Recently Dr Jason Azzopardi, the Opposition’s spokesperson for Employment, Training, Competitiveness and Enterprise has been making a song and dance about the surrender of licences by financial institutions. He has tried to spin this as the result of the FATF decision on Malta.
Without wanting to diminish the importance of our country working rapidly towards successfully achieving the action plan agreed with the FATF, it is important to explain to people not so familiar with the financial services sector that the claim of Dr Azzopardi is pure hogwash.
Financial institutions opt to surrender their licence for a variety of reasons, and this has always been a feature of Malta’s financial services industry. This is very easy to demonstrate. Go to the MFSA website and make a simple search for “surrender of licence” for the period spanning 8 March 2012 and 7 March 2013 – the last year of a Nationalist administration, of whom Dr Azzopardi was a member. This reveals that there was an average of one surrender of licence per week. Using the same logic adopted by Dr Azzopardi, this search would imply that since there were 28 surrenders of licence during the 2012/13 election campaign, this was due to a fear of a change inadministration.
However, a quick look at the statistics issued by the MFSA of the number of licences issued every quarter reveals that during the first quarter of 2013, while there were 25 surrendered licences for collective investment schemes, there were 26 new licences issued. Similarly, during the same period while there were 2 investment services firms that surrendered their licence, there were 8 newly licenced investment services firms.
Trying to spin the surrender of licences as a sign that the FATF decision is resulting in an outflow of millions of funds,shows that the Opposition does not have a basic grasp of the way the financial services sector operates. It is as laughable as the claim made by Opposition Leader Bernard Grech that within 90 days from his appointment as Prime Minister, Malta would be off the FATF monitoring list. As if the FATF agenda and their scheduled meetings would ever be adjusted just to reflect the electoral cycle of Malta.
Moreover, the attempt by some in the Opposition to claim that the surrender of licences is news that is being hidden by Government is also false, as these are easily found on the MFSA website and are documented prominently in the statistics that this authority issues every quarter.
The surrender of licences has always happened and will always happen. Even during the “golden age of impeccable governance and sky-high reputation” Malta was in under the previous administration. In the MFSA 2012 Annual Report’s section on collective investment schemes one reads the following, “during the year, the Authority accepted the surrender of 81 Professional Investor Funds, 14 UCITS funds and one Non-UCITS fund”. This besides the surrender of several investment services firms.
The table below documents the amount of surrender of licences per year for just investment services firms and collective investment schemes. Between 2013 and 2020 there were 91 surrenders of investment services licences and 779 surrenders of collective investment schemes licences. In just the two final years of the previous Nationalist administration there were 15 surrenders of investment services licences and 126 surrenders of collective investment scheme licences.
To someone not familiar with the financial services sector, these statistics may sound terrifying. In ten years, we have had 905 surrenders of collective investment scheme licences and 106 surrenders of investment services licences. Some might fear that Malta’s financial services sector must have disappeared entirely by now. Well in 2011 there were 100 active collective investment schemes and 109 investment services active licences. Despite all these surrenders, in 2020 there were 525 active collective investment schemes and 150 investment services active licences.
The Nationalist Party has had a number of experts who were fundamental in the setting up of Malta’s financial services sector. However, it now finds itself with spokespersons that are clearly incapable of understanding the sector’s basic workings. This does not bode well for the drawing up of legislative proposals and tax policies that could sustain this sector through the changes in the international and technological environment.
For it to continue to prosper, the financial services sector requires much more informed policy makers.