MALTA EUROPE S NEW MODEL FINANCE CENTRE. Michael Xuereb Director Business Development MFSA

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1 MALTA EUROPE S NEW MODEL FINANCE CENTRE Michael Xuereb Director Business Development MFSA

2 . pop. 400,000 working pop. 150,000 size capital 316 sq km Valletta currency EUR 1 : Lm

3 Financial Services Sector 12% of GDP > 6000 employees Value Added per employee: Euro 33,448 (est.)

4 Industry profile + Eur 20 billion in banking sector assets 32 banking and financial institutions 87 investment intermediaries 127 investment service passport notifications 168 domiciled collective investment schemes 363 UCITS notifications 79 insurance operators Around 2500 companies registered each year

5 Investment Funds Net Asset Value of Funds based in Malta: Lm 2,000,000,000 NAV - LOCALLY BASED CISs Eur 4.4 billion 1,800,000,000 1,600,000,000 1,400,000,000 1,200,000,000 1,000,000, ,000, ,000, ,000, ,000, Series1 8,200,477 47,388, ,362, ,122, ,531, ,395, ,112, ,079, ,330,513 1,812,255,0

6 Investment Funds Locally Based CISs: Retail vs PIFs DECEMBER 2000 DECEMBER 2001 DECEMBER 2002 DECEMBER 2003 DECEMBER 2004 DECEMBER 2005 PIFs Ret ail Tot al

7 Financial Services Legislation Primary Legislation Banking Act Financial Institutions Act Insurance Business Act Insurance Brokers and other Intermediaries Act Investment Services Act Special Funds Act Recognition of Trusts Act (Trustees and Trusts Act) Malta Financial Services Authority Act Central Bank of Malta Act

8 Financial Services Legislation Secondary Legislation Companies (includes Limited Partnerships) Act Financial Markets Act Netting upon Insolvency Act Securitisation Act Supporting Legislation Insider Dealing and Market Abuse Offences Act Professional Secrecy Act Prevention of Money Laundering Act

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

10 Collective Investment Schemes Types of fund vehicles: Investment companies with fixed or variable share capital (SICAVs) Unit trusts Mutual funds Investment partnerships Limited partnership Types of funds Retail Funds: UCITS/Non-UCITS Professional Investor Funds

11 Professional Investor Funds For high net worth and institutional investors Professional Investor Funds Qualifying Investors Experienced Investors

12 Asset Management Fast Track Recognition S.9A for routine administrative services: Preparation of NAV Reconciliations Pricing investment portfolio Payment of bills Preparation of financial statements Fund accounting Performance reporting Compliance reporting Preparing contract notes 4 Licence Categories for specialised core business services: Dealing or arranging deals n financial instruments Managing financial instruments discretion to invest assets in financial instruments Trustee or custody services Investment advice Stockbroking Notification freedom of establishment freedom of services

13 Occupational Pension Funds Users could include: Maltese employers Multi-national companies setting up plans for their own employees Service providers who would create packaged plans for individuals and smaller businesses Individual international executives and professionals

14 Occupational Pension Funds Compatible with EU Directive on Institutions for Occupational Retirement Provision IORP (2003/41/EEC) European Passport Rights for Retirement Schemes Pension Schemes may be set up by contract or as trusts, corporates May invest in Retirement Funds, Collective Investment Schemes, financial instruments May be managed by asset managers who are authorised to passport their services into Malta

15 Banking Credit Institutions Minimum Capital Eur 2million Financial Institutions Niche banking activity Electronic Money Institutions EU Directive 2000/46/EC Minimum Capital Eur 0.5 million

16 Insurance Business Insurance Companies EU standards and legislation, including passporting Captive Insurance Insruance companies set up by: - Large Corporate Groups - Trade, Industry & Professional Associations Insurance Management Companies Insurance Brokers

17 Captive Insurance Key Advantages a) Direct writing b) Protected Cell Company legislation c) IFRS (IAS) reporting standards d) Third party business; e) Continuation of Companies legislation f) Insurance Management Services one of the best overall captive insurance domiciles & best upcoming domicile - Reactions Research May 2006

18 Trusts Trustees require authorisation and regulated to high standards Trusts need not be registered Assets constitute a separate estate owned by trustees Mainstream legislation, no difference as to nationality, residence Signatory to the Hague Convention on recognition of Trusts STEP

19 Companies One company regime, fully transparent Based on UK company law Limited liability companies, limited/unlimited partnerships/branches of overseas companies Redomiciliation from recognised jurisdictions with equivalent laws Share capital/accounts in any currency Shareholders/directors need not be resident in Malta

20 External 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) FATF OECD IMF EU MONEYVAL FSF - FATF OECD IMF EU MONEYVAL - FA

21 MALTA CRITICAL SUCCESS FACTORS

22 Law 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

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

24 Average Annual Salaries General Manager Euro 50,000 Senior IT manager Euro 33,000 Finance & Admin manager Euro 26,000 Network Admin/Programmer Euro 20,000 Executive/Professional Staff Euro 18,000 22,000 Secretary/Clerk Euro 13,000 Clerk Euro 11,000 Receptionist Euro 10,000 Source: Malta Financial Services Authority

25 Financial Reporting IFRS International Financial Reporting Standards since1997 Accounting records and bank accounts in foreign currencies

26 Office Rent (per sq.m. per annum) Dublin 592 London 753 Paris 657 Frankfurt 402 Malta 100 Source: CB Richard Ellis Global Market Rents (May 2006) and MFSA Figures

27 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 43 countries

28 Malta Double Tax Treaties EU Countries Other European Countries Rest of the World Austria Belgium Cyprus Czech Re Denmark Estonia France Finland Germany Hungary Italy Latvia Lithuania Luxembourg Netherlands Poland Portugal Slovenia Slovakia Spain Sweden Utd Kingdom Albania Bulgaria Croatia Iceland Norway Romania San Marino Switzerland Australia Barbados Canada China Egypt India Korea (Rep) Kuwait Lebanon Libya Malaysia Pakistan Syria Tunisia South Africa

29 Malta Double Tax Treaties EU Countries Other European Countries Rest of the World Greece Ireland Russia Serbia Montenegro Ukraine Jordan Morocco Thailand Turkey Singapore United Arab Emirates United States Double tax agreements: signed but not yet in force/initialled: being negotiated

30 Indirect Taxation Banking, financial, insurance and reinsurance activity, deemed to be supplied in the country where the customer is established Back office activity such as accounting, consultancy, data processing, supply of information deemed to be supplied in the country where the customer is established Licensed insurance companies and insurance intermediaries are exempt without credit Acquisition/disposal of shares in an ITC are exempt from the provisions of the Duty on Documents and Transfers Act Social Security: 10% Employer, 10% Employee

31 IT & Telecommunications Highly regarded IT skills Widely available, highly-competent IT support services Advanced telecommunications infrastructure with direct access to all countries Privatisation, deregulation and competition driving telecommunications sector Full competition in data transfer and mobile telephony; Globally competitive package deals for incoming companies.

32 300, , , , ,000 50,000 0 Communication Costs Communication Costs Price per annum for 1Mbps of bandwidth Aug-99 Oct-99 Dec-99 Feb-00 Apr-00 Jun-00 Aug-00 Oct-00 Dec-00 Feb-01 Apr-01 Jun-01 Aug-01 Oct-01 Dec-01 Feb-02 Apr-02 Jun-02 Aug-02 Jun-99 Apr-99 Feb-99 Dec-98 US$

33 Airline Connections Amsterdam Athens Berlin Brussels Cairo Casablanca Dublin London Frankfurt Helsinki Istanbul Larnaca Milan Oslo Paris Rome Stockholm Tunis Tripoli Vienna Zurich

34 MALTA OPPORTUNITIES IN FINANCIAL SERVICES Michael Xuereb Director Business Development MFSA

35 Potential for further growth What makes Malta different from other locations? - single passport (vis-à-vis non EU jurisdictions) - product-driven environment (vis-à-vis most EU jurisdictions) - relative cost advantage (vis-à-vis most established EU financial centres) - English language (vis-à-vis all continental EU jurisdictions)

36 Develop synergies between Maltese firms seeking: Diversification Increase in business Knowledge transfer Distribution channels Foreign firms seeking: Increased cost efficiency Cultural interface with other countries into/out of the EU International expansion with least disruption to business continuity

37 The opportunities open architecture framework for asset servicing and back office activity regional distribution customer servicing access to EU markets cost optimisation

38 Thank. you!