The Malta Financial Services Authority (MFSA) has today published its Annual Report and Financial Statements for the year ending 31 December 2018. Apart from providing an overview of the activities and work carried out by the MFSA, together with details about the industry’s performance last year, it also lays out the Authority’s vision for the coming years.

The Maltese financial services sector continued to register significant growth rates in recent years, with the sector, in 2018 alone, seeing a growth of 9.5% over the previous year. Despite a challenging and highly competitive environment, last year, the MFSA registered a further 144 new entities, as more businesses sought to make Malta their jurisdiction of choice, bringing the number of entities licensed by the MFSA up to over 2,300.

When taking the ancillary services linked to the financial services sector into account, the sector now contributes 11.6% of Gross Value Added (GVA), making it one of the highest-ranking contributors to the Maltese economy.  At the end of 2018, the sector employed more than 12,000 people, 1,000 of which were new jobs generated last year. This brings the share of local employment within the financial services sector up to 5.3%, almost double that recorded for other member states of the European Union, which stands at 2.9%.

The following are some of the key elements of the MFSA’s activity during the year under review:

• Carried out a major restructuring exercise to strengthen the Authority’s organisational capability and prepare it for future challenges;
• Coming into force of the Virtual Financial Assets (VFA) Act in November 2018 which meant that Malta was a trailblazer in the world of distributed ledger technologies and digital assets;
• Took regulatory action against Pilatus Bank and Satabank plc for prudential and AML/CFT breaches;
• Worked closely with the International Monetary Fund (IMF) on a Financial Stability Assessment Programme (FSAP) on Malta, which found that the banking system remains resilient even under severe stress test scenarios – recommendations for improvements in the Authority’s supervisory capacity made;
• Signed a Memorandum of Understanding (MoU) with the Financial Intelligence Analysis Unit (FIAU) to enhance collaboration and improve the intensity of AML/CFT on-site inspections;
• Published over 600 regulatory notifications to guide regulated entities and safeguard consumers of financial services;
• Engaged with the sector 15 times last year, issuing consultation documents on several varying topics, ranging from Initial Coin Offerings and Virtual Currencies to the Retirement Pensions Act and Investor Protection;
• Carried out mystery shopping exercises to gain first-hand evidence of the retail customer experience;
• Delivered over 11,000 hours of training to MFSA employees, 19% over the previous year;
• Demerged the Registry of Companies from the MFSA so that the MFSA can focus better on its regulatory role and duties. The Registry has established itself as a standalone agency and is now known as the Malta Business Registry (MBR).

As part of its supervisory activity, the MFSA kept its focus on the need to ensure market trust and improve the stability and integrity of the financial system in Malta. In his Statement featured in the Annual Report, the MFSA’s Chief Executive Officer Joseph Cuschieri explained that the Authority’s work, during 2018, focused on four specific areas:

• A restructuring and reform exercise in the organisational structure with the express aim of strengthening the Authority’s governance, culture and conduct;
• Combating money laundering and terrorist financing;
• Embracing technological innovation; and
• Re-positioning the Authority as a leading employer.

Mr Cuschieri remarked that, in view of the wide-ranging impact of money laundering and terrorist financing, an issue which has international ramifications, “the Authority will be strengthening its supervisory engagement, with the purpose of achieving our statutory objectives better, and this will, in turn, safeguard the reputation of Malta as a jurisdiction of choice for financial services. Whilst supervisory engagement shall be enhanced across the board, emphasis shall be placed on AML/CFT Supervision, in line with our AML/CFT Supervisory Strategy”.

The MFSA Annual Report and Financial Statements can be downloaded from www.mfsa.mt/annual-report-2018/.

Individuals wishing to receive a hard copy of the Annual Report may send an email to [email protected].

Financial Services - 2018 in numbers

• Deposits within domestic banks grew by 6.1%. These were mainly concentrated in current account deposits, with the share of such deposits amounting to around 70.3%.
• Amount of bank loans and advances grew for domestic banks: 6.3% for Core and 18.0% for non-core
• Total assets of Securities and investment services sector in Malta grew by 8.3%, amounting to €11.7 billion in 2018
• Corporate bonds trading reached €93.7 million in 2018, up 22.5% from 2017.
• The aggregate net asset value of Funds Domiciled in Malta totalled to €11.7 billion, up 8% from 2017
• Locally managed assets of non-Malta domiciled funds grew by 9.1%, amounting to Eur24 billion.
• The number of retirement pension schemes grew by 11.5%, with a total of €5.35 billion in assets.
• 63 breach cases investigated; 7 public warnings issued
• 11,000 hours of training to MFSA employees, 19% more than in 2017
• 15 consultation documents and 7 feedback statements issued to industry and the general public
• Over 600 regulatory notifications published
• 26 adverts corrected. Promotional material published by 9 investment firms, 5 insurance intermediaries and 12 credit and financial institutions was revised by MFSA to safeguard consumers.