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MT 11 May 2014

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maltatoday, SUNDAY, 11 MAY 2014 XIV Keeping in touch with MEPs is mutually benefi cial After a distinguished career in fi- nancial services with Barclays, Mid- Med and HSBC Malta, as well as a stint as CEO of the MFSA, James Bonello could have easily retired. However, his interest in banking led him to take the reins as Secretary General at the Malta Bankers' As- sociation, where he has been serving for a decade. When it comes to knowledge about the evolution of Malta's financial services industry, James Bonello has a unique perspective. Bonello explains that the Maltese banking sector is complex but stable and very distinctive due the specifics of the structure of the sector. "The size of the Maltese banking sector, close to 800% of GDP, does not present any undue financial stability concerns as the sector is very diverse in terms of inter-linkages with the domestic economy". The Central Bank of Malta distinguishes between 3 types of banks, according to the extent of their linkage with the Maltese economy. There are 14 "internationally-oriented banks" whose assets amount to 494% of GDP. These banks have almost no links to the domestic economy. Non-core domestic banks' assets represent 77% of GDP. These banks undertake some business with Maltese residents, but not as their core activity. Core domestic banks rely predominantly on resident deposits for their funding, and whose loans are mainly (98%) to Maltese residents. These banks' total assets represent 218% of Malta's GDP, a ratio which is well within the Eurozone average of around 400% of GDP. In order to continue building a world-class financial services jurisdiction, Bonello advocates maintaining steady and prudent adherence to the quality factors that make Malta unique in the region. "The successful growth of the financial services industry in Malta over the past decade has been underpinned by a combination of factors which together blend to make the island an attractive proposition for financial operators. "Political and economic stability, cemented by EU and Eurozone membership, together with a sound regulatory framework, and the accessibility and firm but flexible approach of the single Regulator, have provided a solid base on which the business has flourished. Added to this, costs across the board are measurably lower than in other centres, and businesses also benefit from a tax efficient, full imputation system and double taxation treaties with over 50 countries. "These and other favourable aspects should ensure further sustained growth of the industry. With financial services broadly accounting for around 12% of GDP, the Government's aim is to continue to build on this success and to sustain the sector as a key pillar of the Maltese economy." Bonello says that improvements to the European framework for financial services are welcome. "It is not envisaged that the advent of a Banking Union should bring about any meaningful changes to the prudent business model that has traditionally been adopted by banks in Malta. We are supportive of such a Union, which should ensure that all banks are subject to the same regulatory and supervisory standards, thereby maintaining a level playing field. "The Union also aims to break the link between sovereigns and the banking sector, and to provide an efficient common crisis management framework. To the extent that these steps serve to restore and underpin stability and confidence in the EU's banking sector, the Banking Union should prove to be of benefit to all the banks concerned." While whole-heartedly supporting reform, Bonello says some care is required not to allow European regulatory systems to become overly complex with implications for competitiveness. Here, he mentions the proposed Financial Transaction Tax (FTT) as an example. "We endorse the Malta Government's position against the introduction of the FTT on the basis that this would be detrimental to EU banks' business if the tax is not adopted on a global basis." He says that the European Parliament and the MEPs need to be mindful about resources. "This institution has a key role in the formulation and approval of EU legislative measures and despite Malta's limited representation in the Parliament, experience has shown that there is always scope for influencing the debate with reasoned arguments. "A closer collaboration between Malta's MEPs and relevant institutions would therefore be welcome in order to ensure a proper understanding of the issues concerned from the industry's viewpoint, and to maximize the efforts of our limited resources towards achieving the desired common goals." PHOTOGRAPHY BY RAY ATTARD James Bonello of the Malta Bankers' Association cautions that Europe needs to be careful not to burden financial services with over-regulation Europe 2014

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