The financial services sector has, in recent years, shown significant growth and resilience, in the process positioning itself as a significant contributor to the Maltese economy. In fact, the MFSA’s annual report for 2022 shows that in that year, the financial industry contributed €1.178bn in gross value added to the economy, an increase of 4.3 per cent over the previous year.
In the process, the sector also created an encouraging demand for human resources – in 2022, over 17,000 employees worked within the industry, a growth of 26 per cent over the previous year.
FinanceMalta is at the forefront of this growth – as a public-private initiative, its remit is to promote Malta as an international financial centre.
Graziella Grech, chief operations officer at FinanceMalta, further outlines the growth of the financial services sector.
“The sector – which encompasses banking, insurance, investment management, fintech and other services – has grown significantly in recent years, thanks to favourable regulatory frameworks, a strategic geographical location, and a talented workforce,” she explains.
“Fintech, for instance, has seen significant expansion, with our legislation attracting both start-ups and established companies. Banking has also experienced growth, with local and international institutions expanding their operations on the island. The sector’s success is underpinned by a stable regulatory framework and our EU membership. Furthermore, Malta has been a popular location for investment funds and asset managers due to its flexible regulatory framework and competitive tax policy.”
Such activity, in turn, makes a considerable contribution to the local economy: creating job opportunities for qualified workers while accounting for GDP growth through a variety of routes, including direct investment, taxes and financial transaction fees. The spillover effect is also important, as the financial services sector fuels the success of other industries by providing capital and financial services.
Within this context, FinanceMalta acts as Malta’s strategic ally in promoting its financial services sector globally.
“We engage in advocacy, marketing and networking activities improving Malta’s standing as a leading global financial hub,” Grech says. “By offering crucial information, promoting collaboration and fostering talent development, FinanceMalta stimulates investment and strengthens Malta’s position as a vibrant and competitive centre for financial services.”
To implement strategic initiatives that support market integrity, innovation in the financial services industry, and the improvement of Malta’s regulatory framework, FinanceMalta collaborates with the Malta Financial Services Authority (MFSA) and the Malta Financial Services Advisory Council (MFSAC). Together, FinanceMalta, MFSA and MFSAC contribute to the growth of a strong and competitive financial services ecosystem in Malta by coordinating efforts, exchanging knowledge and encouraging positive communication among industry stakeholders.
The human resource element is also critical to ensure that the financial services ecosystem in Malta achieves sustainable growth.
“Strategic investments in human resources have the potential to enable further growth and resilience in Malta’s financial services sector, which has already made substantial progress,” Grech notes.
Developing expertise in fintech not only encourages innovation but also establishes Malta as a prominent fintech centre
“Developing a solid understanding and proficiency in regulatory compliance and risk management helps ensure one’s actions and strategies comply with changing regulations and effectively reduce the potential for risks. Other critical areas of expertise are data analysis and cybersecurity skills – both of which help strengthen confidence and security in financial transactions.
“Developing expertise in fintech not only encourages innovation but also establishes Malta as a prominent fintech centre, drawing investment and propelling technical progress.”
In 2021, Malta was greylisted by the world’s money laundering and terrorist financing watchdog, the Financial Action Task Force, as the country was deemed to not be doing enough to combat financial crime.
“Greylisting can compel a jurisdiction to implement more stringent legislation and supervision systems to rectify shortcomings in its procedures related to combating money laundering and financing terrorism,” Grech says. “To regain stability, Malta increased its efforts to tighten its regulatory structure, strengthen enforcement measures and expand collaboration with international agencies. These efforts aimed to restore trust and credibility in the global financial community by ensuring investors and stakeholders of Malta’s strong dedication to effectively tackling financial crime.
“Malta’s economic recovery has been strong and resilient, as indicated by reports since being removed from the FATF greylist. The nation’s financial services industry has demonstrated robustness, significantly contributing to the overall economic expansion and stability.”
The Financial Action Task Force (FATF) and the European Banking Authority (EBA) have acknowledged Malta’s endeavours to adopt extensive reforms to enhance its framework for combating money laundering and terrorism financing.
Malta’s international reputation has been enhanced, as evidenced by ratings and evaluations from credit rating organisations like Moody’s and Standard & Poor’s and remarks from international regulatory bodies such as the European Commission.
The next significant development within the financial services sector is the introduction of the Digital Operational Resilience Act (DORA), which will apply as of January 2025.
“DORA’s primary objective is to guarantee the robustness of digital operational procedures in financial institutions, encompassing banks, investment firms and market infrastructure providers. By tackling the growing digitalisation and interconnection of financial services, DORA highlights the significance of cybersecurity, incident reporting and managing ICT risks,” Grech says.
“For the Maltese financial services sector, implementing DORA would include adhering to fresh norms and standards established by the EU. This would likely necessitate modifications in operational procedures, investments in cybersecurity measures and heightened reporting obligations for incidents and ICT risks.”