Insight

Malta’s Finance Sector: The Way Forward

Regulation is an important component of a finance centre's success, but at the core, Malta’s finance sector needs increased focus on good governance, and not overregulation, says Dr Priscilla Mifsud-Parker.

Malta’s financial sector is experiencing significant growth and achieving excellent results, but this, according to Dr Priscilla Mifsud-Parker, is not something that comes without challenges as increasingly stringent regulations have caused “setbacks for the industry”.

Malta’s finance sector has generally remained stable over the years, with sustainable growth marking the area. The 2008 finance crisis however, prompted a wave of global financial sector re-regulation. “While the past decade has brought a compliance boom in banking — the most obvious and direct victim of the financial crisis — it has also led to the introduction of drastic reforms in securities, insurance as well as the corporate services and trusts world,” Dr Priscilla Mifsud-Parker explains. “New, heavy regulation has caused distress to many, including banks, regulators, professional organisations, consultants, legal advisers, financial consultants and even academics. Malta has been no exception in this regard.”

In recent years, Malta’s finance sector has been shaken up by increased problems resulting from money laundering, market manipulation and other abuses. This, Dr Mifsud-Parker says, has shown the need for much stronger measures to deal with the widely discussed abuses in these areas, leading to a safer, yet less profitable environment where banks are desperately seeking additional capital, over and above regulatory requirements; share ownership structures are being transformed, and activities are being shed and less profitable, or more risky activities being disposed of.

 

Good Governance  

“While regulation is an important component of a financial centre's success and its priority is to protect the integrity of Malta as a financial centre, one cannot support a situation where basic banking services are stifled,” Dr Mifsud-Parker says. “Increasingly stringent regulations have caused setbacks for the industry, but Malta’s financial sector can make use of this opportunity for improvement. What is needed today in this over-regulated environment is self-regulation and self-pruning with mechanisms focusing on internal and self-imposed compliance and risk management processes as well as focusing on internal audit and compliance processes. The sector should be supported by good governance, and not overregulation.”

In 2019, the Malta Financial Services Authority (MFSA), Malta’s single financial regulator, announced major restructuring within the organisation, with a focus on improving its regulatory and supervisory functions, and position itself as a forward-looking, proactive and trustworthy supervisory authority. “What is essential is that even though changes in this industry are continuous and challenging, the MFSA is co-operating with other European regulators to be able to share its information with them and have a strategy to face and rise up to,” Dr Priscilla Mifsud-Parker says.

Dr Priscilla Mifsud-Parker believes that in order to ensure the country’s finance sector can compete globally, it needs to reduce its reliance on banks. “Clearly, Malta needs more credit institutions to retune with its growing economy and adopt a different outlook tuned to offer customers effective alternatives to traditional banking — and the government admits that,” she says. 

Dr Priscilla Mifsud Parker is a private client lawyer heading Families & Wealth, and Fintech practice groups at Chetcuti Cauchi. In this capacity, she works in trusts and estate planning, wealth and business structuring for high net worth and successful business families. She is also guiding clients through the emerging fintech sector. In the structuring field her main specialty is tailor-made solutions for the optimisation of high value assets and corporate structures. Priscilla's background enables her to assist clients in overcoming their challenges. Priscilla also heads the Corporate & Trust Services arm of the firm which handles the set up and administration of corporate structures. Her practice here revolves around assisting clients in business start-up stage or with acquisitions, corporate migration and restructurings, shareholder matters and providing day-to-day company law advice to the firm’s clients.

 

SIGN UP TO AND RECEIVE OUR NEWSLETTER

Brands who work with us