Malta: Securitisations Will Strengthen Malta's Competitive Position

Last Updated: 20 July 2017
Article by Finance Malta

Most Read Contributor in Malta, July 2017

Malta's launch of its Institutional Securitisations Market (ISM) later this year will put the country on a competitive footing in the sector with Luxembourg and Dublin, according to Managing Partners Group (MPG), the international asset management group.

Securitisation is a financial technique for raising loan capital that involves a firm issuing a corporate bond backed by certain speci­fied assets owned by the firm.

Jeremy Leach, Chief Executive Officer at MPG, believes the move signifies a huge effort by the Malta Stock Exchange (MSE) in advancing its services and improving the quality of financial services conducted in the country.

The timing of the launch, in which the ISM will become a segment of the MSE, also coincides with the introduction this year of the new 'Simple, Transparent and Standardised Securitisations' regulations (STS) by the Capital Markets Union, whose legislative measures aim to promote a safe and liquid market for securitisations.

The Malta securitisation framework is highly attractive: no VAT is applied to transactions, no withholding tax is payable on dividends or interest, and importantly, there is no taxation on profit made inside securitisations in Malta.

"This means that tax-free profits can be accrued inside an asset-backed security to offset the depreciation of the underlying assets, which significantly reduces the default risk," Mr Leach said.

However, Mr Leach believes that Malta's securitisations could be more attractive if they were to drop the requirement for securitisations to have a trustee overseeing them. He added: "Many of the transactions involving the underlying assets within securitisations are esoteric, so getting someone with the specialist knowledge can be a difficult task, and for this reason it is not always a straightforward exercise to appoint a trustee. Ireland requires this but Luxembourg does not, which gives it a major advantage in attracting business."

MPG held a seminar at the Westbury Hotel in Mayfair, London, for accountants and fund managers to showcase Malta as a domicile for debt capital markets within the EU.

Speaking at the seminar, Stephanie Galea, Head of Business Development and Marketing at the MSE, commented: "The ISM will be a regulated and very specialised market for institutional investors. We anticipate that it will be attractive to those issuers looking for a less expensive alternative to other markets but still with high professional standards and a comprehensive range of services to give issuers and investors a one-stop shop in this sector."

Ivan Grech, Head of Business Development at FinanceMalta, the public-private initiative set up to promote the country as an international financial centre, told delegates at the seminar that Malta's legal and regulatory framework made it highly accessible and business-friendly, while its highly educated workforce, robust and developed operational infrastructure, cost-competitiveness and political/economic stability provided a safe jurisdiction.

Mr Grech said: "Malta's GDP growth is among the highest in the EU and its unemployment is the lowest. Malta's financial services industry is driven by an eco-system of sector diversity."
MPG opened an office in Malta in 2015 to launch a securitisation platform for the issuance of asset-backed securities by its asset management and third party buy-side clients. A key factor in this decision was Malta's securitisation law, which is the most up to date and pre-empts a lot of the issues encountered by the aging laws in competing jurisdictions and has established the country as a leading European Union jurisdiction for the issue of asset- backed securities.

The group is a multi-faceted investment house that specialises in managing alternative asset classes for institutions and sophisticated investors and is a market leader in structuring and managing mutual funds and securitisation vehicles.

MPG manages a wide range of financial products that principally invest in pro­perty, life settlements, absolute return and hedge fund asset classes. The group has offices in Malta, Spain, Switzerland and the United Kingdom. It currently manages funds with a gross value of $500 million.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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