Following in the footsteps of Luxembourg, Switzerland and Singapore, Malta is establishing itself as an international treasury centre. Increased volatility in the global economy and the growing complexity of international markets are driving companies to seek improved control, efficiency and transparency in their cash management, and renowned groups have chosen Malta to set up regional or worldwide treasury operations. With lower costs than the established centres, coupled with sophisticated banking solutions and a strong regulatory framework, Malta is quickly becoming the preferred European location for treasurers and CFOs.
A Central Location
Malta has developed strong skills in finance, accounting and banking, as well as in back and middle office activities. The country’s economy, the smallest in the European Union, emerged from the international financial and European debt crises relatively unscathed – a fact that has strengthened Malta’s growing reputation as a stable and reputable international financial centre. In particular, the country won international acclaim for its solid banking system, which is the 17th soundest in the world according to the World Economic Forum’s 2017-2018 Competitiveness Index. This has allowed Malta to move up the value chain in financial services provision, with a focus on front office activities, complex transactions and high-level risk management. Malta now aims to attract more foreign companies wishing to centralise, or consolidate, their regional or global treasury management operations in Malta. Globally, the increased compliance costs led to a more cost-conscious organisational culture, and more multinational corporations are currently seeking cost-effective jurisdictions for their corporate finance transactions, making Malta an interesting alternative to other European treasury locations.
Group Treasury Companies
In most cases, multinationals want a single platform that can offer them an overview of their position, and many of them have come to appreciate the advantages of a Malta company, which can be established to function as Group Treasury for related companies in Malta and abroad. For smaller corporations preferring to outsource treasury functions, a number of providers, including the ‘Big Four’ accountancy firms, banks and smaller organisations, offer a full range of financial management and transaction services to their clients. Cash pooling, leasing arrangements, asset management, risk management and payment services can all be procured from the same treasury service, whether the client is a single entity or a group of companies.
The success or failure of a treasury service hinges on a number of factors, including the quality of a country’s banking facilities, the ease of access to local stock exchanges and a liberalised capital market. While Malta possesses all these traits, it is also rich in professional expertise, and has a strong telecoms network, providing efficient links to Europe via four submarine cables. Ongoing regulatory changes, many of which affect business processes and systems, further add to the complexity of treasury management. In this climate, treasury departments, now more than ever before, seek to optimise their company’s liquidity. Malta’s very competitive cost-base, which is 20% to 30% lower than those of other Western European locations, has also opened the door for it to become a major player in the treasury sector. Its location between Europe and North Africa makes it attractive for emerging market multinationals and companies expanding into regions such as North Africa and the Middle East that are seeking a sophisticated, safe and stable financial centre to base their treasury operations.
Whether on a regional or global basis, a number of companies already use Malta to efficiently centralise their treasury operations. Although many believe that the country still has some way to go to establish itself as a world-class treasury centre location, Malta is boasting a number of additional unique selling points. It is as stable as many of the current treasury locations, such as Switzerland or Luxembourg, with the bonus of lower operating costs and less bureaucracy.