The fallout in the Cypriot banking sector has raised fears that similar financial centres could go the same way, and savers are understandably pessimistic about the safety of their assets in the wake of the bailout. But Cyprus was a special case and the rescue package from Europe reflected that. What’s more, Malta is home to one of the most robust and stable banking sectors in Europe, and its diversified asset holding and strong solvency ratios will ensure that it remains so into the future.
The Maltese government recently issued a statement assuring its financial sector is safe and secure. It states that the World Economic Forum ranked Malta 13th out of 144 countries in terms of the soundness of its banking sector based on an overall capital adequacy ratio above 50%. The minimum regulatory requirement is 8% under the Capital Requirement Directive, which emphasises the soundness of the system.
Malta’s success as a financial centre dates back some 18 years to the first preparations when Finance Minister John Dalli and Joe Bannister hammered out a full framework for the financial services industry along with Lino Spiteri, who now writes for the Times of Malta.
The bipartisan procedure that was established at the time is still in place today and represents a major plank in Malta’s success because it insulates investors from shock decisions. Since then, the country’s accession into the EU in 2004 has made the centre even more stable, with banks, insurers and reinsurance companies all subject to rigorous appraisal that extends beyond due diligence.
“The result is there to be enjoyed today,” Mr Spiteri says. “Malta has acquired a reputation second to none. It has a core banking sector which concentrates on the domestic market, with deposits, practically all domestic, approximating double the GDP, well below the European average.”
A 2013 report conducted by the European Economic Advisory Group (EEAG) revealed similarly calming sentiments. The study grouped Malta with Germany and Austria as the European nations which have seen the most robust economic momentum in recent years, primarily because of the solid condition of their public and private finances, “as well as their high level of international competitiveness”.
Five reasons to feel safe about Malta
► Soundness of banking sector: World Economic Forum ranked Malta 13th out of 144 countries in terms of how sound the banking is.
► Strong regulatory environment: Malta has an already established regulatory environment in the country which is of strong standing, but the country is also participating in the setting up of a euro area regulatory and supervisory framework, to which it has also actively contributed.
► Size: The size of Malta’s domestic banking system is below the euro area average, with five domestically-oriented banks with total assets of 218% of GDP. The eight banks with limited links to the domestic market had assets totalling 77% of GDP.
► Capital adequacy ratio: Malta’s overall capital adequacy ratio is above 50%, significantly exceeding the minimum regulatory requirement of 8% under the Capital Requirement Directive.
► Integral part of the euro area financial system: Malta forms an integral part of the euro area financial system, supporting an adjustment programme to re-establish sound macroeconomic and financial stability.
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