A report released by PricewaterhouseCoopers LLP titled "Back to the future" expects that governments around the world that have intervened to support financial institutions in response to the global financial crisis will need to prepare for long-term involvement and ownership.

The complexity of individual financial institutions' situations, difficult market conditions and an unattractive disposal environment combine to make the possibility of governments exiting their stakes in the private sector in the short term highly unlikely.

Jan Sturesson, global government leader at PricewaterhouseCoopers LLP, commented: "Realistically, for many governments it will take years to dispose of their stakes in financial institutions. It is not unreasonable to expect that it will take two to three years to sell major stakes, but up to five to seven years before governments are able to fully divest of their stakes and related guarantees."

Jeremy Scott, global financial services chairman, PricewaterhouseCoopers LLP, added: "Governments need to accept, given the limited likelihood of a quick extraction from the sector, that their main focus needs to be on the positive role they can play, given they are 'inside the tent'. With governments retaining stakes in financial institutions for some considerable time they have three key public policy challenges to navigate.

"They must be seen to be 'good owners' focusing on wider social and economic objectives as well as narrow financial goals; rebuild the confidence and trust that are essential for the financial system to function efficiently; and put in place credible plans to address fiscal deficits."

While the timing of governments' exits is inherently difficult to predict, particularly given market conditions, the challenge of valuing assets and market volatility, the report highlights examples of state involvement that has been successful.

Based on the experience of bailing out banks in countries such as Sweden, Norway and Japan and recent bank privatisations in Central and Eastern Europe, current expectations for early sales of large government stakes are misplaced. The key lesson from past privatisations is that the financial institutions or non-bank firm needs to be cleaned up prior to sale.

Kevin Valenzia, territory senior partner at PricewaterhouseCoopers Malta, said, "Internationally, we now face a greatly changed world with the governments looking set to be an integral part of the future shape of the financial services industry for some time to come. What is clear is that the crisis is not over. The aim must be to return the financial system to health, with trust restored, credit formally flowing again and capital more efficiently allocated, while government stakes return to private hands having generated an acceptable return to the taxpayer.

"Locally, while conscious of the difficult economic environment that prevails, in our view the signs for Malta's financial sector are positive and encouraging, and we should continue to take all the necessary steps to ensure that they remain so."