'Delivering better value for money to consumers, the finance industry and the nation'
The Malta Financial Services Authority (MFSA) has just published its report for the year 2002. This is the first report of the MFSA which took over the role of single regulator for all banking, securities, investment and insurance business in Malta on 1 October 2002. The MFSA, which also houses Malta's Companies Registry, has assumed regulatory and supervisory responsibilities previously shared between the Malta Financial Services Centre, the Central Bank of Malta and the Malta Stock Exchange.
In the opening statement, Prof. JV Bannister, chairman of the MFSA, says: 'Moving towards a single regulatory authority is in line with global best practice and Malta is in the first wave of nations to adopt the single regulator approach. Our new regime, embodied in the MFSA, is already delivering significant improvements on the old system. It gives me great pleasure to report that the organisation functioned as a single, coherent and efficient unit from day one.'
Bannister cites the growth in the Maltese financial services industry and the more open and competitive regional and global markets as the main drivers behind these moves. He adds that the revolution in IT and telecommunications and a sustained period of corporate mergers and acquisitions have led to the creation of very large, multi-product and multi-territory financial services groups that require an all-encompassing and consistent regulatory approach.
Main highlights of the year
The EU Peer Review process found Malta's standard of supervision very high. The review also praised the quality of MFSA's staff and endorsed the authority's working procedures. It also ratified the transposition of EU financial services legislation into the Maltese legal infrastructure.
The country has become a full member of the International Organisation of Securities Commissions (IOSCO).
The MFSA participated in an IMF Financial Sector Assessment Programme (FSAP). The mission primarily focused on evaluating Malta's compliance with a number of international standards and codes.
To a greater or lesser extent Malta was affected by international events characterised by concerns regarding corporate governance, financing of terrorism, unstable markets and the threat of war. Despite all this, the underlying strength of the Maltese economy and the management skills of the finance sector kept the business on course. The number of jobs in finance remained at the previous year's levels and, while business and trading volumes remained low, Malta recorded no significant business failures in the finance sector. The industry remained buoyant, confident and energetic, forging new international alliances and launching new products to meet changing investor profiles.
The number of investment services licences (including investment advisors, stock brokers, fund managers and custodians) increased from 96 at the end of 2001 to 111 at the end of 2002.
During the same period the number of collective investment schemes increased from 332 to 369. These included new retail funds launched in the market by Fidelity, Royal and Sun Alliance, HSBC, Valetta Fund Management, Aberdeen and Lazard as well as new licences issued to Thames River Traditional Funds and Garanti Professional Investor Fund Sicav.
The major banks aligned their licenses to new electronic banking directives issued by the MFSA. HSBC Overseas Bank (Malta) Limited and Volksbank Malta Limited surrendered their offshore licenses and moved onshore while Bank of Valletta opened a new branch in Egypt. Two Turkish banks, Tekstil Bankasi and Iktisat Bankasi, surrendered their Maltese licenses in view of changing international economic circumstances.
At the end of 2002, the total number of credit and financial institutions licensed under Maltese law was 27.
During the year, the Financial Services Tribunal approved the transfer of the local long-term business portfolio of British American Insurance Company (Mauritius) Limited to British American Insurance Company (Malta) Limited. NSTS Insurance Agency Limited were authorised to act as agents in the classes of general business on behalf of Goudse Schadeverzekeringen. Standard Steamship Owners' Protection and Indemnity Association (Bermuda) Limited, a mutual association, was also authorised to carry on insurance business in Malta. Four new companies were also enrolled on the brokers list during the year.
At the end of the year, there were five local companies and 14 foreign companies authorised to carry on insurance business in Malta. The number foreign insurers represented through local agents was 15, insurance broking companies numbered 24, individual insurance brokers 43 and insurance sub-agents 571.
The total number of new commercial partnerships registered during the year was 1,705 bringing up the total number of companies on the Maltese company register to over 30,000. Roughly one out of every two companies currently being registered in Malta typically operate on an international level in sectors such as trading, manufacturing, shipping, investment, finance and the provision of services such as back office administration, consultancy, management and internet based services. Company mergers during the year totalled 200.
Since all licenses on the offshore register will expire in 2004, most offshore companies have de-classified and a good number have converted to normal onshore companies. The number of companies still on the offshore register is 275, down from 1,400 at the end of 1996. Malta's preferential regime for offshore companies will officially terminate on 30 September, 2004.
One of the most significant developments has been the passing of the Special Funds (Regulation) Act, which will help attract 'second pillar' pension activity. The new law has opened the way for the setting up of funded retirement benefit arrangements between an employer and his employees as well as arrangements that involve a contributor and a beneficiary.
The Investment Services Act 1994 has also been revised in line with the latest developments in EU and WTO standards. The main changes include the streamlining of licensing requirements for stock-broking and the simplification of regulatory clearance procedures for fund administration services. Strict legal separation of the assets and liabilities of sub-funds within the same company has been introduced while the concept of 'close links' has been adopted for both investment and insurance business in line with the requirements of the post-BCCI EU Directive. Auditors' reporting responsibilities in respect of licence holders have also been extended.
Other developments include changes to security trading regulations, intended to clearly distinguish between the regulatory functions of the Listing Authority, and the business of recognised investment exchanges, including the Malta Stock Exchange.
Company legislation has also undergone important changes mainly related to the specification of the general duties and standard of performance expected of company directors. The MFSA's consumer protection role and structures have been strengthened with newly-assigned powers and responsibilities, and the appointment of a consumer complaints manager.
Malta's international standing is influenced by global bodies such as the OECD, the FATF, the World Bank and the IMF. The MFSA Annual Report re-confirms Malta's commitment to work with international and supranational regulatory bodies to help maintain high standards of integrity and competence, domestically and internationally.
Malta Financial Services Authority
Notabile Road, Attard, BKR14, Malta
Tel: +356 2144 1155,
Fax: +356 2144 1189
e-mail: [email protected]
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