Malta's financial services sector is growing quickly. A challenge is drawing in enough skilled professionals to keep pace, its prime minister and finance minister say.

Malta faces the “problem” of how to recruit sufficient people to keep pace with the jurisdiction’s rapid growth as a financial services centre, the country’s prime minister has said, while also cautioning against excess regulatory zeal at home and abroad.

Dr Joseph Muscat, the Maltese prime minister, told an industry conference that his administration is pushing to aid labour market demand in financial services through, for example, its policy of providing free childcare to make it easier for women to enter or re-enter the workforce after having children. It is also exploring tax incentives to attract talent from abroad.

More than 400 delegates gathered at the Hilton Hotel, St Julian’s, in the Mediterranean island late last month for a Finance Malta conference exploring how Malta can maintain its edge as a financial centre at a time when traditional models of business are being challenged by developments such as fintech and the ever-present flow of regulation from the European Union and elsewhere.

With financial services accounting for around 13 per cent of gross domestic product in the island, the importance of keeping competitive is clear.

“It is obvious that Malta is going through a good time for economic performance and in terms of financial results. Right now we are increasingly experiencing problems...the right kind of problems, such as service providers coming to my office and complaining about their not having enough people and having enough space,” Dr Muscat said. 

His colleague, Professor Edward Scicluna, minister for finance, said the country benefited from its openness to foreign-born workers as demands rose. “We have a very open policy in terms of human resources. It gives us the capacity to grow without overheating. Without input from people from abroad, Malta would have hit a ceiling a while ago. Luckily, this [openness] has contributed a labour market [that] is not that tight yet,” he said, responding to a question from WealthBriefing.

Financial prowess
Malta has become a higher-profile player as a financial and wealth management jurisdiction in recent years, home to a number of private banks, as well as a significant sector in funds, trusts, private client law firms, accountancy firms, along with sectors such as shipping, insurance and aviation. There are 26 banks, with players such as HSBC, Banif Bank, FIMBank and Bank of Valletta. Among the private banks serving wealthy individuals, for example, is Mediterranean Bank. Gross domestic product rose by 6.3 per cent last year and investment rose 21.4 per cent in 2015. Malta, a former British colony and now a European Union member state, has risen in prominence in recent years; in 2014 it unveiled a citizenship-by-investment scheme open to high net worth individuals, similar in some ways to programmes operated in Portugal, Spain and the UK. It is also in the process of introducing legislation aimed at attracting family-run businesses.

Besides government figures such as Dr Muscat, the conference heard comments about regulatory developments from the Malta Financial Services Authority, issues around banking supervision and resolution from PricewaterhouseCoopers; the challenge of financial technology and the involvement of venture capital and alternative investments, and finally, ideas on how to achieve best practice in protecting consumers and dealing with complaints when matters go wrong.

A theme from two of the main figures from the Malta government was about getting a balance right and the challenges of avoiding booms and busts in economics.

The rapid growth of Malta as a financial centre creates its own strains, Dr Muscat said.

“We cannot get away from the fact this is a country of around half a million people. To persuade people to come to the [European] 'periphery' is not always easy,” he said.

Dr Muscat also highlighted a concern that “knee-jerk” reactions from regulators to past financial problems carried their own costs. “My concern is that we are moving to over-regulation and going to another extreme. We are in favour of smart regulation but totally against over-regulation,” he said. 

One problem is that all financial services and jurisdictions are being treated alike and suffer from unfair perceptions from certain quarters, he said. “We are in charge of a system [in Malta] that is very proud to offer high-end and transparent services to customers, but we need to realise that there is this perception,” he added.

A stress on the need for charting a “moderate” course between lax regulation and excessive zeal was also set out by Professor Scicluna.

The regulatory climate still feels the effect of the 2008 financial crisis, Professor Scicluna told delegates. “Banks can’t move; banks can’t open accounts and banks can’t lend. US banks don’t want to touch Southern Europe, North Africa and the Middle East. This is what happens with extremities and in not going down the moderate path,” he said.