Professor Joseph Bannister, Malta Financial Services Authority's chairman

When a financial institution considers setting up in a new jurisdiction, it wants a regime that is robust, but also fair. For many, the Malta Financial Services Authority ticks all these boxes. Writer Michael Imeson

Click here to view an edited video of the discussion

The Malta Financial Services Authority (MFSA), loosely based on the UK's Financial Services Authority, is widely regarded as being a key factor in how successful the country has been in attracting foreign firms. As a member of the EU, it has the same regulatory model as other member states, but it is allowed some leeway, hence its reputation for being 'firm yet flexible'.

The MFSA has moved away from a strictly rules-based approach towards one that is more principles based. It constantly reviews the rules and from time to time removes what is no longer required. It also looks at regulation in conjunction with the needs of the firms it regulates, and their businesses, and where it can be flexible, it is. The MFSA often refers to its activities as 'services' provided to 'clients', which is an indication of how accommodating it can be.

But it is not an easy touch. It runs a strict regime, and gets close to all of those it regulates and supervises - a comparatively simple job in such a small country. The benefits are twofold - the MFSA gains a better understanding of the soundness of licence holders, and that in turn allows it to be adaptable where possible.

Professor Joseph Bannister is the MFSA's chairman, a position he has held since 1998. He wrote the model for it to become the single financial regulator in 2002 and managed many of the reforms of the late 1990s and early 2000s that allowed the financial sector to evolve. Mr Bannister was educated as a life scientist at Oxford, Cranfield and Malta, and is professor of biomedical sciences at the University of Malta.

"When financial institutions consider setting up in a new jurisdiction, the nature of the regulatory regime is always a factor," says Mr Bannister. "They want a regime that is robust, but one that is also fair and not over-burdensome. They want to be able to discuss their concerns with the regulator, and be made to feel comfortable." (A write-up of the interview appears on pages 88 and 89 of this month's The Banker.)

Watch the video 

This is an edited version of the discussion from The Banker's Exclusive Masterclass Series. Click below to view more:

In the mainstream

When Mr Bannister took over the helm at the MFSA, Malta was still an unreformed 'offshore' jurisdiction. It had already begun reforms in preparation for joining the EU, and Mr Bannister continued that work so that by the time it joined the EU, the financial sector had been transformed.

As the authority's website states, Malta was one of the first six countries in the world to reach an advanced accord on fiscal matters with the Organisation for Economic Co-operation and Development (OECD). "As a result of this agreement, Malta is not considered as a tax haven. It is actively involved with the OECD, the EU and the Commonwealth in modelling global regulatory policy," says the authority. The country's finance industry has therefore benefitted significantly from this policy.

The MFSA restructured itself in January, removing the 'silo-based' structure that had served it well since its creation in 2002, but which had become regarded as too limiting and unwieldy. It was replaced with a more integrated, harmonised structure with overlapping functions and responsibilities, intended to lead to greater consistency in licensing, supervision and internal communications.

A significant development took place towards the end of last year that will boost the pensions sector, and the MFSA had a hand in it. The UK's HM Revenue & Customs recognised Malta as a jurisdiction where pension schemes, regulated by the MFSA, can be considered to be eligible for the status of qualifying recognised overseas pension schemes (QROPS) under UK law.

QROPS allow people who are no longer resident in the UK to transfer pension benefits in a UK recognised pension scheme to a recognised pension scheme elsewhere. This can provide certain tax benefits for both employees and employers. The MFSA is currently processing applications for the registration of pension schemes which, once authorised, can apply to be QROPS, providing additional business for firms involved in Malta's pensions sector.

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