Not all that rosy with Malta as a financial centre

Last week, we reported that the Z/Yen and the China Development Institute issued the latest Global Financial Centres Index.

This reported that London retained its crown as the world’s top financial centre in a ranking that surveys industry professionals, extending its lead over New York and Hong Kong despite ongoing uncertainty about the implications of Brexit.

It also reported that Malta dropped eight places since March 2017 to 85th out of 92 financial services centres.

Malta improved its points since March by 15 to 609, but dropped in the rankings nevertheless.

London, the UK capital, fell only two points. Frankfurt, Dublin, Paris and Amsterdam - - all set to gain banking jobs that will likely have to leave London -- all rose. In Asia, Hong Kong leapfrogged Singapore into third place, while other US cities followed New York in losing points.

We also reported, in the same issue and on the same page, the FinanceMalta reaction to this index. Elsewhere, the reaction in Malta to the Z/Yen index was that this is a little-known index and that therefore one that should not be taken seriously.

FinanceMalta said that “Malta is experiencing continuous growth and achieving excellent results in financial services. Different to what was reported in the recent Z/Yen Global Financial Services Index, where it was reported that Malta fell 8 places in this global financial services index from 77 to 85 out of 92 jurisdictions, the industry is thriving and performing extremely well. This success was in fact acknowledged in the index, where it was reported that ‘the European Island centres did well and there were strong rises for Malta, Reykjavik and Gibraltar.”

One would have expected this reaction from FinanceMalta, whose role is to promote Malta’s financial services around the world but objectivity demands a more objective assessment.

After all, the 92 financial centres are all out to improve their business and to compete against each other in the difficult world of international finance. To fall eight places from 77 to 85 out of 92 jurisdictions is no laughing matter.

FinanceMalta’s chairman, Kenneth Farrugia said in reply to the findings of the index that in 2016, FDI was up by €9.5bn to €151.4bn of which 98% came from financial and insurance activities, retirement schemes were up from 36 in 2015, to 46 in 2016 and 50 up to June 2017. Other indications that further highlight the success of the industry are the increase in investment services licence holders which improved from 149 as at December 2016 to 163 as at June 2017, the establishment of 60 new funds in the first six months of 2017, the registration of services providers which increased from 67 in 2015 to 140 in 2016 and 158 in 2017.

Also new company and partnership registrations increased to 2,625 in the first half of this year compared to 2,523 for the same period last year.

Mr Farrugia added, given that the index evaluates attractiveness on factors such as infrastructure and access to high-quality staff, small jurisdictions such as Malta are always going to be at a disadvantage because of the size of the market. However this does not mean that the country is underperforming, as what really matters is the real life situation where the industry is exceeding all expectations.

That may all be true, but the stark fact remains that Malta slipped eight places from 77 to 85 out of 92 jurisdictions. There must be something we are not seeing. We would all do well to humbly address what may be hindering us from at least retrieving these eight places if not move forward in the index.