This has not been a good year for the country’s effort to revamp its international image, a critically important factor to attract new investment.
The latest setback is the probable exit of HSBC from the local banking market.
It is never good news to see a major international player like HSBC leave the country.
The fallout from the public hospitals scandal and the legal action being taken against the former prime minister and the former ministers of finance and health, among others, have also been reported in the international media.
It can hardly be stressed enough that these reports are closely scrutinised by potential investors looking for where to locate their next venture.
Moreover, a Eurostat survey in July found that 95 per cent of Maltese believed corruption is widespread in the country. The EU 2024 Rule of Law report also noted the slow progress in fixing Malta’s defective rule-of-law framework.
It is critically important for the new owners of HSBC to have a solid reputation for integrity, professionalism and a good governance record.
The HSBC brand is recognisable on a global level. Despite some reputational setbacks over the years, they are considered an international banking giant striving to professionally fulfil its obligations to shareholders, clients and other stakeholders.
Of course, it is up to the present owners of the bank to decide to who they sell their Malta operations.
Regulators in Malta and Frankfurt will ensure that whoever takes over the bank’s operations in Malta has the necessary expertise, financial backing and the right strategy to conduct banking business safely in the interest of all stakeholders. It is comforting to know that banking is one of the most tightly regulated industries.
Still, the exit of HSBC in Malta could negatively impact Malta’s already tarnished image at the international level. Should another bank with a good reputation buy the local operations, the impact of HSBC’s exit will be mitigated.
Of course, prospective buyers of a bank will be influenced mainly by the potential of getting a good return for their investment.
Pricing of the HSBC shares will be a determining feature. Hopefully, the present owners of the bank will have various sale options, and the most favourable one will also be the best option for enhancing Malta’s reputation internationally. While local bank APS is being cited as a potential buyer, it is encouraging to read reports that HSBC could still hold a minority shareholding.
The banking industry is undergoing substantial changes, with old business models being revamped to optimise shareholders’ returns through the digitalisation of services.
Unfortunately, this often means that sections of the community are deprived of services that for decades have been taken for granted, such as free banking, branches in most towns and villages and an extensive ATM network.
For the present customers of HSBC, what matters most is that the service they enjoy today is guaranteed and, hopefully, improved.
This objective will not be easy to achieve as most European banks adopt similar retail banking strategies with fewer physical branches and more online services. Industry experts argue that this trend toward digitised banking services is irreversible and is a question of time before it becomes a reality for all banks in the local market.
The best outcome that one can expect from the exit of HSBC is that the new buyers will have the qualifications and characteristics likely to favourably project Malta’s image internationally as a mature and reputable jurisdiction that adopts the highest governance standards in all spheres.