good communication and -- Good communication and transparency transparency

ConclusionsConclusions

MALTAMALTA

Critical Success Factors

LLegislationegislation

• Flexible & versatile legal frameworkFlexible & versatile legal framework• Civil Law jurisdictionCivil Law jurisdiction• Business legislation based on English law Business legislation based on English law

principlesprinciples• Old, established juridical systemOld, established juridical system• Laws and Regulations published in Laws and Regulations published in

English and MalteseEnglish and Maltese

Financial ReportingFinancial Reporting

• IFRS – International Financial IFRS – International Financial Reporting Standards Reporting Standards since 1997since 1997

• Accounting records and bank accounts Accounting records and bank accounts in foreign currenciesin foreign currencies

• PWC, Deloitte, Ernst & Young, KPMG, PWC, Deloitte, Ernst & Young, KPMG, Grant Thornton, PKF, BDO, Mazars etcGrant Thornton, PKF, BDO, Mazars etc

Human ResourcesHuman Resources

• Multilingual communityMultilingual community

• English is the working language. Well-English is the working language. Well-spoken Italian,spoken Italian, French, SpanishFrench, Spanish, , GermanGerman;;

• Free market for labour;Free market for labour;• Availability of multilingual graduates in Availability of multilingual graduates in

disciplines related to financial servicesdisciplines related to financial services as as alsoalso administrative and clerical staff administrative and clerical staff;;

• High levels of productivity.High levels of productivity.

Cost Structure - Average Salaries

General ManagerGeneral Manager Euro74,000Euro74,000

Senior IT ManagerSenior IT Manager Euro45,000Euro45,000

Finance and admin Finance and admin managermanager

Euro26,000Euro26,000

Network Network Admin/ProgrammerAdmin/Programmer

Euro24,000 Euro24,000

Senior/executive staffSenior/executive staff Euro19,000Euro19,000

Office Office clerk/secretaryclerk/secretary

Euro14,000Euro14,000

ReceptionistReceptionist Euro12,000Euro12,000Source: Malta Financial Services Authority

Cost structures - Office Cost structures - Office RentRent (Euros per sq.m. per (Euros per sq.m. per annum)

DublinDublin 524524 LondonLondon 984984 PParisaris 924924 FrankfurtFrankfurt 555 555

MaltaMalta 1 13535

Source: CB Richard Ellis – Global Market Rents Source: CB Richard Ellis – Global Market Rents (Nov 2010) and MFSA Data(Nov 2010) and MFSA Data

TaxationTaxation

• Modern and competitive tax regimeModern and competitive tax regime

• Tax-efficient base for outsourcing activitiesTax-efficient base for outsourcing activities

• Tax system based on the full imputation Tax system based on the full imputation system:system:

• 35% tax on company profits ……35% tax on company profits ……

• shareholders receive full credit for any tax shareholders receive full credit for any tax paid by the company from which a dividend is paid by the company from which a dividend is receivedreceived

• Double tax treaties with 56 countriesDouble tax treaties with 56 countries

The Opportunities

• Funds ServicesFunds Services• Managed insurance and Re-Managed insurance and Re-

Insurance CompaniesInsurance Companies• Management of TrustsManagement of Trusts• Management of Pension Management of Pension

SchemesSchemes• Financial InstitutionsFinancial Institutions• Banking ServicesBanking Services

COMPETITIVE HIGH QUALITY SKILLSCOMPETITIVE HIGH QUALITY SKILLS

STEADFAST REGULATIONSTEADFAST REGULATION

AGILITY IN THE MARKET AGILITY IN THE MARKET

MALTA - the culture of getting things done

..

www.mfsa.com.mt

Thank you!