Savings And Investments Union: What Does It Mean For Malta?

1) What is the difference between the SIU and the CMU?

In 2020, the Commission relaunched the through a new Action Plan, partly because progress since 2015 remained incomplete, and EU capital markets were still fragmented.

The 2020 Action Plan was framed as a “CMU for people and businesses” and was shaped by the post-COVID recovery context, as well as by the green and digital transitions. This marked an important broadening of the agenda, with retail investors, financial literacy, long-term savings and pensions becoming more visible within the CMU framework.

The SIU was first conceived in Enrico Letta’s Single Market Report (April 2024), wherein he made the case that Europe needs to better mobilise private capital and turn citizens’ savings into productive investment to strengthen competitiveness and finance the Union’s strategic transitions.

In that sense, the SIU retains the CMU’s core objective of deeper, more integrated and more liquid capital markets, but reframes the discussion around Europe’s savings, households and competitiveness.

In its proposal, the Commission is presenting the SIU as a framework to create better financial opportunities for citizens while improving the financial system’s ability to connect savings with productive investment. It aims to tackle Europe’s underlying challenge of having substantial savings, but too much of this remains in low-yield deposits or is not channelled efficiently into innovation, SMEs, strategic sectors and long-term growth.

For Malta, this changes the way the opportunity should be framed.

The discussion is no longer only about whether Maltese or EU businesses can access capital markets, but rather about whether Maltese citizens and households can be encouraged and supported to move from a strong savings culture, towards a broader savings-and-investment culture.

2) How does the shift in priorities towards households reflect what is happening within EU Member States?

The shift in focus onto households reflects a growing recognition that Europe does not lack savings; but rather it lacks sufficiently effective channels to turn those savings into long-term productive investment.

Across the EU, households hold a significant share of their wealth in low-risk and liquid products. Around €11.5 trillion is held in cash and deposits, representing roughly one third of households’ total financial assets, compared with around one tenth in the United States.

Against this background, the discussion on the SIU has moved beyond the usual question of how to finance companies, towards a broader issue of how citizens themselves – who collectively hold a significant share of the EU’s wealth – can participate more safely and effectively in Europe’s growth.

As highlighted by the European Central Bank, there is a blocked pipeline between savers and innovators: savings often do not enter capital markets in sufficient volumes, but remain fragmented within national markets, or fail to flow effectively towards innovative companies and strategic sectors.

This shift also mirrors developments within many Member States, where ageing populations, pension adequacy concerns, pressure on public finances and major investment needs linked to the green and digital transitions are becoming more pressing.

In this context, it is no longer sufficient for the EU to rely only on banks, public budgets or traditional business financing channels.

The challenge before us is therefore how to offer citizens simple, transparent, affordable and trustworthy ways to invest over the long term, while also safeguarding their interests by ensuring strong investor protection and equipping them with robust financial literacy.

3) Malta has one of the top three savings rates for households (2024). Will the SIU help to nudge investor behaviour into more productive areas? Will it help to diversify into investments where it lies below the EU average?

It is currently expected that the SIU will have a positive effect on encouraging investor behaviour in Malta. However, while the SIU is expected to help create the conditions for a gradual shift in investor behaviour, it will not automatically change household behaviour on its own.

For Malta, the key issue is not whether households save, but whether the financial system will be able to offer simple, trusted, cost-effective, and well-explained routes through which part of those savings can be invested over the long term.

For Malta, the SIU could support diversification in areas where households remain more exposed to deposits and traditional low-risk savings products, and less exposed to capital-market instruments, long-term funds, pension products or other diversified investment vehicles.

However, such a shift would need to be accompanied by suitable enabling conditions, such as stronger financial literacy, appropriate investor protection, trusted advice, simplified and more accessible digital interfaces, access to a sufficiently broad range of products, and an overall smoother investor journey and experience.

The fundamental objective should be to widen informed choice, and not to push citizens or households into investments they do not understand, or to replace prudence with excessive risk-taking.

This would build on steps Malta has already taken through existing national initiatives, such as the ĠEMMA initiative, consumer-awareness efforts by the MFSA, tax incentives for personal pension plans, and ongoing work on an auto-enrolment framework for occupational pension schemes.

Recent Budget measures have also strengthened the broader pensions framework, including through more favourable tax treatment of pension income and continued support for pensioners, thereby contributing to a policy environment that encourages saving, retirement preparedness and long-term financial planning.

4) Will the SIU encourage the creation of more products and services for the financial services sector in Malta?

Yes, this is likely, provided that the SIU is designed in a way that is proportionate and workable for smaller markets.

For Malta, the initiative could open new opportunities in areas such as retail investment products, pension-related services, asset management, fund distribution, advisory services, digital investor tools, fintech, financial literacy solutions and, over time, innovative market infrastructure such as tokenisation.

This opportunity must, however, be supported by two principles.

Firstly, proportionality must be at the centre of the SIU agenda. Smaller markets operate with different structural characteristics: scale is more limited, the number of providers may be smaller, product ranges may be narrower, and retail investor familiarity with capital-market instruments may be less developed. Overly prescriptive or administratively burdensome EU rules could have the undesirable outcomes of increasing costs, reducing product availability, or outright discouraging firms from serving retail investors, undermining the SIU’s objective of broadening participation and building confidence in capital markets.

Secondly, EU-level action should respect the role of Member States in designing tax incentives and domestic measures aimed at encouraging savings, pension provision and long-term investment. Tax policy remains largely within national competence, and it is Member States that are best placed to calibrate incentives to their respective fiscal frameworks, savings patterns, pension systems and market realities.

The SIU should therefore support and complement national efforts, rather than lay down prescribed one-size-fits-all solutions that may not fit all markets.

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