MFSA active in generating reforms despite regulations – Joseph Bannister

"As we are here today to put the spotlight on financial services, I cannot but highlight the remarkable results being achieved in this sector, despite the fact that competition from other jurisdictions has grown significantly. The positive aspect of this success is that it is being registered within a wide spectrum of financial services."

Minister of Finance Tonio Fenech was addressing a packed seminar, State of Play: Malta as a financial centre, organised by the Institute of Financial Services Practitioners (IFSP) and held at the Corinthia Hotel in St Julian's, yesterday.

"We have 25 banks, more than 600 funds, and 54 insurance companies. Two years ago, we have amended legislation to allow the setting up of pension management schemes in Malta - in a short space of time, 13 such schemes are being managed from Malta.

"Over and above, I am equally impressed by the feedback given by independent and non-regulated professionals involved in corporate services, who report, that, despite all the challenges, they are constantly busy registering companies, providing registered offices and several other services," Fenech said.
Companies registered with the MFSA are on the increase: just under 10,000 in the past three years, the best year being last year with 3,458 new companies. Figures available so far for 2012 indicate that this trend is being maintained.

Fenech also said that "around four to five years ago, when we first came up with our Vision 2015 proposal, we had defined our target of transforming Malta as a regional centre of excellence in financial services. Five years later... we have certainly come a long way", adding "and this is recognised by the World Economic Forum, putting Malta amongst the world top 15 in the world. This is also thanks to your commitment and dedication".

The seminar hosted various key players in the financial sector including Andrew Manduca, IFSP president, Doreen Fenech, director, tax, KPMG, Edward Attard from PriceWaterhouse Coopers, Andre Zerafa from Ganado & Associates, among others. MFSA chairman Prof Joseph Bannister was among the event's speakers.

Among the subjects tackled were the latest developments and regulations implemented by the Malta Financial Services, High Net Worth Individuals' and Highly Qualified Expatriates' taxation developments, IT and Corporate Services, anti-money laundering regulations and the IFSP Guidance Notes on the subject, and the Solvency II Directive.

The aim of the conference was to highlight the many changes underway in many areas of the financial services sector, changes that have the capacity to influence the way practitioners do business and provide service to their clients.

In his speech, Bannister said that "many reforms have been made to protect companies in Malta, including the financial supervision of financial institutions, improved consumer protection, an improved hedge-fund directive, transparency directive, among others.

"MFSA is active in generating reform, and doesn't simply sit there implementing regulations continuously emerging from Brussels - but by reviewing all the regulations and making sure that Malta attracts foreign investment at the same time. It is then in the business operators' hands to utilise such developments and further attract business."

Bannister also referred to the talk of 'Shariah banking' (Islamic banking) which isn't an easy structure to follow and implement. "Besides, Shariah is never found to be in a EU State, however, there is space for bringing in Sharia funds eventually."

Islamic banking is the world's fastest growing sector in world finance.

Bannister said that the MFSA has gone a step further by also meeting the demand for a platform model involving an incorporated cell company providing administrative services such as routine contractual matters and start-up support to a number of Incorporated Cells licensed as collective investment schemes. He was referring to the Recognised Incorporated Cell Company's new legal structure.

A collective investment scheme may be established as a Sicav ICC that operates under a CIS licence in accordance with the Companies Act (Sicav Incorporated Cell Companies) Regulations or one may opt for a platform serving purely for the provision of administrative services to incorporated cells in terms of the Companies Act (Recognised Incorporated Cell Companies) Regulations.

The regulations build on the "cellular" concept of establishing a cluster of cell companies group under an incorporated cell company structure.

On the Companies Act - Amendment of the Tenth Schedule regulations - MFSA has carried out certain amendments, according to Bannister. The regulations are aimed at aligning the Tenth Schedule of the Maltese Companies Act with Sicav regulations

"This alignment was considered necessary so as to bring limited partnership structures on a level playing field with SICAVs," Bannister added.

Regarding the Solvency II EU Directive - by which the European insurance business is regulated - the MFSA chairman said that it was another important new framework that requires insurers take into account the risks inherent to their assets such as investment risks, credit risks and operational risks.

Meanwhile, Bannister said that Malta was one of the jurisdictions to meet the Qualifying Recognised Overseas Pensions Scheme (QROPS).

QROPS is an overseas pension scheme into which UK private pension rights can be transferred.

Meanwhile, on the Retired Pensions Act (to be enacted in July), Barrister said that amendments were still in the consultation process since certain issues related to governance were pending approval, adding that "it would be released for consultation some time soon".

Concluding, Bannister said that "operators must always bear in mind that the MFSA is not a one-man band", adding that "we consult on all regulations and directives prior to implementation with all concerned".

A new set of provisions targeted towards attracting foreign High Net Worth Individuals who wish to relocate to Malta have also been established.

The conditions required to qualify for special tax status, as well as the minimum tax payable under the HNWI Rules, vary depending on whether the applicant falls within or outside the EU, EEA or Swiss national category.

Doreen Fenech, director, tax KPMG, said: "One of the selling points of Malta is definitely taxation. High Net Worth Individuals taking up residence in Malta in respect of any foreign income received here are subject to 15% tax. EU nationals are subject to paying 20,000 euros plus 2,500 per dependent in tax. With respect to Third country nationals, neither nationals of Switzerland, the minimum tax payable in Malta is 25,000 euros, plus a further 5,000 euros per dependant."

Fenech also highlighted the Highly Qualified Expatriates rule which started off in respect of companies which are licensed and recognised by the MFSA and which was further extended to employees of companies licensed with the Lotteries and Gaming Authority (LGA).

"Expatriates moving to Malta to take up employment in the top offices of companies licensed or recognised by the Malta Financial Services Authority or the Lotteries and Gaming Authority and in receipt of a minimum annual salary of €75,000, may benefit from a flat rate of tax of 15% for a determined number of years, subject to the fulfilment of certain conditions."