1,000 new jobs created in financial services sector

Finance Minister Tonio Fenech has told Parliament that a thousand new jobs were created in the financial services sector over the last three years. Since 2004, the value of deposits increased to €26 billion.

Piloting the second reading of the Retirement Pensions Bill, Mr Fenech said the Bill would give Malta a modern financial sector framework to attract more activity, increased employment opportunities and more profit for the country.

The Bill, which would substitute the 10-year-old Special Funds Act, would establish a regulatory framework for international retirement schemes and pension funds. It would also provide the framework for pensions under the third pillar as envisaged by the pensions working group. It did not affect local pensions because these were regulated by the Social Security Act.

Mr Fenech said that the number of professionals and other well-paid employees in the financial services sector increased to 9,600 when 12,000 were employed in the tourism sector. This was a sector with opportunities for University and Mcast students.

The Bill was needed because of further developments in the sector over the last years and obligations under the EU 2003 directive. It would deal with international pension schemes and not with the national social security pension and would serve to strengthen foreign investments in this sector.

The Bill would introduce the concept of establishing a base for the international pension market in Malta. This was also possible because the UK had recently awarded Malta the qualified overseas pension schemes certification. As a result, six international pension schemes were being operated from Malta. The bill aimed at attracting similar investment to the financial sector.

The Bill also strengthened the financial services sector which maintained high standards under the supervision of the Malta Financial Services Authority. A recent World Economic Forum competitive index ranked Malta in the eleventh position with regard to the developments in the financial services and in the eighth position with regard to bank stability.

Operators of these schemes would need a licence to operate in Malta and not just registration as was the practice since. This strengthened the regulatory framework because of the process of due diligence enabling Malta to hold its high repute in the sector.

The Bill provided clearer definitions of employment and private schemes. These would incorporate the third pillar pension schemes in Malta in the future. The Bill was less prescriptive and easier to implement because regulations had to be issued by the financial authorities or by legal notices. It was similar in structure to other financial laws and provided provisions for good governance, regulatory and investigative powers.

Winding up the debate at the end of the sitting, Minister Fenech said that the political stability of the country also impinged on how well Malta did in the financial services sector. This had continued to contribute towards development.

Investment in education as well as establishing expertise in different aspects of the sector was necessary. One of the main aims of the proposed law is to foster specialised sectors and contribute towards their growth.

Any tax schemes that were made available to funds and other businesses within this sector are to be considered as part of the holistic impetus that the government was seeking to give to the sector. Malta also needed to address the personal income of experts in this field to be able to entice them to work and operate in Malta. He particularly noted the concept of custodian banks for which an interest has already been shown by a number of players in the field.

Although the law could impinge on the wider reform of the pension schemes, especially the third pillar pensions, it was not connected with the consultation being undertaken by the Pensions Working Group. The main amendments in this law were necessary for the financial services sector and were being proposed after consultation with relevant stakeholders. The amendments would seek to tap into a wider potential and to attract foreign companies and investment. However this was being done within a responsible regulatory framework to ensure not only investor protection but also protection of Malta’s reputation in the field.

Issues related to national pensions were addressed through the pension reform of five years ago, and that consultation was still ongoing for the implementation of second and third pillar pensions.

The amendments would not change the regulatory framework and would not put into risk those funds already established in Malta, but would strengthen the legislative framework. It was important that developments in this sector took place within responsible framework.

Minister Fenech thanked the Malta Financial Services Authority for having put Malta on the forefront and for having established Malta’s good reputation in the sector. Progress could not be done in only one niche within the financial services sector, but must be widespread over different aspects of financial services, thus allowing Malta to provide different services and ensuring a development of the sector that contributes to the economic good of the country.

Mr Fenech also invited the MFSA to collaborate with guidance teachers so that young people were guided towards studying for employment within the financial services sector.

Nationalist MPs Frederick Azzopardi and Karl Gouder also contributed to the debate. The Bill was unanimously approved.

The House rose for the Easter recess and stands adjourned for Monday, May 2.