Malta Financial Services Authority

1. Malta Financial Services Authority Malta as a finance centre: A Model Of Stability in a Changing Landscape

2. MALTA Framework for the Development of Financial Services

3. Financial Services Legislation Financial Services Legislation Primary Legislation • Banking Act • Financial Institutions Act • Insurance Business Act • Insurance Intermediaries Act • Investment Services Act • Special Funds Act [Retirement Pensions Act] • Trustees and Trusts Act • Malta Financial Services Authority Act • Central Bank of Malta Act

4. FinancialServices Legislation Supporting Legislation:- • Companies (includes Limited Partnerships) Act • Netting upon Insolvency Act • Securitisation Act • Prevention of Financial Market Abuse Act • Professional Secrecy Act • Prevention of Money Laundering Act

5. Regulation Malta Financial Services Authority (MFSA) • Single regulator for financial services • Regulates banking, financial institutions, insurance companies, investment services companies, securities, stock exchanges and listing, trust management companies, pension schemes • Autonomous public institution, self-funded Avoidance of Prescriptive Regulation to allow promoters the flexibility to operate

6. Main Objectives of the MFSA • to regulate, monitor and supervise financial services in Malta; • to promote the general interests and legitimate expectations of consumers of financial services, and to promote fair competition practices and consumer choice; • to advise the Government generally on the formulation of policies in the field of financial services, and to make recommendations to Government as to any action which in the opinion of the Authority, it would be expedient to take in relation to matters in respect of which the Authority has such duties;

7. MFSA - Structure MFSA Legal & Int Affairs Unit Board of Governors Chairman Board Secretary Co-ordination Committee Company Registry Board of Management and Resources Supervisory Council Director General Registrar of Companies Chief Operations Officer

8. Functions – Board of Governors • Board of Governors is composed of seven members including the Chairman. Chairman and Governors appointed for a period of up to five years and their appointment may be renewed for further periods of five years; • Board of Governors sets policy; • The Legal and International Affairs Unit acts as Secretary to the Board of Governors and the Co-Ordination Committee.

9. Composition of the Supervisory Council

10. Remit of the Supervisory Council • Art 10. (1) of the MFSA Act states:- • The Supervisory Council shall be responsible for the approval of and for the issuing of licences and other authorisations, for the processing of applications for such licences and authorisations, and for the monitoring and supervision of persons and other entities licensed or authorised by the Authority in the financial services sector.

11. Board of Management & Resources MFSA Act Art 11 states “.....responsible for carrying out the day-to-day management and finances of the Authority, including business development and ancillary services and for the general co-ordination of the Authority’s administrative affairs and shall be composed of the persons responsible for such activities as may be designated by the Board of Governors”

12. Remit - Board of Management & Resources

13. Co-Ordination Committee Chief Operations Officer - Board of Development and Resources

14. Membership of International Organisations • New EU Supervisory Architecture:- • European Securities & Markets Authority (ESMA) • European Banking Authority (EBA) • European Insurance and Occupational Pensions Authority (EIOPA) • International Association of Insurance Supervisors (IAIS) • International Organization of Securities Commissions (IOSCO) • International Organisation of Pensions Supervisors (IOPS)

15. Memoranda of Understanding currently in force

16. MFSA Human Resources

17. Number of Employees

18. Males and Females

19. Employee Age Bracket

20. Qualified Personnel

21. International Evaluation • FATF – Financial Action Task Force (1999) • OECD – Organisation for Economic Co-operation and Development (2000) • Council of Europe Money Laundering Committee (2001) • EU Peer Review (2002) • International Monetary Fund – full FSAP (2003)

22. International Evaluation • “Malta embraces international tax standards for transparency and exchange of information and has joined OECD member countries in committing to eliminate harmful tax practices.” (OECD Official News Release, June 2000) • “ a comprehensive and robust legal framework and a particularly well-regulated financial sector” (Report of the Council of Europe Money-laundering Committee, April 2003)

23. International Evaluation • The World Economic Forum Report on Competitiveness (2010-2011) Report places: • Malta in the 11th position in financial market development. Key performance indicators for the financial services sector also confirm the sector’s standing as a leading innovator in the Maltese economy. • Soundness of Maltese banks has been ranked in 10th position. • Malta is in the 12th position in the assessment carried out on the regulation of securities exchanges. • 8thposition on the strength of auditing and reporting standards.

24. International Evaluation • “Malta’s financial system appears to be healthy and well supervised …. Malta has a comprehensive legal framework and strongly adheres to most of the international standards and codes…. The authorities have undertaken major efforts in strengthening the supervisory framework” (International Monetary Fund, Financial System Stability Assessment (FSSA), September 2003)

25. Independent Assessment based on:Basel Core Principles (BCP)International Organisation of Securities Commission (IOSCO) International Association of Insurance Supervisors (IAIS)

26. Assessors:-Piero Ugolini (former Assistant Director – IMF and mission Chief of the IMF/World Bank team that conducted the 2002/3 FSAP exercise)Richard Nun (former Deputy Director – Texas Banking/Finance Commission, Austin-Texas; and currently peripatetic expert in banking Supervision – IMF and Centennial Group – Washington D.C., USAMichael Kehr, Senior Advisor International Policy/Affairs, Bafin, Bundesanstalt fur, Finanzdienstleistungsaufsicht, Federal Financial Supervisory Authority, Germany

27. 2002/3 FSAP Overall Outcome • Malta’s financial sector is sound and well supervised but very concentrated • Very concentrated sector and strong reliance on real estate properties collateral • Insurance and Securities : not systemically important • Insurance companies are healthy

28. The 2010 Assessment: BCP-IAIS-IOSCO What’s new? • World wide dissemination of international standards and best practices • Entry into EU – 2004 • Concentration of Supervision in MFSA • Expansion of financial sector and reputational risk/benefit

29. 2010 Overall Outcome • Positive : progress noted in all assessments • Banking sector : the most clear progress • Insurances : recent extensive changes in the Principles do not allow a proper comparison with 2003 • Securities : progress from an already relatively 2002/3 positive assessment

30. BCP Comparison 2002/3 Assessment Compliant : 11 Largely Compliant: 12 Materially NC: 1 • 2010 Assessment • Compliant :21 • Largely Compliant: 5 • Materially NC : 0

31. Insurance - IAIS • October 2000 methodology : 17 Principles • October 2003 methodology : 28 Principles

32. IAIS Principles - Broad Comparison 2002/3-2010 2002/3---17 ICP Observed: 12 Broadly observed: 3 Materially non observed: 2 2010 ---28 ICP Observed : 22 Largely observed: 4 Partly observed : 2 Non observed : 0

33. IOSCO 2002/3- 201030 Principles 2002/3 Implemented : 22 Broadly implemented:0 Partly implemented: 6 Non-implemented: 0 Not applicable: 2 • 2010 • Implemented: 24 • Broadly implemented: 4 • Partly implemented: 0 • Non implemented: 0 • Not applicable: 2

34. Conclusions Overall progress and strong framework -- Entry in EU -- Implement international standards and best practices -- Reorganization at the MFSA -- Good communication and transparency

35. MALTA Critical Success Factors

36. Legislation • Flexible & versatile legal framework • Civil Law jurisdiction • Business legislation based on English law principles • Old, established juridical system • Laws and Regulations published in English and Maltese

37. Financial Reporting • IFRS – International Financial Reporting Standards since 1997 • Accounting records and bank accounts in foreign currencies • PWC, Deloitte, Ernst & Young, KPMG, Grant Thornton, PKF, BDO, Mazarsetc

38. Human Resources • Multilingual community • English is the working language. Well-spoken Italian,French, Spanish, German; • Free market for labour; • Availability of multilingual graduates in disciplines related to financial servicesas also administrative and clerical staff; • High levels of productivity.

39. Cost Structure - Average Salaries

40. Cost structures - Office Rent(Euros per sq.m. per annum) Dublin 524 London 984 Paris924 Frankfurt 555 Malta 135 Source: CB Richard Ellis – Global Market Rents (Nov 2010) and MFSA Data

41. Taxation • Modern and competitive tax regime • Tax-efficient base for outsourcing activities • Tax system based on the full imputation system: • 35% tax on company profits …… • shareholders receive full credit for any tax paid by the company from which a dividend is received • Double tax treaties with 56 countries

42. The Opportunities • Funds Services • Managed insurance and Re-Insurance Companies • Management of Trusts • Management of Pension Schemes • Financial Institutions • Banking Services

43. COMPETITIVE HIGH QUALITY SKILLS STEADFAST REGULATION AGILITY IN THE MARKET MALTA- the culture of getting things done

44. Thank you! . www.mfsa.com.mt