With some of the safest and most liquid banks in the eurozone, Malta is establishing itself as an international credit and financial institution centre and hub for finance in the Mediterranean region.
Malta’s credit and financial institution system remains well-capitalised, liquid and profitable; however, banks’ risk appetite has become ever more conservative, which means the island is increasingly turning to fintech players for the next stages of growth.
Malta has one of Europe’s healthiest and most profitable credit and financial institution sector, yet, concerns that the country is not doing enough to keep the sector free from crime, coupled with the fact that some market segments of the island’s finance centre remain under-served, mean this sector is in need of adjustment. The island’s ever-growing economy has exposed the need to expand the scope of credit and financial institution services, especially to serve smaller corporate clients. However, increasing the number of credit and financial institutions is a tough challenge as the global banking sector has retreated into consolidation mode due to heightened capital requirements and rising compliance costs, which have affected banks’ risk appetite. The good news though is that fintech companies and neobanks have Malta on their radar, and the Malta Financial Services Authority (MFSA) expects to welcome new entrants to Malta’s financial scene in the near future.
Malta’s banking sector, home to no less than 24 banks, comprises institutions focused on the local market and a large number of banks offering specialist services or supporting operations abroad.
International banking institutions have long been calling Malta home. Some of the longest established international banks in Malta are branches of Turkey’s Akbank and Australia’s CommBank. More banks discovered the country as a platform for business when Malta joined the EU in 2004, offering banks regulated in Malta EU passporting opportunities and access to the EU market. Today, banks originating from the UK, Turkey, Qatar, the US, Czech Republic, Finland, Bahrain, Ireland, Greece and Holland have operations in Malta. Those banks have no
or little interaction with the Maltese economy. They do not take local deposits, but rather focus on business with non-residents or intragroup transactions supporting their parent bank or concentrate their activities on areas such as trade and project finance, syndicated loans and investment banking. In fact, many of them hold executive responsibility for specialised areas of their group’s global operations.
While Malta’s banking sector has grown significantly in recent years, Malta’s expanding economy, coupled with an influx of foreign talent and companies, has led to a growing demand for banks that support the niches that Malta’s finance sector has built up – such as private banking, wealth management and investment services. The island offers remarkable growth opportunities for banks that are ready to seize a share of this business. The biggest opportunity lies in custody businesses, where the limited number of custody banks affects the growth of the fund industry. The island is also a land of opportunity for credit institutions looking for an EU-compliant, yet flexible, domicile that provides access to the EU market and the neighbouring countries of North Africa. The emerging economies of the region need infrastructure development, offering opportunities in the area of project finance.
At a time when digital solution providers challenge traditional banking models like never before, Malta’s banking sector has caught the attention of fintech entrepreneurs and payment companies, who have established operations on the island offering their solutions in Malta and abroad.
Malta offers an OECD and EU-approved fiscal framework and has concluded over 70 double taxation treaties with the most global and developed economies in the world.
Further information on the tax regime in Malta can be found here: https://cfr.gov.mt/en/Pages/Home.aspx
by FinanceMalta
10th June 2020
