An interview with Professor Joseph Bannister, Chairman of Malta Financial Services
How has the financial sector in Malta developed, and how important is it to the economic well-being of the island?
It's very important indeed, on a number of grounds. As you know, in the late 1980s and 1990s, Malta experienced an economic boom. We had 5-8 per cent growth in GDP, compared to European countries in recession with no growth, while we were expanding. That created jobs and increased the standard of living on the island.
At the same time the Government put a lot of money into education. This led to an expansion in University courses including business management and economic courses.
We also decided that we had to move into the service industries, because as you know we have no natural resources. Our major service industry is tourism, but the Government had to develop another service industry and they chose to create a strong financial sector.
What are the advantages of Malta as an offshore financial centre? How does it compare to, for example, other Mediterranean centres like Cyprus or Gibraltar?
We have political and economic stability. We have a workforce that is well-educated and highly skilled. And our costs for running a business are about 40 per cent of cost of doing the same in London.
The Financial Services sector offers a good package of laws, based on EC directives. Corporation tax is about 35 per cent, but a system of tax breaks and incentives means that foreign companies can limit it to about 4-5 per cent. By comparison at somewhere like Ireland, for example, people pay about 10 per cent in tax, so we have a clear advantage.
In comparing us with other offshore financial centres, the key things to look at are image and regulation. Malta is strong on regulation, though we have flexibility. We are after good quality companies rather than numbers, so brass-plate companies are not allowed (by that I mean registered companies which don't carry out business operations). In this respect we contrast favourably with Gibraltar.
We're also very strict on Russian banks, which we won't have, in contrast to Cyprus. Companies in our centre have to be recognised names and adhere to the guidelines laid out in the Basle Concorde.
How does the regulatory climate differ from other leading offshore financial centres? And do you feel any changes need to be made to the regulatory environment to make it more responsive to the needs to the offshore investor?
The truth is that some have virtually no regulations at all. But Malta follows the EU directives, and we have a regulatory climate that is very strong yet flexible. Our chief regulator is Hilton McCann, who used to be the head of banking in the Isle of Mann. So I think that that is clear indication that we want to be strong on regulations.
As far as our responsiveness is concerned we are already very flexible. We prefer to negotiate with companies before we start the formal submission of applications.
Generally, from your experience, do you think the image of offshore financial centres has improved?
It is slowly, though I'm not talking about Malta here because we went straight to the top. If you look at what Gibraltar and the Cayman Islands our doing in their recent attempts to improve their financial systems, I think they are moving in the right direction. I think it is very important the offshore financial centres develop a good image.
What steps are being taken in Malta to ensure the balanced growth of a broad spectrum of financial services?
The financial sector has the full Government support, as well as the support of all other parties in Parliament. The financial services sector was started by the previous Government, but the Government that came to power in October is committed to continuing to develop the sector. I was appointed Chairman by the previous Government and still continue in that role now, so there is a consistent approach.
We are committed to bringing companies into Malta, and we market our services on a one to one direct approach, not as a roadshow.
Last year we listed Rothchild, Hambros and Midlands Bank. So we are confident of perhaps slow growth, but growth which is good and steady. At the end of the day we are after quality companies, not numbers. This year a number of new companies have applied to be listed on the stock exchange.