Finance Minister Prof. Edward Scicluna said that the forthcoming Alternative Investment Fund Managers Directive, which will take effect as from mid-July 2013 will present the financial services sector with many challenges but also opens up a number of opportunities to increase Malta’s competitiveness especially outside the EU.
Prof. Scicluna was delivering the opening address to Ernst & Young’s 2013 Annual Hedge Fund Symposium on Friday 24th May 2013, at the Westin Dragonara resort.
During his address, Scicluna also said that it has now become accepted that Malta’s banking and financial sector has proven itself sound and resilient, and that Malta’s risk of contagion from other ailing member states is low.
Scicluna said that Malta has weathered the ongoing economic severe and sovereign debt crisis well, and that our economy continues to grow.
“Our debt is higher than the 60% we are committed to as members of the Eurozone, but not anywhere near the unsustainable levels seen other member states. The rate of unemployment is just 6.5%, and exports are still buoyant. Inflation is under control at 0.9%.”
He noted that while Malta does face challenges, these represent opportunities for the country to address inherent issues and undertake necessary reforms so as to maximise economic growth potential.
One such challenge, Prof. Scicluna said, is the energy sector, in which Malta remains hampered by near-total reliance on oil as an energy source, which is resulting in among the highest energy prices in the European Union – a state of affairs acknowledged by the International Monetary Fund.
“Yet all in all, and especially in the light of the problems faced by many other European countries, Malta is doing well,” he said.
Turning to the financial sector, Prof. Scicluna said that this represents one of Malta’s proudest success stories, born out of a regulatory framework which enjoyed bipartisan support.
Prof. Scicluna noted that among the factors that contributed to this success was that Malta’s banks have “consistently and responsibly maintained good banking practices, which until just a short time before made them look unexciting and conservative.”
“The result, however, was that they met the crisis head on equipped with strong balance sheets, capital ratios well above regulatory minima, and strong loans-to-deposits ratios. This translated into stability for the banks themselves and, importantly, for the businesses that relied upon them for operating credit and ultimately for the economy as a whole.”
Noting the recent Cypriot crisis, Prof. Scicluna said that despite initial attempts to draw parallels between Malta’s banking sector, and those in other ailing member states, it is now accepted that Malta’s banking sector is not afflicted by the inherent weaknesses that proved the downfall of others.
“Maltese domestic banks, which represent a total assets proportion of 218% of GDP, have limited exposure to securities issued by the program countries and are less vulnerable to the destabilizing withdrawal of non-resident deposits. This is largely because its debt is mostly held domestically and its banks have low exposure to the sovereign debt of peripheral European countries.”
It is to this effect that credit rating agencies Fitch and Standard & Poor’s, Bloomberg, Nomura Global Services, the European Commission, and most recently the International Monetary Fund, concluded that Malta’s risk of contagion from other ailing member states is low, and that Malta’s banking and financial sector has proven itself sound and resilient, Prof. Scicluna said.
– Friday, 24th May, 2013