The KPMG Financial Services conference will be held on November 1. Anthony Manduca spoke to Juanita Bencini, Partner Risk Consulting Advisory Services, KPMG in Malta, about the theme of the conference and the challenges facing the financial services sector.

KPMG’s Financial Services Conference this year is entitled ‘Maintaining the Vision – Driving Value from Change’. Why this theme?

We chose this theme because it considers financial services on two levels. On the one hand Malta has to maintain the vision of becoming an important financial services centre within the EU. This is the underlying theme of the conference especially since over the space of the last two years, there has been considerable growth in the industry and this in spite of the turmoil that is going on in Europe, particularly in this sector.

The industry has to be part of a government drive to encourage our youngsters to pursue tertiary education

We think that Malta will experience further growth in this industry in the next couple of years as Europe adjusts to the swathe of new regulation. Secondly, at the micro level entities are being faced by a tsunami of regulation which has largely been aimed at the big players but has to be adopted by all and sundry. This is proving to be quite a daunting task and the entities that will survive will be the ones that adapt themselves and their business model, perhaps even spotting opportunities in the additional regulatory obligations.

The financial services sector in Malta so far seems to be immune to the turmoil present in various eurozone markets. What do you think this is so and how long can this situation last?

The whole Maltese economy has demonstrated remarkable resilience to the turmoil, with financial services being one of the main contributors to such resilience. The interest in Malta has never waned during the span of the crisis and even today the MFSA is being kept very busy with several new applications for licences being received on a daily basis. In European circles, Malta is featuring even more and more in debates on financial services jurisdictions of the future.

One of the reasons is the resilience we have demonstrated during the crisis relative to falling confidence in the larger financial centres, where regulators have come under a lot of fire for the way that they supervised financial services entities. Although centres like London, Frankfurt and Luxembourg will always remain the main financial centres in Europe, today more and more players are looking at operating from jurisdictions where the regulation is the same however where there are operational cost savings to be made.

The situation will last for as long as Malta remains competitively priced, quick to turnaround licensing applications and nimble in acceding to the demands and general direction required by the industry, within the parameters set by EU regulation.

What are the main challenges ­facing Malta’s financial services sector?

I think that the biggest challenge is to remain nimble. This is not something that the regulator or the government can do alone – they need constant open communication channels with people in the industry. These are the people who are sourcing the business, meeting promoters and prospective licensees as well as servicing the current operators that are based in Malta. They can therefore provide valuable insights on what their clients are seeing as trends in the industry.

This capability to be in touch with the latest developments in the industry coupled with the ability to react fast has been one of the cornerstones of our success in the past and it has to continue to be so. Another challenge is definitely resources: The financial services industry is driven by competent capable resources. This is why the industry has to be part of a government drive to encourage our youngsters to pursue tertiary education. We need to bring the statistic for tertiary education participation up by at least 10 per cent from the 19 per cent that it is today. Otherwise we cannot hope to attract more business to our shores if resources to man the operations are not ­available.

Banks are inevitably being blamed for much of Europe’s financial crisis. Is this fair and how do you see banking changing over the next few years?

Clearly the objective today to avoid another crisis is one that we all share and banks have been very much at the heart of the crisis. This is because the banking sector has always effectively dominated economies generally and governments are now reacting to the perceived and real dangers inherent in this. Therefore it comes as no surprise that much of the regulation coming out of Europe and the US is specifically aimed at the banking sector.

This is like trying to police a group of troublesome boys – instinctively you suss out who the ringleaders are and try to control them. This increased regulation will inevitably push international banks to change and reshape themselves, even though this should not affect our local banks much since they have never forayed into investment banking and trading activities. To this regulatory push must be added the fact that a banking transaction at a retail branch or through a call centre has been reported as costing an institution $12 whereas that same transaction via a self-service channel costs $0.25.

In the face of narrowing spreads and losses on their investments, there is therefore a compelling case for banks to push customers to the self-service channel, which goes beyond online banking. This new mould for banking will in fact be one of the topics discussed during the banking session at the conference.

There are quite a few conferences related to financial services that are being organised in Malta this autumn. What makes the KPMG conference different from all the rest?

As in previous editions of this conference, we have some key speakers from the international KPMG network. These speakers will draw on information from research carried out in KPMG’s Regulatory Centres of Excellence and in many ways the insight they will provide is unique. This year, for example, we have our Global Head of Retail Banking, David Sayer, who is flying in to make two presentations on the day.

This is the fourth time that we are holding this financial services conference and the response from the market is always very encouraging and every time spurns us on to keep organising this event. We have a formula that is now tried and tested whereby we offer attendees both an update on the global economic scenario as well as a hard look at the Maltese situation and also deal with topics that are specific to the industry and the various sectors in the industry, namely banking, insurance and investment services (where this year the accent will be on funds).

It therefore brings together a very wide representation of the industry from the various sectors. We feel it is important and necessary to bring players from the various areas together because really and truly the way regulation is going, there are common threads which affect all players irrespective whether they are banks, insurance companies or investment services companies.