Under the Microscope 2015

FINANCIAL SERVICES

Under the Microscope

A Review of the Maltese Banking Sector for Financial Year 2014

October 2015

A REVIEW OF THE MALTESE BANKING SECTOR 1

© 2015 KPMG, a Maltese Civil Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. All rights reserved.

At KPMG in Malta (“KPMG”) we have long felt that the Maltese market lacked a publication which provides insightful analysis of the performance of Maltese licensed banks, over a given period. It is with this in mind that we present our first edition of Under the Microscope. The first truly comprehensive stock-take of banks in Malta.

The banking sector in Malta has wit-nessed significant growth in the past decade. Indeed, since Malta’s acces-sion to the EU in 2004 we have seen the number of banks grow from 16 to 28. During 2014 alone, three banks were licensed by year-end and KPMG is proud to have been associated with

the licensing of all three, confirming our standing in the market as leaders in the banking space. Despite this growth however, the availability of impartial financial analysis for the country’s credit institutions remains very limited and generally restricted to the major players in the domestic market. This publication seeks to go some way to resolving this issue and aims to be a point of refe-rence for those interested in getting a clearer understanding of the banking industry in Malta. More specifically, in this review, we provide answers to the following four questions:

• How are the major credit institu-tions performing?

• How do banks operating in the same space compare?

• What trends are we currently see-ing in the banking sector?

• What do we think will be the most important issues that Maltese licensed banks will have to deal with over the coming year?

Whether you are an industry professio-nal or just looking to gain an overview of the sector, we hope that you find this publication an interesting and insightful read.

Foreword

Juanita Bencini Partner, Risk ConsultingAdvisory Services KPMG Malta

Noel Mizzi Partner, Audit ServicesKPMG Malta

Table of contents

04 09 13Introduction Approach The Profile of

Maltese BanksRegulators Key Figures

12 1407Glossary

Key Figures Core Domestic BanksAPS Bank LimitedBanif Bank (Malta) plcBank of Valletta plcHSBC Bank Malta plcLombard Bank Malta plcMediterranean Bank plc

Non-Core Domestic BanksBAWAG Malta Bank LimitedFCM Bank LimitedFIMBank plcIIG Bank (Malta) LtdIzola Bank plcSparkasse Bank Malta plc

International BanksAgriBank plcCommBank Europe LimitedDeutsche Bank (Malta) LtdECCM Bank plc Ferratum Bank plcNBG Bank Malta LimitedNemea Bank plcNovum Bank LimitedPilatus Bank Ltd

Industry Outlook

17 25 33 39

4 A REVIEW OF THE MALTESE BANKING SECTOR


Juanita BenciniPartner,

Risk Consulting

Advisory Services

+356 2563 1143 [email protected]

Mark CurmiSenior Manager,

Banking Advisory Services


Noel MizziPartner,

Audit Services


Anthony PacePartner,

Taxation Services


Introduction



INTR

ODUC

TION

Malta’s financial services sector, of which banking is a major part, currently directly contributes 8.5% of the coun-try’s GDP and around 8.5% indirectly to GDP1.

The increase in the number of registe-red banks in Malta since EU accession in 2004 reads a staggering 75%. More impressive is that this growth was registered without a loss of stability. Indeed, the World Economic Forum (WEF) found Malta’s banks to be the 10th soundest in the world in 20142.

So what characteristics have made Malta such an attractive international fi-nancial centre? Eurozone membership is undeniably important, but more sig-nificant is the country’s highly-qualified yet cost-effective workforce, favourable tax system for corporations and robust legal and regulatory frameworks. The culmination of these factors make

Malta an attractive domicile with a sig-nificantly lower cost of doing business than other parts of the EU.

In this Report we will be looking more closely at what makes banks in Malta successful – where they differ from one another and what they have in common. The banks have been divided into the following categories: core domestic, non-core domestic and international. The main sections of this publication contain an analysis of the banks’ financial positions and key trends.

The final section brings KPMG’s insight and expertise through the pen of our competent subject matter experts on trends and issues relevant to the Mal-tese banking industry.

Helping you cope with Regulatory ChangeComplexity and change are driven by numerous forces, both external (regulations, marketplace events) and internal (new products, business models)- all of which impact your organisation. KPMG’s Risk Consulting Team can shape the thinking of Boards and Management regarding complex business issues. The team is composed of dedicated specialists who are well placed to assist you with your efforts towards regulatory compliance and beyond.The team, which is supported by a wider global network, is experienced in managing diverse issues including, but not limited to, regulatory compliance, anti-money laundering, governance structures and capital management.

We welcome the opportunity to discuss what KPMG’s Risk Consulting Team can offer to you.

Contact us:Juanita BenciniPartner, Risk Consulting Advisory ServicesT. +356 2563 [email protected]

www.kpmg.com.mt

Download the KPMG Malta App:



Glossary

AEoIAIFsAQR

BCBS239

BnCARCBMCET1

CIRCMU

CrCRS DAC

DrECBECL

ECOFIN

ESCBEU

EUSDFATCA

FIAUFTT

FVOCI

FVTPLFY13FY14GDP

Automatic Exchange of InformationAlternative Investment FundsAsset Quality ReviewBasel Committee on Banking Supervision Rule 239BillionCapital Adequacy RatioCentral Bank of MaltaCommon Equity Tier 1Cost-to-Income RatioCapital Markets UnionCreditCommon Reporting StandardsDirective on Administrative CooperationDebitEuropean Central BankExpected Credit LossesThe Economic and Financial Affairs CouncilEuropean System of Central BanksEuropean UnionEuropean Union Savings DirectiveForeign Account Tax Compliance ActFinancial Intelligence Analysis UnitFinancial Transactions TaxFair Value Through Other Comprehensive IncomeFair Value Through Profit or LossFinancial Year 2013Financial Year 2014Gross Domestic Product

HTMKYCIAS

IFRS

LACLBT

MM&A

MFSANAVNED

NIINIL

OECD

OFOI

PATPB

PBTPCC

RICCROE

SMEsSSM

UCITS

USWEF

Held-to-maturityKnow Your CustomerInternational Accounting StandardsInternational Financial Reporting StandardsLoans and Advances to CustomersLoss before taxMillionMergers and AcquisitionsMalta Financial Services AuthorityNet Asset Value Non-Executive DirectorNet Interest IncomeNet Impairment LossesOrganisation for Economic Co-operation and DevelopmentOwn FundsOperating IncomeProfit after taxPrice to BookProfit before taxProtected Cell CompanyRecognised Incorporated CompaniesReturn on EquitySmall and Medium-Sized EnterprisesSingle Supervisory MechanismUndertakings for the Collective Investment in Transferable SecuritiesUnited StatesWorld Economic Forum

GLOS

SARY

Economy

• Total GDP: €8.0 billion3 (Q2 2015: €2.1billion4).• Real GDP Growth: 3.5%3 (Q2 2015: 5.2%4): • GDP per capita in Purchasing Power Stan-

dards relative to the EU-27 average (2014): 85%5.

• Unemployment rate (2014 Q4): 5.9%6 (June 2015: 5.5%)7.

Taxation

• Double taxation treaties with 69 countries11.• Corporation tax of 35% but full imputation

tax system which completely eliminates the economic double taxation of company profits.

• Apart from operating a full imputation system, Malta operates a tax refund system redu-cing the effective tax rate to between nil and 6.25%.

Regulators

• The Malta Financial Services Authority (MFSA) acts as the sole Regulator for Credit and Financial institutions in Malta.

• In view of the fact that Malta is part of the Eurozone, the Central Bank of Malta is now integrated with the ECB.

Government

• The current Labour Government came into power in 2013. Next elections are due in 2018.

• This Government has promised continued support for the financial services sector.

• Inflation rate of 0.8% (2014)6 (June 2015: 1.1%)7.

• Largest contributors to Gross Value Added (2014): Trade, Accommodation (22.3%); Public Administration and Defence, Education (19.4%); Manufacturing (12.2%); Arts and Entertainment (9.8%) ;Financial and Insurance Activities (7.2%)7.

• The Financial Intelligence Analysis Unit aids in the flow and analysis of information so as to combat money laundering and the funding of terrorism.

• Malta’s Sovereign rating.• Fitch: A/F1;• S&P: BBB+/A-2;• Moody’s: A315.

• Government Deficit 2014: 2.1% of GDP9.• Total Government debt 2014: 68% of GDP10.

• Maximum personal taxation rate of 35%, for those earning €60,001 upwards. Tax free inco-me up to € 8,500 under single rates.

• Highly qualified foreign executives can benefit from a flat rate of 15% tax rate on income up to €5m. Any income over and above this will be tax-free.

(Sources: NSA Gross Domestic Product: Q4/20141, CBM Quarterly Update: Q3 20142,MFSA Annual Report 20143,Finance Malta ‘Banking Sector Guide 2015-164,Eurostat5,http://mfsa.com.mt/pages/licenceholders.aspx6, CBM FSR update 20147, www.financemalta.org/double-taxation-agreements8, https://ird.gov.mt/services/taxrates.aspx#20159,GCI 2014/1510

Key Sector Information



Banks

• 28 active credit institutions12.• Loans 2014: €16.4 billion13.• Deposits 2014: €31.2 billion13.• Total Assets 2014: €52 billion13:• 135 Bank Offices and Branches13. • Ranked 10th of 144 countries for soundness

of banks in 20142.

Insurance

• Mature domestic market.• 9 domestic players15.• 60 licensed insurance undertakings15:• 45 Non-Life15;• 6 Life15;• 2 Composite15;• 7 Reinsurance15.

Trusts & Funds

Trusts• 89 registered trusts in Malta (June 2015)16.• Foreign trusts can re-domicile to Malta wi-

thout having to dissolve and re-incorporate.

IFC

(International Financial Centre)

• Ranked 36th of 144 countries for Financial Market Development2.

• Ranked 13th of 144 countries for strength of auditing and reporting standards2.

• Leverage Ratio 2014: Core Banks: 7.3%, Non-Core Banks: 10.4%, International Banks: 50.1%14 .

• Average Capital Adequacy Ratio 2014: Core Banks : 14.9%, Non-core Banks: 18.7%, Inter-national Banks: 54.3%14.

• The only full European member state to offer Protected Cell Company legislation, allowing risks to be written through individual cells.

• Can passport their services to other EU countries.

• The RICC structure is similar to that of a PCC. The difference between the RICC and PCC structure is that each incorporated cell within the RICC is a separate legal entity.

Funds• Winner of Hedge Fund Review award’s “Most

Favoured Domicile in Europe” in 2014.• Funds registered in Malta (June 2015): 61716,17.• Net Asset Value 2014: €9.7bn13.

• Highly educated workforce -60% of students continue onto further education18.

• Ranked 24th of 144 in capacity to attract talent in 20142.

KEY

SECT

OR IN

FORM

ATIO

N



Approach

This Report is based on the Annual and interim results (where appli-cable) of: AgriBank plc, APS Bank Limited, Banif Bank (Malta) plc, Bank of Valletta plc, BAWAG Malta Bank Limited, CommBank Europe Limited, Deutsche Bank (Malta) Ltd, ECCM Bank plc, FCM Bank Limited, Ferra-tum Bank plc, FIMBank plc, HSBC Bank Malta plc, IIG Bank (Malta) Ltd, Izola Bank plc, Lombard Bank Malta plc, Mediterranean Bank plc , Medi-terranean Corporate Bank Ltd, NBG Bank Malta Limited, Nemea Bank plc, Novum Bank Limited, Pilatus Bank Ltd and Sparkasse Bank Malta plc.

Akbank T.A.S., Credit Europe Bank N.V. Branch Malta and Turkiye Garanti

Bankasi A.S, being branches of in-ternational banks operating in Malta, have been excluded from the analy-sis. Volksbank Malta Limited was also not included in view of its acquisition by Mediterranean Bank plc in 2014 and subsequent renaming to Medite-rranean Corporate Bank Ltd.

In view of the fact that Satabank plc, Yapi Kredi Bank Malta Ltd and Credo-rax Bank Limited are all new banks, they are yet to release their first financial statements as at the time of writing and have therefore been excluded from this analysis.

This Report is primarily based on 2014 Annual Group results and preceding

APPR

OACH

period comparatives. In the assess-ment of Lombard Bank Malta plc, the results of Redbox limited, which is the Bank’s subsidiary holding shares in Maltapost p.l.c. have been exclu-ded. Similarly, in the assessment of the results of AgriBank plc, the results of AgriFunding 13-1 Ltd have been excluded in view of the fact that the latter had been incorporated in October 2013.

All data in sections 13 to 39 has been obtained solely from publicly available sources. The analysis has, in most cases and as much as possible, utilised comparable data to provide meaningful results.


The Move Towards Global Automatic Exchange of Information (AEoI)

Over 90 countries, including Malta, have

committed to implementing the OECD’s initiative,

the Common Reporting Standard

(“CRS”)

1.1.2016 is the big bang date for introducing the new due diligence

requirements

Financial Institutions must consider the impact on the overall customer experience of AEoI and try to keep requests to a minimum, while still satisfying requirements of various regimes.

Differences between FATCA and CRS means that Financial Institutions may not be able to use the same due diligence and reporting systems for both standards.

Financial Institutions with a significant customer or investor base will result in a substantial increase in the volume of data to be identified and potentially reported upon.

CRS is not FATCA 2.0 CRS introduces a major increase in reporting requirements – FATCA is much narrower in scope than CRS.

Non-Compliance makes headlines, protect your business against reputation risks.

Automatic Exchange of information is not new, but it is only recently that the push became more global in scope.

AEoI @ KPMG

KPMG has a dedicated team of AEoI experts, whose knowledge and skill set spans a variety of

disciplines, working across multiple sectors with clients of all sizes to deliver automatic exchange

of information (commonly referred to as AEoI, including CRS) solutions.

Our team has extensive experience and competence in advising and assisting with respect to FATCA and

AEoI compliance. This includes assisting with entity classification, registration with the Commissioner for

Revenue, due diligence requirements including the identification and remediation of pre-existing accounts and

updating of client on-boarding procedures, reporting and any ad-hoc advice as requested including AEoI programme

healthchecks.

Smart Data

Collection

Over 90

countries committed

1st

January

2016

Contact our AEoI Professionals:

Juanita BrockdorffPartnerE: [email protected]

T: +356 2563 1000www.kpmg.com.mt

Jessica SullivanManagerE: [email protected]

Justyna BielikAssistant ManagerE: [email protected]

Sonia BrahmiAssistant AdvisorE: [email protected]

Lisa Zarb MizziAssociate DirectorE: [email protected]



The Profile of Maltese Banks

The Central Bank of Malta splits Malte-se banks into three categories:

• Core Domestic banks can be loose-ly defined as those which provide an array of banking services and are core providers of credit and deposit services in Malta. Typically, these banks operate through a branch network.

• Non-core domestic banks play a more restricted role in the Maltese economy, since the suite of ban-king services they offer to Maltese residents are somewhat limited and usually restricted to deposit taking.

• International banks are those which predominantly offer their services to persons residing outside Malta

Malta also hosts branches of Turkish (2) and Dutch (1) credit institutions.

Core Banks19

• APS Bank Limited• Banif Bank (Malta) plc• Bank of Valletta plc

THE

PROF

ILE

OF M

ALTE

SE B

ANKS

• HSBC Bank Malta plc• Lombard Bank Malta plc• Mediterranean Bank plc• Mediterranean Corporate Bank

LimitedTotal number of Core Banks: 7

Non-Core Banks19

• BAWAG Malta Bank Limited• FCM Bank Limited• FIMBank plc• IIG Bank (Malta) Ltd• Izola Bank plc• Sparkasse Bank Malta plc• Credorax Bank LimitedTotal number of Non-Core Banks: 7

International Banks19

• AgriBank plc• CommBank Europe Limited• Deutsche Bank (Malta) Ltd• ECCM Bank plc • Ferratum Bank plc• NBG Bank Malta Limited

• Nemea Bank plc• Novum Bank Limited• Pilatus Bank Ltd• Satabank plc• Yapi Kredi Bank Malta LtdTotal number of International Banks: 11

Branches of foreign Banks19

• Akbank T.A.S. • Credit Europe Bank NV Malta

Branch • Turkiye Garanti Bankasi Anonim

SirketiTotal number of Branches: 3

Following the adoption of the Single Supervisory Mechanism (SSM), Bank of Valletta plc, HSBC Bank Malta plc and Deutsche Bank (Malta) Ltd are be-ing directly supervised by the European Central Bank (ECB), since these were considered to be Significant Banks in 2014/2015. Mediterranean Bank plc has, more recently, been included in the list of banks directly supervised by the ECB.



Regulators

Malta Financial Services Authority (MFSA)

Central Bank of Malta (CBM)

Since its establishment in 2002, the MFSA has been the sole regulator for financial services in Malta. Its key func-tions include regulating the conduct of the financial services industry, by publi-shing rules, regulations and guidance notes to the industry, supervising the industry through its various Supervi-sion Units and liaising with national and supranational organisations such as the ECB. The regulation and supervision

The role of the CBM has evolved substantially since it was established in 1968. Originally, the Central Bank was tasked with the implementation of exchange rate policy, the management of the country’s reserves, banking su-

conducted by the MFSA mainly encom-passes credit institutions, financial institutions, securities and investment services, regulated markets, insurance companies, pension schemes and trus-tees. Malta’s Registry of Companies is also housed within the MFSA.

2014 was a watershed year for banking supervision as the MFSA prepared itself for a joint-supervisory approach

pervision and the provision of currency and banking services to the govern-ment, public sector and banks.

In 1994, the CBM’s operations and the industry as a whole began to mo-

with the ECB, through the implemen-tation of the SSM. The SSM has been operational since 4th November 2014.

The country’s size has allowed the MFSA to build a reputation as an accessible yet serious regulator, which establishes constructive working relationships with the companies it regulates.

dernise, with the Bank gaining more autonomy in the determination of mo-netary policy. In 2002, the Central Bank was granted full autonomy, as Malta prepared for EU membership. In 2004, responsibility for the supervision of the

Regulators



REGU

LATO

RSFinancial Intelligence Analysis Unit (FIAU)

The FIAU became operational in 2002, and as an independently operating unit, aids in the flow and analysis of informa-tion so as to combat money launde-ring and the funding of terrorism. The FIAU is part of the Egmont Group, the informal international association of Financial Intelligence Units, currently comprised of 147 members.

Alongside its watchdog obligations, the organisation is tasked with the

education and training of professionals working in the financial services indus-try, so as to develop the relevant skills and awareness in anti-money launde-ring. The FIAU has recently expanded its operations, so as to increase its monitoring, analytical, and administra-tive capacity to enable it to fully meet the challenges it will face over the coming years.

Malta Stock Exchange (MSE) and the banking sector was transferred to the MFSA. Since then, the Central Bank’s focus has been the maintenance of financial stability.

Upon gaining EU and Eurosystem

membership, in 2004 and 2008 res-pectively, the CBM became part of the European System of Central Banks (ESCB). The CBM is now integrated within the decision making bodies of the ECB.



Key Figures

Total assets Amounts owed to

customers

Net Interest Income/

(expense)

Net fee and commision

income/(expense)

Profit/(loss) for the

financial year

Profit before Tax

€ million € million € million € million € million € million

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Core Domestic Banks1 APS Bank Limited 1,108 965 893 781 22 22 3 3 9 9 13 142 Banif Bank (Malta) plc 619 596 579 554 9 8 2 2 1 0.1 1 0.33 Bank of Valletta plc 8,297 7,258 7,120 6,220 126 131 56 52 69 79 104 1164 HSBC Bank Malta plc 7,199 5,722 4,867 4,518 120 125 28 30 34 59 52 905 Lombard Bank Malta plc 676 594 578 499 14 15 2 1 3 4 5 66 Mediterranean Bank plc 2,784 2,204 1,206 777 34 31 1 1 30 19 34 30

Non-Core Domestic Banks7 BAWAG Malta Bank Limited 353 1,245 2 3 9 14 (0.1) (0.4) 10 (2) 13 0.38 FCM Bank Limited 50 25 38 16 0.3 0.1 (0.02) (0.01) (1) (0.4) (1) (1)9 FIMBank plc 1,161 896 431 313 21 12 16 17 (34) (3) (40) (3)10 IIG Bank (Malta) Ltd 129 80 92 59 2 2 0.1 (0.3) 1 0.5 2 111 Izola Bank plc 148 119 91 71 2 2 3 2 2 2 4 312 Sparkasse Bank Malta plc 442 235 409 206 2 2 4 3 3 3 5 4

International Banks13 AgriBank plc 10 8 1 1 1 0.4 (0.2) (0.1) (0.6) (0.4) (0.9) (0.6)14 CommBank Europe Limited 1,677 1,931 0 0 62 83 1 4 58 68 68 8215 Deutsche Bank (Malta) Ltd 538 2,829 4 41 15 52 1 3 9 47 14 7216 ECCM Bank plc 102 455 0 0 0.4 41 0.03 2 (0.3) 34 (0.4) 4217 Ferratum Bank plc 21 13 0 0 18 4 (0.5) (0.1) 2 0.1 4 0.118 NBG Bank Malta Limited 1,375 1,468 542 525 17 18 1 1 12 12 13 1319 Nemea Bank plc 24 9 18 3 0.1 0.2 2 1 0.2 0.04 0.3 0.120 Novum Bank Limited 13 10 2 1 0.2 0.1 10 2 (2.0) (7) (2) (7)21 Pilatus Bank Ltd 111 N/A 85 N/A 0.3 N/A 0.1 N/A 0.3 N/A 0.3 N/A

For ease of perusal, all figures in the above table, exceeding €0.5million, were rounded up to the nearest €million.



KEY

FIGU

RES

ROE CET 1 Capital

Own Funds Staff Branches

percentage € million € million number number

2014 2013 2014 2014 2013 2014 2013 2014

8.9% 10.3% 89 104 87 258 241 113.8% 0.6% 18 22 24 150 164 1217.5% 21.1% 464 576 592 1,539 1,536 427.7% 13.9% 306 376 366 1,389 1,338 293.8% 5.3% 72 76 76 157 151 8

19.7% 15.5% 166 218 152 249 227 6

11.8% (0.2%) 86 86 140 8 8 1(11.6%) (5.3%) 7 7 7 11 9 1(24.5%) (2.8%) 138 143 96 329 227 1

9.0% 4.3% 12 15 10 11 6 29.2% 8.6% 21 24 21 13 11 1

15.4% 12.3% 19 19 21 31 21 1

(7.8%) (5.1%) 6 6 7 9 5 12.7% 2.1% 1,492 1,492 1,642 8 8 11.8% 1.7% 24 24 2,228 5 9 1

(0.3%) 7.8% 102 102 442 10 15 119.6% 0.5% 12 12 10 101 34 14.3% 4.6% 271 271 259 25 26 14.5% 0.7% 5 6 5 23 11 1

(34.4%) (117.6%) 6 6 6 55 31 12.6% N/A 10 9 N/A 6 N/A 1

Core Domestic Banks1 APS Bank Limited2 Banif Bank (Malta) plc3 Bank of Valletta plc4 HSBC Bank Malta plc5 Lombard Bank Malta plc6 Mediterranean Bank plc

Non-Core Domestic Banks7 BAWAG Malta Bank Limited8 FCM Bank Limited9 FIMBank plc10 IIG Bank (Malta) Ltd11 Izola Bank plc12 Sparkasse Bank Malta plc

International Banks13 AgriBank plc14 CommBank Europe Limited15 Deutsche Bank (Malta) Ltd16 ECCM Bank plc 17 Ferratum Bank plc18 NBG Bank Malta Limited19 Nemea Bank plc20 Novum Bank Limited21 Pilatus Bank Ltd

For ease of perusal, all figures in the above table, exceeding €0.5million, were rounded up to the nearest €million.

Interesting times for M&A globally

+13% anticipated increase in

capacity for M&A deals by June 2015

$1 trillion and growing -M&A Boom in

2014

Over a 5 year period, KPMG has been the

KPMG’s Transactions and Restructuring team, which runs a portfolio of M&A transactions in various sectors, is the place to turn to for a broad range of advice on your M&A transaction. Building on our experience, we can support you with services that cover the full life cycle of a deal – and help you create the value you seek, while avoiding unnecessary surprises.

M&A @ KPMG

mid-market financial advisor globally1.#1

“Our acquisition strategy enables us to derive quick added value through the exploitation of our core strengths in other,

related fields.”

....but the M&A process has its set of challenges

38% 29%20%

#1 Well- executed

integration plan

#2 Correct valuation / deal price

#3 Effective due

diligence

Mergers and Acquisitions (M&A): Growth in the fast lane

Contact our Transactions and Restructuring team:

Sources: KPMG M&A Predictor Tool, Bloomberg Businessweek (2014)

Source: KPMG 2014 M&A Outlook Survey Report

+16% increase in M&A appetite

since June 2013

Tonio ZarbSenior PartnerE: [email protected]

David CaruanaPartnerE: [email protected]

David PacePartnerE: [email protected]

Mario J VellaDirectorE: [email protected]

Hermione ArciolaDirectorE: [email protected]


Feedback from M&A professionals on the key deal success factors to focus on:

Growth motivates deals - local companies are typically sharing the following thoughts:

1Source: Thomson Reuters

“We grow our business via acquisitions. It gives us immediate access to expertise, products and a footprint in the market.”

“Through this acquisition we have extended our product portfolio so we are now able to offer a more complete solution

to our clients.” “Our local market is mature. We are looking overseas for growth.”

M&A in Malta: What’s the deal?




CORE

DOM

ESTI

C BA

NKS

Core Domestic Banks

20

21

22

23

24

25

APS Bank Limited

Banif Bank (Malta) plc

Bank of Valletta plc

HSBC Bank Malta plc

Lombard Bank Malta plc

Mediterranean Bank plc

Interesting times for M&A globally

+13% anticipated increase in

capacity for M&A deals by June 2015

$1 trillion and growing -M&A Boom in

2014

Over a 5 year period, KPMG has been the

KPMG’s Transactions and Restructuring team, which runs a portfolio of M&A transactions in various sectors, is the place to turn to for a broad range of advice on your M&A transaction. Building on our experience, we can support you with services that cover the full life cycle of a deal – and help you create the value you seek, while avoiding unnecessary surprises.

M&A @ KPMG

mid-market financial advisor globally1.#1

“Our acquisition strategy enables us to derive quick added value through the exploitation of our core strengths in other,

related fields.”

....but the M&A process has its set of challenges

38% 29%20%

#1 Well- executed

integration plan

#2 Correct valuation / deal price

#3 Effective due

diligence

Mergers and Acquisitions (M&A): Growth in the fast lane

Contact our Transactions and Restructuring team:

Sources: KPMG M&A Predictor Tool, Bloomberg Businessweek (2014)

Source: KPMG 2014 M&A Outlook Survey Report

+16% increase in M&A appetite

since June 2013

Tonio ZarbSenior PartnerE: [email protected]

David CaruanaPartnerE: [email protected]

David PacePartnerE: [email protected]

Mario J VellaDirectorE: [email protected]

Hermione ArciolaDirectorE: [email protected]


Feedback from M&A professionals on the key deal success factors to focus on:

Growth motivates deals - local companies are typically sharing the following thoughts:

1Source: Thomson Reuters

“We grow our business via acquisitions. It gives us immediate access to expertise, products and a footprint in the market.”

“Through this acquisition we have extended our product portfolio so we are now able to offer a more complete solution

to our clients.” “Our local market is mature. We are looking overseas for growth.”

M&A in Malta: What’s the deal?




APS Bank Limited Financial year ended 31st December 2014

APS Bank Group (“APS” or the ‘Group’) comprises of APS Bank Limited (“APS” or “the Bank”), APS Consult Limited (the ‘Subsidiary’) and APS Funds SICAV p.l.c. APS Bank Limited was initially established in

1910. Founded by l’Unione Cattolica San Giuseppe, APS has been majority owned by the Archdiocese of Malta since November 1947. APS offers a ran-ge of personal and corporate banking services, with wealth management

Loans and advances to banksLoans and advances to customersBalances with CBM, treasury bills and cashInvestmentsOther Assets

Assets as at 31.12.2014

Pro

fit B

efo

re Ta

x €’

000s

RO

E a

nd

Tie

r 1

Cap

ital

Rat

io

2012 2013 2014

16000 -

14000 -

12000 -

10000 -

8000 -

6000 -

4000 -

2000 -

0 -

- 18%

- 16%

- 14%

- 12%

- 10%

- 8%

- 6%

- 4%

- 2%

-

5%3%

35%

1% 56%PBT ROE Tier 1 Capital Ratio

services provided through the Bank’s subsidiary APS Funds Sicav p.l.c. The Bank is mainly driven by its social commitment towards the community, including ethical considerations and youth development.

2014

PBT

€12.8m

2014

Total Assets

€1.1bn

2014

CET 1

14.9%

2014Cost-Income

Ratio

54.7%

2014

LAC

€632.6m

2014Net

Impairment Losses

€1.2m

The Group’s PBT for 2014 decreased by 7.6% (or €1.1m) over the preceding financial year, largely due to a significant increase in write-downs.

The Group registered an increase of 15% (or €143m) in its asset base over financial year ended 31st

December 2013. This expansion was driven mainly by increases in Loans and Advances to Customers totalling €75m (or 14%). In terms of liabilities, the largest contributor remained customer deposits, which increased significantly by €112m (or 14%). Total customer deposits as at 31st December 2014 amounted to €893m (2013: €781m).

The Group has registered a strong CET1 ratio of 14.9% as at 31st December 2014, while CAR stood at 17.5% (2013: 15.5%). Total Own Funds as at 31st December 2014 amounted to €104m (2013: €92m), of which CET 1 amounts to €89m (previous year: €77m). CET 1 is largely composed of share capital (2014: €58m).

The Group has registered a slight improvement in its Cost-Income Ratio, down from 56.6% in 2013 to 54.7% in 2014.

The Group’s leading credit risk emanates from lending to households and individuals, representing 63.1% of Loans and Advances to Customers, gross of provisions, as at 31st December 2014. The Group’s exposure to SMEs as at 31st December 2014 amounted to €169m.

NIL for 2014 increased significantly over the previous year, and amounted to €1.2m, given that the Bank registered Net Impairment Reversals of €1.6m during the prior year..

Key Metrics



RO

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Cap

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PBT ROE Tier 1 Capital Ratio

Banif Bank (Malta) LimitedFinancial year ended 31st December 2014

Banif Bank (Malta) plc (“Banif” or “the Bank”) has been operating in Malta since 2008, during which time it has established itself as one of the industry’s core banks. The Bank is

a fully-owned subsidiary of Banif S.A. Banif and has established a network of 14 branches spread across the Maltese Islands. Banif offers a range of personal and corporate services. Banif’s banking


Assets as at 31.12.2014Key Metrics

Pro

fit B

efo

re Ta

x €’

000s

2012 2013 2014

1600 -

1400 -

1200 -

1000 -

800 -

600 -

400 -

200 -

0 -

- 8%

- 7%

- 6%

- 5%

- 4%

- 3%

- 2%

- 1%

-

27%3%4%

5%

61%

model is mainly geared towards lending to the local community, with a specific focus on small and me-dium-sized enterprises (SMEs).

2014

PBT

€1.4m

2014

Total Assets

€619.1m

2014

CET 1

6.7%

2014Cost-Income

Ratio

76.9%

2014

LAC

€378.2m

Banif registered an increase in PBT in 2014 of €1.1m (or 454%) over financial year 2013. This was largely due to an increase in NII of 7.6% (or €0.6m) and Net Fees and Commission Income of 25% (or €0.4m). Concurrently, the Bank reduced its Interest Payable expense by €1.2m (or 7.9%).

The Bank registered an increase of 4% (or €23m) in its asset base over FY13. This expansion was dri-ven mainly by increases in Loans and Advances to Banks amounting to €45m (or 37%) and Loans and Advances to Customers totalling €36m (or 10%). In terms of liabilities, the largest contributor remai-ned customer deposits, which increased by €25m (or 4.5%). This resulted in a total customer deposit base of €579m as at 31st December 2014 (2013: €554m).

As at 31st December 2014, the Bank maintained a CAR of 8.4% (2013: 8.3%), whilst the CET1 ratio stood at 6.7%. The Bank’s Own Funds amounted to €22.2m as at 31st December 2014. This was mainly composed of share capital amounting to €32.5m, which was in turn negatively impacted by accumulated losses of €10.5m. The Bank’s CET 1 capital stood at €18m as at the end of 2014.

The Bank has registered a significant decrease in the Cost-Income Ratio from 87% in 2013 to 77% in 2014.

Banif’s credit risk is mainly concentrated in lending to households and individuals. This represents 64% of loans and advances to customers as at 31st December 2014.

NIL during FY14 amounted to €1.8m, resulting in an increase of 38% (or €0.5m) over FY13. The corpo-rate banking sector accounted for €1m NIL during 2014.

CORE

DOM

ESTI

C BA

NKS

2014Net

Impairment Losses

€1.8m



Bank of Valletta plc Financial year ended 30th September 2014

Bank of Valletta p.l.c. (“BOV” or “the Group”) established in 1974, is the largest and the oldest credit institu-tion in Malta. At present, the Maltese Government holds 25.23% of the Group, whilst the Italian Banking giant UniCredit S.p.A holds 14.55%,

the remaining equity is held by the general public. BOV presently provides retail banking and commercial services, insurance services as well as provi-ding administration and management services to various types of investment funds. Since November 2014, the Bank

Pro

fit B

efo

re Ta

x €’

000s

2012 2013 2014

118000 -

116000 -

114000 -

112000 -

110000 -

108000 -

106000 -

104000 -

102000 -

100000 -

98000 -

- 25%

- 20%

- 15%

- 10%

- 5%

- 0%

13%10%

29%

2% 46%

has been directly supervised by the European Central Bank. BOV provides a wide array of banking services to its customers, and is the most diversified bank when compared to other domes-tic players.

2014

PBT

104.1m

2014

Total Assets

€8.3bn

2014

CET 1

11.7%

2014Cost-Income

Ratio

43.1%

2014

LAC

€3.9bn

2014Net

Impairment Losses

€19.4m

The Group’s PBT for year ended 30 September 2014 decreased by 10% (or €12m). This decline in profit was mainly attributable to lower Interest Receivable on Loans driven by a low interest rate environment, which decreased by 5% (or €8m). The decline in profit has been reversed during the interim period en-ding 31st March 2015, wherein the Group registered an increase in PBT by 16% (or €8m) when compa-red with the six months ending 31st March 2014.As at 30th September 2014, the Group registered a significant increase in its asset base amounting to €1bn (or 14%), driven mainly by an increase in Investments of 45% (or €0.8bn). Deposits from custo-mers also increased by €0.9bn (or 14%). Similarly, during the six month period ending March 2015 the Group increased its asset base by €746m (or 9%) and amounts owed to customers by 9% (or €658m), over the financial year ended 30th September 2014.

BOV registered a CET1 ratio of 11.7% as at the end of September 2014. As at 31st March 2015, the Bank registered a slight increase in its CET 1 ratio, which resulted in 11.8%. Moreover, the Group had a Total CAR of 14.5% as at end of September 2014 (16.5% as at September 2013). The reduction in the Bank’s CAR year-on-year resulted from an increase in the Bank’s Total Risk Weighted Assets of €0.4bn. The Bank’s total Own Funds as at 30th September 2014 amounted to €576m, of which €464m represent CET 1 capital.

The Bank has registered an increase in the Cost-Income Ratio from 38.7% in 2013 to 43.1% in 2014. An increase in fees caused by the introduction of a new regulatory reporting regime as well as the Bank’s participation in the AQR, resulted in an increase of 5% (or €4.4m) in operating costs during FY14.

The Group’s Lending and Advances to Customers (LAC) as at 30th September 2014 totalled €3.9bn, representing an increase of 5.3% over 2013. Loans to households and individuals, which comprise 42.6% of LAC, increased by €131.5m (or 8%) over 2013. The Bank’s lending is concentrated in the wholesale and retail trade sector (9% of LAC), the financial and insurance activities sector (8% of LAC), the transportation and storage sector (8% of LAC), and the construction sector (7% of LAC).

NIL during the financial year 2014 amounted to €19m, resulting in a decrease of 24% (or €6m) over 2013.

Key Metrics




RO

E a

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r 1

Cap

ital

Rat

io



2014Net

Impairment Losses

€22.5m

HSBC Bank Malta plc Financial year ended 31st December 2014

HSBC Bank Malta p.l.c. (“HSBC” or “the Group” or “the Bank”) is one of the three largest licensed banks in Malta and is considered to be a systematically important bank. It for-ms part of the international banking

giant HSBC Group. Since November 2014, the Bank has been directly super-vised by the ECB. HSBC was establi-shed in Malta in 1999 following the acquisition of 70.33% in equity holding in Mid-Med Bank plc. The Bank servi-

Pro

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x €’

000s

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E a

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Tie

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Cap

ital

Rat

io

2012 2013 2014

120000 -

100000 -

80000 -

60000 -

40000 -

20000 -

0 -

- 18%

- 16%

- 14%

- 12%

- 10%

- 8%

- 6%

- 4%

- 2%

- 0%

12%5%

36%

2% 45%

ces principally the personal and com-mercial funding requirements of the domestic market. HSBC is actively engaged in enabling domestic players to access international opportunities.

2014

PBT

€52m

2014

Total Assets

€7.2bn

2014

CET 1

10.6%

2014Cost-Income

Ratio

56.8%

2014

LAC

€3.3bn

The Group’s PBT for the year ended 31st December 2014 decreased by 42% (or €38m) to €52m, when compared to FY13. In addition, NII decreased by 3.6% (or €4.5m) year-on-year. During the interim period ending 30th June 2015, the Bank registered a decline in PBT of €4m over the preceding interim period.

As at end of FY14, the Group’s asset base totalled €7.2bn, representing an increase of 25.8% (or €1.5bn) year on year. This expansion was driven mainly by increases in Loans and Advances to Banks by €310m (or 55%), as well as an increase in Debt and Other Fixed-income Securities of €236m (or 26%), year-on-year. Deposits held by customers totalled €5bn as at 31st December 2014, registering an increase of €349m (or 8%) over the preceding year.

The Group has registered a CET 1 ratio of 10.6% as at 31st December 2014. The CAR remained constant at 12.9% when compared to 2013 (13%). As at 31st December 2014, HSBC registered CET 1 capital of €305.7m and Tier 2 capital of €70.7m, leading to an accumulated Own Funds of €376.4m. The Bank increased its CET 1 ratio to 11.5% as at the end of the interim period ending 30th June 2015.

The Bank has registered an increase in the Cost-Income Ratio from 49.9% in 2013 to 56.8% in 2014. This increase was mainly driven by an increase in expenditure of €5m, year-on-year, which represent increased levels of regulatory and compliance costs.

As at 31st December 2014, the Bank was mainly concentrated in lending to households and indivi-duals, which represent 56% (or €1.9bn) of the Bank’s total gross maximum exposure to customers. Additionally, HSBC’s lending is also skewed towards the wholesale and retail trade sector (11%) and the construction sector (9%).

During FY14, the Bank registered NIL of €22.5m, representing an increase of €19m year-on-year. Total write-downs by the Bank during FY14 amounted to €34m.

CORE

DOM

ESTI

C BA

NKS






Lombard Bank Malta plc Financial year ended 31st December 2014

Lombard Bank Malta plc (“Lombard” or “the Bank”) was initially esta-blished in Malta in 1955 and was subsequently nationalised in 1975. In 1991, the Government sold its equity in the Bank, which was then listed on the Malta Stock Exchange in 1994.

The major shareholder of the Bank is Cyprus Popular Bank Public Co Ltd, which has a 48.9% shareholding in the Bank. Moreover, the Bank has an equity holding of 70.08% in the Maltese postal operator, namely Maltapost plc.



2012 2013 2014

9000 -

8000 -

7000 -

6000 -

5000 -

4000 -

3000 -

2000 -

1000 -

0 -

- 20%- 18%- 16%- 14%- 12%- 10%- 8%- 6%- 4%- 2%-

27%6%

8%

12%

47%

Lombard’s banking model focuses mainly on the provision of credit fa-cilities to customers originating from the commercial sector and operating within the property and construction Industry.

2014

PBT

€4.9m

2014

Total Assets

€675.8m

2014

CET 1

15.9%

2014Cost-Income

Ratio

47%

2014

LAC

€319.4m

2014Net

Impairment Losses

€4.6m

The Bank’s PBT for year ended 31st December 2014 decreased significantly (by 23% or €1.5m) when compared to the financial year ended 2013. An enhanced regulatory regime introduced in 2014 resul-ted in an increase in compliance costs for the Bank. This added burden impacted mainly Other Opera-ting Costs, which increased by 15% to €3m. Moreover, NII declined by 5% (or €0.7m) during 2014.

As at 31st December 2014, Loans and Advances to Banks increased significantly by €115 (or 168%), and was the major contributor to the Bank’s increased asset base by €81m (or 14%) over the previous financial year. Amounts Owed to Customers also increased substantially, registering an increase of 16% (or €79m) , year-on-year.

The Bank’s CAR as at 31st December 2014 stood at 16.8% (2013: 19%). The decrease in the Bank’s CAR was largely due to the increase in risk-weighted assets (€50m). Moreover, the Bank has registe-red a strong CET 1 ratio of 15.9% as at 31st December 2014. The Bank’s total Own Funds amounted to €76m, which is mainly comprised of CET 1 capital (€72m).

The Bank has registered an increase in the Cost-Income Ratio from 42.3% in 2013 to 47% in 2014.

The Bank’s credit risk exposure is mainly concentrated in lending to customers within the property and construction industry, which represent 54% (or €180m) of the Bank’s Total Gross Advances to Customers.

During 2014, NIL increased by €0.5m (or 12%) over the preceding year.

The results of Redbox limited, which is the Bank’s subsidiary holding shares in Maltapost p.l.c. have been excluded.


RO

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Cap

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Rat

io

Pro

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efo

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x €’

000s



CORE

DOM

ESTI

C BA

NKS

Key Metrics

2013 2014 2015

35000 -

34000 -

33000 -

32000 -

31000 -

30000 -

29000 -

28000 -

27000 -

- 25%

- 20%

- 15%

- 10%

- 5%

-

Mediterranean Bank plc(Including Mediterranean Corporate Bank Ltd) Financial year ended 31st March 2015

Mediterranean Bank plc (“the Group” or “the Bank”) was granted a credit institution licence by the MFSA in 2005. Subsequent events led to the recapitalisation of the Bank when it was acquired by a UK private equity firm AnaCap Financial Partners LLP.

As a result of the Bank’s growth in the local market, in 2015 the Bank was re-classified from a non-core bank to a core domestic bank. In September 2014 the Bank acquired Volksbank Malta Limited (“Volksbank”). Subsequently, Volksbank was integrated within the Group and has

6%2%

54%

38%

since been rebranded as Mediterranean Corporate Bank Ltd. The Bank provides a wide array of savings products, weal-th management and investment ser-vices. Mediterranean Corporate Bank Ltd is solely focused on the provision of services to corporates.

2014

PBT

€34.5m

2014

Total Assets

€2.8bn

2014

CET 1

11.3%

2014Cost-Income

Ratio

54.1%

2014

LAC

€1bn

2014Net

Impairment Losses

€4.3m

The Group registered an increase in PBT for year ended 31st March 2015 of €4.6m (or 15%), when com-pared to the financial year 2014. This increase in the Group’s profit was mainly due to an increase in NII of 9% (or €3m). Other Operating Income during FY15 includes the gain on the acquisition of Volksbank, which amounted to €22m. The Group also suffered a write down in the value of financial instruments of €4.2m.

The Group’s total asset base comprises mainly investments, totalling €1.5bn and Loans and Advan-ces to Customers, totalling €1bn. On the liabilities side, Amounts Owed to Customers increased by €429m (or 55%) over 2014, whilst Amounts Owed to Financial Institutions totalled €1.2bn (2014: €1bn) as at 31st March 2015.

The Group’s Own Funds as at 31st March 2015 totalled €218m, and are mainly comprised of CET 1 capital (€166m). The Bank’s CAR as at 31st March 2015 stood at 14.8% whilst it’s CET1 ratio for the same period resulted in 11.3%.

The Group has registered an increase in the Cost-Income Ratio from 53.2% in 2013 to 54.1% in 2014.

The Group’s model is mainly concentrated in lending to corporates, which represents 96% (or €1.1bn) of the Bank’s Gross Loans and Advances to Customers.

During the year ended 31st March 2015, NIL increased by €2.2m (or 105%) over the previous repor-ting period, resulting in total NIL amounting to €4.3m.




RO

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Rat

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Pro

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x €’

000s


TimelineIssue date24 July 2014

Effective date1 January 2018

Annual report31 December 2018

20152014 2016 2017 Mar June Sep Dec

Interim reportsEarly adoption permitted

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Strategic partnership Tools and accelerators Market insight and relationships

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For further information how KPMG can help your business, please contact Jonathan Dingli, Director at [email protected] or +356 2563 1405.

www.kpmg.com.mt



NON

-COR

E DO

MES

TIC

BAN

KS

Non-Core Domestic Banks

28

29

30

31

32

33

BAWAG Malta Bank Limited

FCM Bank Limited

FIMBank plc

IIG Bank (Malta) Limited

Izola Bank plc

Sparkasse Bank Malta plc



BAWAG Malta Bank LimitedFinancial year ended 31st December 2014

BAWAG Malta Bank Limited (“BAWAG” or “the Group”) was licensed in Malta in June 2003 and is a fully owned subsidiary of BAWAG P.S.K Bank, which is registered in Austria. It has subse-quently operated as a commercial bank with a primary focus on the provision of direct loan facilities for project finance across public and private sectors in the EU mainly through loan syndication. In 2014 BAWAG liquidated its structured finance transactions held through its subsidiaries, also placing its subsidiary Bodensee Limited into dissolution. According to the 2014 Financial State-ments, the Bank does not engage in any retail business.


Assets as at 31.12.201420%

1%47%

32%

The Group registered a PBT of €13m, up significantly from the previous year, when it registered a PBT of €0.3m. This was mainly attributable to an increa-se in fair value gains on shares in subsidiary undertakings and other related instruments of €23m year on year. Moreover, the Group achieved a NII of €9m (2013: €14m), with the reduction being largely due to the liquidation of Bodensee Limited.

Although the Bank reduced significantly its share capital by €400m, the CAR improved from 33.8% as at 31st December 2013 to 37.9% as at 31st Decem-ber 2014. Risk-weighted assets decreased by €186m (or 45%) year-on-year. Furthermore, the Bank’s Own Funds, which constitute only Tier 1 capital, de-creased by €54m as at end of FY14, thereby totaling €86m.

The reduction in the Group’s Investments of €816m (or 88%), resulted in a decrease of 72% (or €892m) in total assets, which stood at €353m as at end of FY14. Loans and Advances to Customers decreased by 24% (or €23m) while Loans and Advances to Banks increased by 191% (or €3.5m).

On the liabilities side, the largest contributor remained Amounts Owed to Banks which decreased by €105m from €364m in 2013 to €259 in 2014. The Group had a customer deposit base totaling €2m as at end of FY14.

€13.2 millionPBT

(2013: € 0.3 million)

€353.2 millionTotal Assets(2013: €1.2 billion)

37.9%CAR

(2013: 33.8%)



FCM Bank LimitedFinancial year ended 31st December 2014

FCM Bank Limited (“FCM” or “the Bank”) was licensed to carry out banking activities by the MFSA in July 2010. The majority shareholder of the Bank is a fund administered by Forte-lus Capital Management LLP, which is a UK-based asset manager. In 2012, FCM was officially launched to the public through the introduction of its first savings product. To date, the Bank has extended its marketing campaign and operations, specialising in savings and fixed term products, and has also expanded its investment portfolio. In addition, the Bank is mainly focu-sed on acquiring quality investment securities within European economies, whilst concurrently increasing its retail deposit base within Malta. FCM’s main operations are conducted online.



19%

4%

77%

€1.4 millionLoss Before Tax

(2013: LBT €0.6 million)

14.3%CAR

(2013: 29.9%)

€49.6 millionTotal Assets(2013: €25.1 million)

The increase in loss before tax of €0.8m was mainly due to an increase in admi-nistrative expenses of €0.4m and the decrease in net trading gains by 99% (or €0.3m). Fair value movements and net gains on sale of financial instruments at fair value decreased by €0.3m over the financial year ending 2013.

The Bank has registered a CAR of 14.3% as at December 2014, down from 29.9% in 2013. Total Own Funds as at the end of FY14 totalled €7.4m and consists of only CET 1 capital.

The expansion in the asset base was driven mainly by the increase in held-to-maturity investments of 186% (or €16m) and loans and receivables by 100% (or €8m). The Bank’s asset base as at 31st December 2014 amoun-ted to €50m.

Customer deposits remained the main driver on the liabilities side, increasing by €22m, from €16m in 2013 to €38m in 2014.

NON

-COR

E DO

MES

TIC

BAN

KS



FIMBank plcFinancial year ended 31st December 2014

FIMBank p.l.c. (“the Group” or “FIMBank” or “the Bank”) is an international trade finance specialist and was established in 1994 through the incorporation of First International Merchant Bank Ltd. The shares were subsequently listed on the Malta Stock Exchange in 2001. In addition, the Bank was renamed FIMBank p.l.c. in 2005. The Group also engages in forfaiting business. Burgan Bank SAK and United Gulf Bank BSC own 80% shareholding in FIMBank, and the remaining equity is owned by the general public on the Malta Stock Exchange.


Assets as at 31.12.201430%

23%

1%

7%

39%

The increase in total assets was largely driven by Loans and Advances to Customers, which increased by USD132m(€108.7m). Conversely, balances with the Central Bank of Malta decreased significantly by USD62m (€51.1m)(or 89%), resulting in a total balance of USD8m(€6.6m) as at end of FY14.

The largest component of liabilities remained Amounts Owed to Customers, which increased by 21.3% (or USD92.2m(€76m)) and Amounts Owed to Banks, which increased by 11.2% (or USD 67m (€55m)). Amounts Owed to Banks stood at USD671m (€553m) as at 31st December 2014.

USD 1.4 billion€1.2 billion

Total Assets(2013: USD 1.2 billion)

(€0.9 billion)

USD 53.4 million€40.2 million

Loss before tax(2013: LBT USD 4.1 million)

(€3.1 million)

The Group’s loss before tax was mainly a result of impairments tota-lling USD51m (€38.4m) (2013: USD6.5m (€4.9m)). This was attributable to the negative results achieved from the Indian and Russian factoring business. In contrast, the Group has shown improved performances in terms of NII, although Net Income decreased by 82.1% year on year (2014 USD(4.7m) (€3.5m); 2013 USD26.3m (€19.8m)).

The Group has registered a CAR of 13.8% and a CET 1 ratio of 13.3% as at December 2014. Moreover, the Group’s Own Funds amounted to USD173m (€142.5m), driven mainly by CET 1 capital totalling USD167m (€137.5m).

13.8%CAR

(2013: 12.3%)

Figures in USD were converted using the applicable ECB EUR/USD financial year end exchange rate and average currency exchange rate



IIG Bank (Malta) Ltd (“IIG” or “the Bank”) is an affiliate of International Investment Group LLC based in New York, and has been operational in Malta since 2010. International Investment Group LLC mainly engages in the provision of global commodity export services, with particular focus on emerging markets.


Assets as at 31.12.201425%

34%

2%

39%

IIG Bank (Malta) LimitedFinancial year ended 31st December 2014

The Bank’s total asset base increased by 41% (or USD45m)(€37.1m), with the expansion being mainly driven by increases in Loans and Ad-vances to Customers of USD32m (€26.4m) as well as increases in Fi-nancial Sssets, classified as Available-For-Sale, of 13.5 % (or USD6m (€4.9m)). However, Financial Assets Designated at Fair Value throu-gh Profit or Loss decreased by USD2.4m (€1.8m). Amounts owed to Customers increased by 39% (or USD31m) (€25.5m) whilst Amounts Owed to Banks increased by 41% (or USD5m (€4.1m)).

USD 156.3 million(€128.7 million)

Total Assets(2013: USD 111 million)

(€80.4 million)

USD 2.8 million(€2.1 million)

PBT(2013: USD 1 million)

(€0.8 million)

Throughout its first years of operation, IIG has focused mainly on ex-panding its operations and its customer base, resulting in an increase in both revenues and expenses year on year. NII also increased by 3.8% (or USD0.1m (€0.08m)), whilst Administrative Expenses increased by 41.2% (or USD0.7m (€0.5m)) over financial year 2013. As part of its operating ex-penses, IIG also recorded an impairment charge of USD1.2 m (€0.9m) in 2014. Operating Income increased by USD3.7m (€2.8m) year on year (2014 USD 6.5m (€4.9m); 2013 USD 2.8m (€2.1m)).

The Group’s CAR stood at 17.1% as at December 2014, complemented by a CET 1 ratio of 13.7%. Moreover, the Group registered a CET 1 capital of USD15m (€12.4m), increasing IIG’s Own Funds to USD18m (€14.8m) as at end of FY14 (FY13: USD14m (€10.2m)). This increase was largely attribu-table to an increase in share capital of USD1m (€0.8m) and an increase in investment revaluation gains of USD2.3m (€1.9m).

17.1%CAR

(2013:23%)

NON

-COR

E DO

MES

TIC

BAN

KS




Izola Bank plcFinancial year ended 31st December 2014

The origins of Izola Bank plc (“Izola” or “the Bank”) date back to 1994, with the initial intention to service the trading and financial interests of the Belgian Van Marcke Group, a family-run business which still maintains majority shareholding of the Bank. At present, the Bank is an internet-based bank, mainly providing corporate banking services to non-resident customers, particularly in Belgium.



1%

22%

18%11%

48%

A positive increase €0.7m in the Bank’s profit was mainly attributable to a significant increase in Net Fee and Commission Income of 22.4% (or €0.5m). Improved levels of Net Interest Income of 16% (or €0.3m) contributed to an increase in Operating Income of 21% (2014 €5.2m; 2013 €4.3m).

The Bank achieved a CAR of 49.1% as at end of FY14, marginally down from the previous financial year. The Bank registered an increase in Own Funds of €3m, resulting in total Own Funds of €24m. CET 1 capital contributed €21m to the Bank’s Own Funds.

The Bank’s asset base expansion of €30m was mainly attributable to in-vestments, which increased by 33.5% (or €18m). Available-for-Sale Debt Securities also rose by 66.5% (or €18m). Furthermore, Izola increased its Other Loans and Advances to Customers by 67.5% (or €13m). Other Loans and Advances to Customers as at 31st December 2014 stood at € 33m.

Customer Deposits, which constitute 74% of the Bank’s Total Liabilities, in-creased by €20m to €91m in 2014.

€3.5 millionPBT

(2013: €2.8 million)


49.1%CAR

(2013: 50.1%)



Sparkasse Bank Malta plcFinancial year ended 31st December 2014

Sparkasse Bank Malta plc (“Sparkas-se” or “the Bank”) was established in Malta in October 2000, and is a subsi-diary of the Austrian Savings Bank and Erste Bank Group. Sparkasse focuses mainly on the provision of private ban-king services, investment services and custody and depository services.


Assets as at 31.12.201476%

3%

1%

1%

19%

According to the Directors’ Report for the year ended 2014, Sparkasse re-gistered its best operating year from the commencement of its operations in Malta. In 2014, the Bank recorded an increase in PBT amounting to 23% over 2013. During 2014, the Bank also expanded its Net Fee and Commis-sion Income by 42% (or €1.2m), whilst also achieving an increase in Net Interest Income of 10% (or €0.2m).

As disclosed in the Bank’s financial statements for FY14, during 2014 the Bank’s shareholder increased its shareholding by €2 million, resulting in a fully authorised and paid up share capital amounting to €20m. As at end of FY14, the Bank registered total Own Funds of €19m, which is almost fully comprised of Tier 1 capital. Moreover, the Bank’s CAR stood at 13.8%, down from 34% in 2013.

The Bank’s increase in its asset base of 88% was fuelled by significant in-creases in Loans and Advances to Banks of €191m (or 132%) and increases in balances held with the Central Bank of Malta and Cash of 52% (or €5m). Financial Assets (mainly government and local treasury bonds) also rose by 14% (or €10m) while Loans and Advances to Customers remained stable. In 2014, there was also a significant increase in Other Liabilities, mainly con-sisting of Amounts Due to Shareholders, which grew by 260% (or €4.5m). Moreover, Amounts Owed to Customers increased by 98% (or €203m).

€5.0 millionPBT

(2013: €4.1 million)


13.8%CAR

(2013: 34%)

NON

-COR

E DO

MES

TIC

BAN

KS

IT Advisory Services

An effective, well-managed IT system is one of the most valuablebusiness advantages an organisation can secure.

The right technology, implemented properly, appropriately managedand monitored, can lead to significant gains in growth andefficiency. It is essential to get sound business advice to helpensure technology risks are managed. IT is challenging to getright and expensive to get wrong, not only in terms of cost, butalso in lost efficiency and potential regulatory infringements.

We provide support and guidance to help clients with thetechnology issues within their business. We focus onthe business impact of technology rather than systemsimplementation, and we are not tied to any hardware orsoftware suppliers. As a result, our advice is independentand geared to the specific needs of each client.

Contact usEric MuscatPartner, IT Advisory ServicesT. +356 2563 [email protected]

www.kpmg.com.mt




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International Banks

36 AgriBank plc

CommBank Europe Limited

Deutsche Bank (Malta) Limited

ECCM Bank plc

Nemea Bank plc

Ferratum Bank plc

Novum Bank Limited

NBG Malta Limited

Pilatus Bank Limited

36

37

37

39

38

39

38

39



AgriBank plc (“Agribank” or “the Bank”) was established in Malta in 2012 and is owned by Mr. Frank Sekula. The Bank’s business model is to operate through obtaining funding from retail deposits and local financial intermediaries and providing finance lease and hire-purchase agreements to customers within the UK’s agricultural sector. The Bank operates solely on an online platform. In October 2013, Agribank incorporated a subsidiary, AgriFunding 13-1 Ltd, whereby its main activity is securitization transactions.

This increase in the Bank’s loss before tax for year ended 2014 is mainly due to the increase in Net Fee and Com-mission Expense which increased by GBP0.1m (€0.1m) (or 126.5%) and Operating Expenses, which increased by 53% (or GBP0.4m) (€0.5m). On a more positive note, Net Interest Inco-me generated by the Bank increased by 70.8% (or GBP0.2m (€0.2m)).

The expansion in the Balance Sheet was driven mainly by the Bank’s invest-ment in the subsidiary AgriFunding 13-1

Ltd, amounting to GBP 1.9m(€2.3m). This was significantly offset by a de-crease of 29.2% (or GBP1.8m(€2.2m)) in Finance Lease Receivables. On the liabilities side, Debt Securities in Issue grew by 975% (or GBP0.8m(€1m)) while amounts owed to customers remained constant at GBP0.9m(€1.1m).

In addition to the above, AgriBank registered a CAR of 67.36% as at 30th June 2014, whilst Own Funds stood at GBP5.1m(€6.4m).

CommBank Europe Limited (“Comm-Bank” or “the Bank”) is a subsidiary of Commonwealth Bank of Australia, which is a multi-national Australian bank with a presence across Europe, the Americas and Asia-Pacific regions. CommBank was registered in Malta in 2005, mainly focusing on infrastruc-ture and utilities solutions, corporate lending and asset finance solutions to its clients throughout Europe.

The Bank’s primary income stream is NII, which was the biggest contri-butor to the Bank’s profit. NII for year ended 30th June 2014 amounted to AUD 92m (€62.3m) (2013: AUD104m (€82.5m)), whilst the Bank’s PBT decreased by AUD4m(€2.7m) (2014:

AUD100m(€67.7m); 2013: AUD104m (€82.5m)). The Bank registered a Net Trading Gain of AUD7m (€4.7m) during FY14, up significantly from the prece-ding financial year (2013: Net Trading Losses of AUD2.5m(€1.7m)). According to the Annual Report for 2014, the de-crease in the Bank’s profits is expected to continue in 2015 due to the repatria-tion of AUD435m (€299.2m) in capital in 2014. In 2012, the Bank decided to downsize its Maltese operations.

The Bank’s asset base decreased significantly (by 20% or AUD596m (€410m)), largely due to AUD416m (€286.2m) decrease in Loans and Advances to Banks and a decrease of AUD254m (€174.7m) in Balances with

the CBM. The Bank’s asset base as at 30th June 2014 totalled AUD2.4bn (€1.7bn). Similarly, Amounts Owed to Banks, which comprise 85% of the Bank’s total liabilities, decreased by 40% (or AUD152m (€104.6m)), leading to total Amounts Owed to Banks of AUD229m (€157.5m).

The Bank registered a decrease of AUD 410m (€282m) in its Own Funds over 30th June 2013, leading to total Own Funds of AUD2.2bn (€1.5bn). The Bank’s Own Funds, are mainly compo-sed of Share Capital. In addition, the Bank registered a CAR of 103% as at 30th June 2014 (2013: 98%).

AgriBank plcFinancial year ended 30th June 2014

CommBank Europe LimitedFinancial year ended 30th June 2014





Deutsche Bank (Malta) Ltd (“Deuts-che Bank” or “the Bank”) has been a licensed credit institution since March 2010, when it changed its name from Deutsche Financial Services (Malta) Ltd, and passported its Credit Institu-tion licence into 29 EU countries. The Bank is a subsidiary of Deutsche Bank AG, which, together with its subsidia-ries, form the Deutsche Bank Group. The Bank also provides administrative and banking services to the hedge fund industry in Malta.

The Bank changed its financial year end date from 30th November to 31st December in 2014. In addition, during

2014 the Bank significantly reduced its share capital by €2.2bn, comple-menting the Deutsche Bank Group Strategy 2015+. This strategy outlines plans by Deutsche Bank Group where to reduce its Risk-Weighted Assets, mainly through the sale of non-core operations. In view of this, net interest income decreased by €37.5m. The de-cline in PBT by 80% (or €58m) mainly emanated from a decrease in activity as a result of the aforementioned sha-re capital reduction.

This also impacted significantly Loans and Advances to Banks, which, re-duced by €2.3bn (or 81%) in 2014.

Subsequently, the Bank’s total asset base stood at €538m as at 31st Decem-ber 2014 (30th November 2013: €2.8bn). Similarly, Amounts Due to Customers decreased by €37m (or 90%), whilst Trade and Other Payables decreased by 77.5% (or €32.5m).

The Bank’s CAR as at December 2014 stood at 12.82%, whilst Own Funds stood at €24m.

ECCM Bank plc (“ECCM” or “the Bank”), formerly known as Raiffesen Malta Bank plc, was registered in Mal-ta in 1996, focusing mainly on transac-ting with large international customers. Raiffesen Malta Bank plc was fully acquired by Kronospan Group on 30th June 2014. At present, the Bank’s sha-reholders are Banasino Investments Li-mited and Douglas Insurance Company Limited, both of which form part of the Kronospan Group, an Austrian manu-facturer of wood-based panels.

The Bank also changed its financial reporting period from 31st December

to 30th September 2014. In view of the aforementioned acquisition, the Bank’s Loss Before Tax amounted to €0.4m for the period ending September 2014. Going forward, the Bank will seek to expand its customer base. Accordingly, ECCM has installed a new IT system and employed new staff in order to complement its growth.

The transfer of ownership in the Bank resulted in a decrease of €353m (or 78%) in total assets, which amounted to €102.3m as at 30th September 2014. This was driven mainly by the decrease in Cash and Cash Equivalents by 81%

(€369m). This decrease was partia-lly off-set by an increase of €15.6m pertaining to Loans and Advances to Customers.

The Bank has registered a strong total capital ratio of 146% as at 30th September 2014. Moreover, Total Own Funds as at 30th September 2014 totalled €102m, being fully constituted of Tier 1 capital.

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Deutsche Bank (Malta) LimitedFinancial year ended 31st December 2014

ECCM Bank plcFinancial year ended 30th September 2014



Ferratum Bank plc (“Ferratum” or “the Bank”) was set up in Malta in Septem-ber 2012 in order to provide additional funding sources and business opportu-nities to the parent company, Ferratum Group (“the Group”). The Group, which was established in 2005 by Finnish En-trepreneur Mr. Jorma Jokela, provides internet and mobile microloan services and has a client base exceeding 1.5 million customers world-wide.

The Bank’s PBT for year ended 31st December 2014 increased significantly

by €3.7m (or 6577%), when compa-red to financial year ending 2013. This increase in profit was mainly due to an increase in Interest and Similar Income which increased by €14m year-on-year.

As at 31st December 2014, the Bank’s total asset base amounted to €21m, representing an increase of 57% (or €8m). This expansion was driven mainly by an increase in Loans and Advances to Customers of €12m. Similarly, with respect to liabilities, Borrowed Funds, which are effectively amounts owed to

other institutions or corporate entities increased by €1.7m (or 69%). Other Liabilities also increased by €2.2m (or 228%). As outlined in the Directors’ Report for year ending 2014, the di-rectors envisage that this trend will be sustained over 2015.

The Bank’s Capital Adequacy ratio stood at 23.1% as at 31st December 2014, whilst the Bank had Own Funds amounting to €12m, all of which were CET 1 capital.

NBG Bank Malta Limited (“NBG” or “the Bank”) obtained a banking licence by the MFSA in 2005. The National Bank of Greece S.A. fully owns NBG through its subsidiary NBG Internatio-nal Holdings B.V., which is registered in the Netherlands. NBG targets mainly high net worth individuals and large corporate clients through the provision of wide-ranging banking services, including the provision of loans and attracting deposits.

The Bank’s PBT remained constant for 2014 at €13m, decreasing marginally by 1.3% (or €0.2m) over the previous

reporting period. This decrease was mainly attributable to a decrease in NII of €1.2m (or 7%).

The Bank’s total asset base stood at €1.4bn as at December 2014, which re-presents a decrease of 6.4% (or €93m) over a twelve month period. Moreover, Loans and Advances to Banks amoun-ted to €719m whilst Loans and Advan-ces to Customers amounted to €616m. In addition, Deposits from Banks totalled €553m whilst Deposits from Customers stood at €542m as at 31st December 2014. The Directors’ Report for the period ending December 2014

outlines that the Bank is not seeking to expand further its loan portfolio for the foreseeable future.

Moreover, in order to mitigate the increased risk pursuant to the current economic scenario in Greece, the Bank maintained a pledge of €14m in favour of the Depositor Compensation Scheme, given that it’s depositor base is predominantly Greek. As at end of FY14, the Bank’s Own Funds totalled €271m, and comprise only of CET 1 capital. For the year ended 2014, the Bank also registered a strong CAR of 35.25%.

Ferratum Bank plc Financial year ended 31st December 2014

NBG Bank Malta LimitedFinancial year ended 31st December 2014



Nemea Bank plc (“Nemea” or “the Bank”) was established in Malta in 2008, with a view to being an onli-ne-only bank. The Bank provides online banking services to various customers, including international businesses and institutions, individuals and high net worth individuals. Through its online service and by benefitting from the EU passporting rights, Nemea Bank offers its services to customers within the 31 countries of the EU/EEA area.

During the financial year ended 31st December 2014, NII decreased by

€0.1m (or 52%), resulting in NII for the year of €0.1m. On a positive note, the Bank registered an increase in Net Fee and Commission Income by €0.9m (or 131%), thereby achieving a Net Fee and Commission Income of €1.6m. The Bank achieved a PBT of €0.3m during 2014 (2013: €0.06m).

Nemea’s total asset base increased by 183% (or €16m), driven mainly by an increase in Loans and Advances to Customers of €11m over the perfor-mance registered in 2013. Thus, as at 31st December 2014, the Bank’s total

assets stood at €24m (2013: €8.5m). The Bank’s liabilities are mainly compri-sed of Amounts Owed to Customers, which totalled €18m as at 31st Decem-ber 2014 (2013: €3m).

Nemea’s CAR stood at 32% as at December 2014 (2013: 63%). The decrease in the Bank’s CAR resulted from an increase of €9m (or 105%) in the Bank’s Risk-Weighted Assets year-on-year. The Bank registered a marginal increase in its Own Funds in 2014, which stood at €5.6m (2013: €5.4m).

Novum Bank Limited (“Novum” or “the Bank”) was established in Malta in 2009 and is a subsidiary of Novum Holdings Limited. The Bank was for-merly known as VoiceCash Bank Limi-ted and was renamed to Novum Bank in 2013. During 2014, the Bank establi-shed a new card operating platform, thereby enabling the Bank to attain significant cost reductions. The Bank also expanded its operations in 2014 to attract new customers from Germany, Poland, Spain and the Netherlands, and will also be targeting customers from France and Austria in 2015.

During the financial year ended 31st December 2014, Novum increased its NII by €0.1m (or 125%) and its Net Fee and Commission Income by €8m (or 533%), thereby decreasing its loss before tax from €6.7m in 2013 to €2m in 2014. According to Novum’s 2014 Annual Report, the aforementioned developments will enable the Bank to be in a better position to register a profit in 2015.

With respect to the Statement of Financial Position, Novum’s total asset base, which totalled €13m as at end of

FY14, increased by 30.3% (or €3.1m). This was mainly driven by an increase in Loans and Advances totalling €5.3m (€3.6m in 2013) and Other Assets which increased by 38% (or €1.1m) over the previous reporting period. On the liabilities side, Amounts Due to Customers increased by 110% (or €1.2 m), while other liabilities increased by 80% (or €2.1m).

The Bank registered a CAR of 49% as at December 2014 (2013: 66%). As at end of FY14, the Bank maintained Own Funds of €5.8m (2013: €5.9m).

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Nemea Bank plc Financial year ended 31st December 2014

Novum Bank LimitedFinancial year ended 31st December 2014

Pilatus Bank Limited (“Pilatus” or “the Bank”) was licensed by the MFSA during the first quarter of 2014. Pilatus mainly targets global high net worth individuals by providing both private and commercial banking services.

During the first period of operations, na-mely from December 2013 to December 2014, the Bank registered a PBT amoun-ting to €0.3m. The Bank’s profit was dri-

ven mainly by Net Gains on Investment Securities, which totalled €1.1m.

With respect to the balance sheet, the Bank’s total asset base stood at €111m as at end of December 2014. Loans and Advances to Banks amounted to €81m whilst Loans and Advances to Custo-mers amounted to €23.5m. Amounts owed to Customers, namely Sight De-posits Repayable on Demand, totalled

€85m as at 31st December 2014.

As outlined in the Chairman’s Statement for the period ended 31st December 2014, the Bank will seek to maintain a low risk revenue mode, whilst also ensuring that risk management and internal controls are in line with the Bank’s strategy. As at end of 2014, the Bank registered Own Funds of €9m, whilst also registering a CAR of 27%.

Pilatus Bank Limited Financial year ended 31st December 2014

Internal AuditServices

Contact our Internal Audit professionals:Juanita BenciniPartnerE: [email protected]


Internal Audit@ KPMG

**Source: KPMG Internal Audit 2015: The top 10 key risks in 2015.


You thus require your Internal Audit function to maximise the value added it provides to your organisation by focusing on the risk areas which matter to you.

Alex AzzopardiAssociate DirectorE: [email protected]

At KPMG we listen to YOU so as to provide you with Internal Audit services that are targeted and tailored to best fit your needs.

We believe in being innovative so that YOU can benefit from our expertise in risk and controls in areas that go beyond financial reporting.

We provide you with highly-skilled teams and ensure we include the required subject matter specialists to really home in on those areas which matter most toYOU.

More importantly, we believe that Internal Audit must focus on providing value to YOU.

What should you watch out for?

*Source: The KPMG 2014 Global Audit Committee Survey

Is your Internal Audit function ready to handle

this expanded role?

We believe that leading

edge internal auditing entails

much more than providing assurance

on financial reporting and controls. Our

view is shared by more than 4 out of 5 Audit

Committee members from around the globe.

International

operations

Antibribery /

Anticorruption

Mergers,

acquisitions and

divestitures

Data analytics

and continuous

auditing

Strategic

alignment

Integrated and

continuous risk

assessment

Talent

recruitment

and retention

Regulatory

ComplianceCybersecurity Third-party

relationships

82%

18%

*

**



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Industry Outlook



Banks and financial institutions are un-der pressure to improve their ability to address the complex requirements of an environment which is in continuous flux. The Great Recession of 2008 had a huge impact on the banking industry as customers demanded higher value added services that are flexible and cost efficient. As a result of this, the industry became more competitive and the regulators introduced more stringent obligations.

KPMG has observed that over the past five years, local banks have shifted towards the use of information tech-nology as a strategic weapon. They have leveraged current and new cyber technologies to enhance multi-channel banking and to introduce new services. Management has also benefited from more timely information for decision making particularly through the use of business intelligence tools. Whi-lst this is a positive development for the sector, the local market is overall still rather slow in adopting innovative

technologies.

Within the local context, KPMG has identified Big Data as the next new wave of innovation for various indus-tries including banking. Big Data is characterised as having a high volume, velocity and veracity, and goes beyond the structured data that is typically presented in management dashboards. With the advent of powerful analytics and visualisation technologies, the handling of unstructured data is now possible and valuable. This can include internal data sets such as transactions, location data, log data, emails and external 3rd party or public data sets such as social media profile data, social media interactions, machine generated sensor data such as weather reports, images, audio and so forth.

Banks have an opportunity to better manage threats and to embrace new opportunities through leveraging Big Data. For example, a bank could analyse data from multiple sources

to develop a comprehensive view of customers’ preferences including the preferred channels of communication, the identification of triggers that in-crease the customer’s interaction with the bank, or when the customer will be most receptive to new incentives. Such analysis allows the customisation and personalisation of services. A bank could also assess customers’ credit risk through the analysis of a combina-tion of data from within the bank’s own digital vaults, from third parties and through public sources such as social media.

Local banks need to take on the Big Data challenge without further delay. They should start with assessing what they have available in terms of skills, technology and data, to determine whether there are any gaps in their capabilities. Then progress to the ge-neration of ideas, the development of skills and the building of capacity. The time is now.

BIG DataEric Muscat,Partner, IT Advisory Services

Robert Farrugia, Manager,IT Advisory Services



The EU draft proposal on opting out of the Financial Transactions Tax (FTT) does not fully protect institutions outside of the 11 Member States that elect to go down the enhanced cooperation route. This is due to the fact the EU’s draft directive has extra-territorial effects. By focusing on the domicile of the parties to the deal, in a situation where a bank in a participating state is involved in the deal, tax liability applies even if the deal is concluded in a non-participating state. This arises as an extension of jurisdic-tion based on the residency principle. The FTT will also apply when trading an instrument issued within the FTT zone, even if both parties are outside the FTT zone under the issuance principle.

In addition, the impact is not limited to charging 0.01% for transactions in derivatives and 0.1% for all other transactions, which encompasses, inter alia, sale, purchase, exchange and repurchase of financial instruments and the redemption of shares or units in an investment vehicle. Firstly, because such rates are minimum rates and Member States are free to impose higher rates. Secondly, because the FTT is designed to apply to a gross basis and is meant to be separate to the individual elements

If it moves tax it, if it keeps moving regulate it and if it stops moving, subsidize it

Financial Transactions Tax

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Juanita Brockdorff,Partner, Taxation Services

John Ellul Sullivan, Director,Taxation Services

of each financial transaction in a multiple or cascading effect.

Britain attempted to foil the proposal by filing a case before the Court of Justice of the European Union. However, the Court steered clear of the challenge, allowing the FTT to go forward. Thus, while 11 Member States, including Germany, France, Italy and Spain forge ahead, Malta, which had advocated that the tax be global to avoid placing the EU at a competitive disadvantage, finds itself exposed.

In terms of the last draft of the FTT, Maltese financial institutions (including credit institutions, UCITS, and AIFs) may be exposed if said institutions face the following situations:

• A Maltese Bank that buys an Italian share held by a French Bank will mean that both the Maltese and French Banks would be liable to pay the FTT to the French tax authorities. This is because a financial institution like a Maltese Bank, established outside a FTT Member State will be deemed established in the State of the Coun-terparty.

• A Maltese Bank that sells German bonds in London to a Chinese Bank, will result in both the non-participating Maltese and Chinese Banks having to pay the FTT to the German tax authorities, given that according to the issuance principle, a financial institu-tion party to a transaction involving a financial instrument issued in a participating Member State, such as Germany, will be considered as established in such State and liable to pay the tax.

The introduction of the FTT will lead to a distortion of competition, as there will be an increased cost in trading with instruments issued by FTT zone coun-

tries and with counterparties in FTT zone countries. In addition, the FTT will lead to an increase in the cost of compliance as Maltese Banks will have to withhold the FTT, whereby their counterparties in FTT zone countries, being jointly and severally liable to the tax, will insist on such compliance. This will occur becau-se the means of application and enfor-cement on instruments issued by FTT zone countries are, to date, unclear.

The European Commission and the par-ticipating Member States are working to find a solution in time to meet the deadline for the introduction of FTT by 1st January 2016. Ironically, in May 2015, in a report commissioned for the French Economy and Finance Ministry, the French Government was advised that the proposed FTT could distort competi-tion across the European single market and risked undermining the launch of the Capital Markets Union (CMU), in that:

“It will significantly distort compe-tition within the European financial system and disrupt proper allocation of capital”.

Similarly the European Banking Federa-tion, representing 32 national banking associations that in turn collectively represent some 4,500 banks in Europe, firmly believes that an FTT puts at risk economic growth in Europe and that it will harm Europe’s financial indepen-dence in the global financial services markets and the CMU.

Even though ECOFIN did not discuss the topic due to lack of progress on 6th October 2015, Maltese banks should closely monitor the new form of the proposal to ensure their preparedness for the FTT’s impact on their business, develop strategies to manage it and implement procedures for compliance.



The OECD and the EU have stepped up their initiatives aimed at enhanced tax transparency and automatic ex-change of information (AEoI). Increa-singly such developments are leading banks to become administrators for governments in the fight against tax evasion.

OECD Common Reporting Standard (CRS)

For months on end, the world debated and criticized FATCA for its draconian extra-territorial reach. Ironically, its success led to discussion at an OECD level for a global model of automatic exchange of information.

Drawing from FATCA, CRS requires financial institutions to play a funda-mental role in providing local tax au-thorities with information on taxpayers’ income held in financial accounts. This information is exchanged automatically on an annual basis to the relevant tax authorities. Participating jurisdictions

must enact the necessary domestic legislation and enter into bilateral or multilateral governmental agreements to provide a legal basis for the exchan-ge of information.

Malta committed to the early adoption of CRS, with implementation expected by 31 December 2015 and proposed commencement of reporting by 1 January 2017. The good news is that CRS is modelled on the intergover-nmental approach to implementing FATCA, namely on IGA Model 1, which Malta has implemented. Therefore, Maltese banks should be able to leverage on the recently implemented FATCA processes and systems.

However, the CRS is not merely FATCA Version 2. Firstly, the volumes will inevitably be larger for CRS. In addition, under the current CRS framework, it is unclear whether banks are required to apply due diligence procedures once, to its entire client database or whether such procedures must be undertaken

each time a new bilateral agreement is reached by the bank’s jurisdiction. Fur-thermore, for those who have opted to comply with FATCA by steering away from any US business, CRS represents a new and inevitable challenge.

Banks will be required to report under the CRS the same information as that required for FATCA. However, whilst FATCA is based on US citizenship, CRS is based upon tax residence in a reportable country. Tax residence is an unharmonised definition which banks will find themselves grappling with in various reporting countries. Given the absence of tie-breaker rules in CRS, multiple reporting will arise. In view of this, we expect guidance to be issued on understanding and implementing tax residency. In addition, under the emerging global standard all pre-exis-ting individual accounts will have to be documented.

CRS is set as a minimum standard with countries therefore being free to

Banks facing the music Juanita Brockdorff,Partner, Taxation Services

Lisa Zarb Mizzi, Associate Director,Taxation Services

as various global initiatives drive automatic exchange of information



request more information. As a result, banks may be required to report under multiple automatic exchange regimes, making it more challenging for them to standardize processes.

EU Savings Directive (EUSD)

In addition, banks operating with the EU have to layer on additional reporting requirements of the recently extended EUSD. Changes due to take effect in 2017 require banks to look through non-taxed legal arrangements and identify individual beneficial owners. This, in addition to reporting on certain insurance products which previously fell outside scope, like for example, unit linked insurance products.

Meanwhile, Maltese banks should mo-nitor closely the new form of the propo-sal to ensure they prepare for the FTT’s impact on their business, developing strategies to manage it and implemen-ting procedures for compliance.

Directive on Administrative Coopera-tion in Tax Matters (DAC)

In order to provide an EU-level legal basis for CRS, the EU amended the Di-rective on Administrative Cooperation (DAC) which requires a broad range of information relating to all types of financial products (with certain exemp-tions) to be automatically exchanged by Member States. Member States are required to adopt and publish the laws necessary for this information exchan-ge by 31 December 2015 and for these to be effective by 1 January 2016, with the first reporting to take place by 30 September 2017.

The implementation of CRS under DAC requires all material information that would be exchanged under the EU Savings Directive to be exchanged under DAC. Therefore, in order to avoid duplication of reporting with two sets of reporting rules and in response to the criticism launched by the industry,

the Commission has brought forward the proposal to repeal the EU Savings Directive which was only approved a few months ago. In order not to leave any gaps in the reporting, the repeal of the Savings Directive needs to be well coordinated with the timing of the application of the Amending Directive on Administrative Cooperation.

The Take Away

In all cases, banks should follow developments closely and make ready for upcoming changes as automatic exchange of information will require a response consisting of adapting and enhancing the solutions developed for FATCA. Processes for customer accep-tance, know your customer (KYC), and customer documentation will need to be extended and new systems for re-porting relevant data to tax authorities developed.

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Staying relevant in a changing worldThe world is constantly and rapidly changing. The market forces at play today are challenging our clients to find trusted, reliable and relevant advisors who can help them adapt and succeed in this world.

Managing ‘big data’, understanding changing customer behaviours, dealing with competitive forces, complying with regulatory expectations and building a world-class internal audit function, are only some of the concerns that keep our clients awake at night. By addressing these challenges in a multi-disciplinary and holistic way, we can help you make a difference. With a team of professionals, supported by a wider global network, we are experienced in managing diverse issues including, but not limited to, regulatory compliance, risk and finance transformation, anti-money laundering, governance structures, and capital management.

We welcome the opportunity to discuss what KPMG’s Risk Consulting Team can offer to you.

Contact usJuanita BenciniPartner, Risk Consulting Advisory ServicesT: + 356 2563 1053

[email protected]

www.kpmg.com.mt



KPMG’s MegatrendsJuanita BenciniPartner, Risk Consulting Advisory Services

Noel Mizzi,Partner, Audit Services

for the Maltese Banking Industry

There exist as many definitions of mega trends as there are definitions of risk. In its simplest form, a mega trend is a long term change in, for example, demographics, societies, regulation that drives other trends in financial markets and compels a redirection of sales, growth and strategy. So what does KPMG think will be the defining changes that will force the banking industry to react? Here is our list of the top five megatrends that we see and their impact on banking activities.

1. Investor base heading eastwards and the triumph of the “niche” non-core bank

Over these last 15 years, we have seen significant changes in the profile of the investor base in Maltese banks. At the turn of the century, we had several Tur-kish owned banks operating in Malta – today very few remain. Then we had the boom of the Austrian banks and again today most of those banks have either changed hands or they have moved out of the scene completely. As Europe continues to battle with an ailing banking system that is finding it hard to get back on its feet, the profile of the “new” investor in the Maltese banking sector, supported by the inte-rest that KPMG is seeing, is that of a Middle Eastern or Far Eastern prove-nance. The banking models for non-co-re banks will be largely based on trade finance or the offering of specialised banking products or services.

2. The asset side of the balance sheet will be the problem for the core banks

“Credit growth has been on a downward trend since 2008 and turned negative since 2012, widening signifi-cantly in 2013 and 2014”. Banks lament that they are not seeing any decent bank financing proposals coming from the market. The market complains that banks are not willing to lend no matter

what you put in front of them. Stale-mate. This is a new reality for Maltese banks and the Maltese entrepreneur. As regulation bites and capital absorp-tion is the key driving force behind every lending decision, the banks are being left with a huge problem on their hands. To compound matters, there is no sign of deposits drying up and so the big question that banks have to grapple with is what to do with the money – this in an environment where banking shareholders are showing sig-ns of exasperation at the low return on their investment. Treasury departments are definitely set to grow and become more specialised.

3. Fees and commissions rather than NII

The general low interest rate environ-ment is set to prevail. This means that banks will increasingly look at other ways to generate revenue that go beyond the traditional interest spreads. They will rely more heavily on fees, commissions and charges to achieve the double digit growth and dividends that shareholders expect. Breaches will become more heavily penalised and potentially, products such as cheques that generate a lot of administrative work for banks and are labelled as “ex-pensive” products may also become subject to a charge, in a drive to push the public to increase the use of cards. We will see a revived interest in crea-ting products and specialised services that generate fees.

4. The continued pursuit for perfect corporate governance

In a banking environment where regulation is for the first time imposing governance arrangements in banks through the CRDIV package and a Maltese banking industry which is cha-racterised by either small banks with an emphasis on remaining lean or local banks, where NEDs are sourced from

old school tie networks or other local networks, there is bound to be wee-ping and gnashing of teeth over these new rules. As regulators push in their pursuit of perfect corporate governan-ce in an imperfect local banking scene, it will be interesting to see where the dust will settle in a few years’ time. There are already those who are saying that being a bank board member will become a full time job especially for the systemically important banks. Cer-tainly, the way that Maltese banks look at their board and its composition and the demands being placed on board members, is slowly changing. This is likely to result in increases in the cost of governance arrangements for banks going forward.

5. Data, data and even more data

Speak to any European banker from a systemically important bank and they will tell you that BCBS 239 is one of their top agenda priorities for 2015. Issues with data or the lack of cohe-rent data capable of being processed at the touch of a button was one of the key findings from the AQR assessment that was carried out in systemically im-portant Eurozone banks last year. Tech-nology will need to move far higher up the agenda in Maltese banks to meet regulatory demands but also to service an increasingly demanding customer base. Interfaces with users will beco-me simpler and more user-friendly and banks will slowly discover the impor-tance of client profiling and effective data analytics to give them an edge on the competition.

To quote Harvard economist, Ted Levitt “The future belongs to people who see possibilities before they become obvious”. Banks may complain that they already have too much on their plates but the world will keep on changing leaving today’s complainants panting to catch up.

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David Pace, Partner, Deal Advisory Services

Malta has witnessed increased deal activity in the banking sector over the past year. We ask why and where the trend is set to go.

Increased deal activity for Maltese banks

Banking M&A deal activity (2008 to date)

1 1 1 1

2 2

0 02008 2009 2010 2011 2012 2013 2014 2015

What is driving the deal flow?

Radical changes in the economic and regulatory environment are leading to a rethinking of banks’ business models.

Wafer thin margins and higher com-pliance costs motivate consolidation within the sector. At the same time, a number of established European banking groups came under fire as they sought state assistance to allay finan-cial troubles. Against this backdrop, we continue to witness the shedding of non-core assets and a wave of geo-graphic re-trenchment also impacting certain local subsidiaries of international banking groups.

The reputation of the Maltese jurisdic-tion coupled with the Regulator’s firm yet approachable disposition, continues to sustain interest in new local ban-king operations with a preference, at times, for the acquisition of an ongoing operation as a mode of entry. Reasons underpinning the latter’s preference in-cluded knowledgeable financial services personnel and their trusted relationships with key stake-holders in the industry, operational processes and procedures already in place that are compliant with local requirements, together with speci-fic financial assets that may be of value to the acquiring entities.

Meanwhile, developments in technolo-gy and the digital era continue to drive niche banking offerings. Promoters of such banking models are keen to meet the required robust standards while keeping operating structures lean and cost effective – and Malta fits the bill in this regard.

The Maltese jurisdiction is also seen in a favourable light by large industrial/trading groups interested in a banking division to service the needs of group members, as well as customers and suppliers.

Source: : KPMG analysis as at 19th August 2015, based on MergerMarket, CapitalIQ, Times of Malta, and internal data.

No. of transactions (completed or announced)



Pricing of banking deals

The limited number of local transactions does not allow for meaningful transac-tion insights, as prices reflect transac-tion specificities. On a more general level, prices are however reflective of global Price to Book (PB) multiples that are still below pre-crisis levels and currently averaging at a marginal premium above book. Also mirroring developments at a European level, are below book pricing scenarios arising as vendors are tasked to exit investments in non-core banking units with limited time-frames and resources to groom for sale.

The future?

At a European level, M&A activity in the banking space is predicted to conti-nue in bear mode as the major banks continue to restructure and digest new regulation. The ECB’s AQR is expected to give rise to an additional round of non-core and regulatory driven sales.

This could impact local banking M&A by presenting target opportunities. On the buy side the increasing appeal of consolidation of second tier domestic (core) players could also spur interest in transactions.

Sharing insights from our experience in banking M&A transactions

From a sell-side perspective, it is critical to dedicate sufficient resources and time to prepare the asset for the mar-ket. This will typically entail juxtaposing the key areas of value of the bank with knowledge of what is being sought for in the buyers’ market, allowing the seller to groom the bank in a way that increa-ses its appeal to the buyer audience. This process will typically be supported by the preparation of high-level key information at an early stage in the pro-cess, coupled with the implementation of actions to optimise the bank’s target structure, such as asset carve-outs or reduction of capital.

Looking at a transaction from a buy-side point of view, a key factor is the extent to which the acquirer can be specific on its strategic rationale for the acquisition, reflecting it in a clear and robust view of the target’s synergistic potential. Validating the deal rationale through focussed due diligence is also an impor-tant element of a successful acquisition. Finally, all this needs to be mirrored in the business plan to be presented to the Regulator when seeking its approval for the transfer of ownership.

Keeping an open and proactive commu-nication line with the Regulator is highly recommended as a key contributor to a smoother and timelier transaction execution, whether buying or selling a Bank.

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Now that the multi-phased replacement of IAS 39 is complete and we have a full view of what IFRS 9 entails, a number of banks are closely monitoring the endorsement of this standard and considering the pros and cons for early adoption of the standard before its 2018 effective date.

There is little doubt that we will see simplifications on a number of fronts. Classification of financial assets will be more reflective of their characte-ristics and the bank’s business model for holding those assets. The standard will allow more flexibility for changes in the business model without triggering the harsh tainting provisions and the reduced categories of financial assets should make the standard relatively easier to apply than its predecessor.

IFRS 9 does not carry forward the tain-ting provisions from IAS 39. While sales out of the amortised cost category will not result in the reclassification of existing assets measured at amorti-sed cost, frequent sales transactions will question the continued applica-

bility of an entity’s business model for managing the relevant portfolio. This represents a change from IAS 39 which required reclassification of all Held-to-maturity (HTM) financial assets to be reclassified out of that category.

The new standard will likely result in more financial assets being measured at fair value (including some which may currently be classified as HTM), with knock-on effects on volatility in profit or loss, OCI and equity. Banks’ regulatory capital and regulatory ratios are also likely to be impacted. For example, under Basel III, changes from the amortised cost classification to classification at Fair Value Through OCI (FVOCI) or Fair Value Through Profit or Loss (FVTPL) will have a direct effect on a bank’s regulatory capital.

In addition, IFRS 9 moves away from IAS 39’s incurred loss model to an expected loss model requiring recogni-tion of expected credit losses (ECLs), measured as either 12-month ECLs or lifetime ECLs. This new impairment loss model may result in a negative

impact on equity upon initial application of IFRS 9, as provisions will reflect both incurred credit losses as well as expec-ted credit losses. Initial application may also affect a bank’s regulatory capital as this erodes its CET 1 capital.

The measurement basis would depend on whether there has been a significant increase in credit risk since initial recog-nition. An entity is required to compare the risk of default at a given reporting date with the risk of default at initial recognition and move the underlying asset into the lifetime ECL bucket if the former represents a significant increase in credit risk when compared to the latter. It is therefore possible to have two comparable loans with the same risk of default in two different buckets (12-month and lifetime) as the signifi-cant increase in credit risk is a relative, rather than absolute, concept.

The figure below gives an overview of what drives classification in the respec-tive bucket.

Jonathan Dingli,Director, Accounting Advisory Services

Darren Govus,Director, Audit Services

Ramping up for the new Financial Institution standard



In conclusion, while the adoption of IFRS 9 promises to result in simpler, more business-centric accounting for financial ins-truments, banks need to consider both sides of the coin. In particular, banks should ramp up for the adoption of IFRS 9 well in advance as they may need to collate currently unavailable data and should also consider the impact that the standard may have on profitability and equity to avoid any undesirable and unintended consequences.

•No significant deterioration in credit quality

• 12 months expected credit losses - The portion of lifetime expected credit losses that represent the ECLs that result from default events occuring within the 12 months after the repor-ting date, weighted by the probability of that default occuring.

• Significant increase in credit risk

•Change relates to probability of default rather than changes in LGD

•Rebuttable presumption that the crite-rion for lifetime expected credit losses is met if payment are more than 30 days past due

•Credit-impaired financial assets (includes purchased and origi-nated credit-impaired assets)

12-months expected credit losses Lifetime expected credit losses Lifetime expected credit losses

Change in Credit Risk since initial recognition

Stage 1Performing

Stage 2Underperforming

Stage 3Non-Performing

TransferIf the credit risk on the financial asset has increased significantly since inicial recognition

Move backIf transfer conditions above is no longer met

IFRS 9 introduced a special approach for assets that are credit-impaired at initial recognition. These assets are referred to as ‘purchased or originated credit-impaired or ‘POCI’ assets. An asset is credit-impaired if one or more events have occurred that have a detrimental impact on the estimated future cash flows of the asset. These assets fall directly under the ‘non performing’ portfolio and a lifetime expected credit loss is applied. The following is an example of accounting for a credit-impaired loan at initial recognition and subsequently up to maturity. It also provides the accounting treatment of modification in the expected cash flows.

Details of the nominal amount, purchase price of the credit impaired asset and the contractual interest rate are noted in Table 1.

Nominal amount

Purchased amount

Contractual interest rate

Credit-adjusted effective interest rate

Period

Table1: Contractual terms

€1,000

€800

5.90%

3.925%

4 years

(credit impaired at initial recognition)

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Table 2 provides the contractual cash flows of the loan from drawdown to maturity. The loan of €1,000 is paid over a 4 year period at equal annual installments of €288, inclusive of interest. Discounting the future cash flows of €1,152 into present value using the original effective interest rate of 5.9% would be equal to the carrying amount of the loan at €1,000.

1 2 3 4 Total

Opening Balance

Expected Cash Flows

Interest Receivable

Recoverable Amount

Contractual

Closing Balance

Table 2: Contractual cash flows

(Discounted at 5.90%)

1,000

59

1,059

288

771

288

€ € € € €

771

45

816

288

529

288

529

31

560

288

272

288

272

16

288

288

0

288

152

1,152

1,152

1,000

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Upon acquisition of a credit-impaired loan, no impairment losses are recognised in profit or loss on day one. In line with the requirements of IFRS 9, the original effective interest rate becomes the ‘credit-adjusted effective interest rate’. Applying this methodology will enable the holder of the loan to recognise the ‘impairment loss’ over the contractual lifetime by reducing the recognition interest income throughout the period.

Referring to Table 3, the credit-adjusted effective interest rate has been reduced from the contractual rate of 5.9% to 3.925% such that over the 4-year period, the holder of the loan would recognise interest in line with the agreed cash repayments.

Year 1 2 3 4 Total

Opening Balance

Expected Cash Flows

Interest Receivable

Recoverable Amount

Repayment

Closing Balance

Table 3: Credit-impaired at initial recognition


800

31

831

220

611

220

611

24

635

220

415

220

415

16

432

220

212

220

212

8

220

220

0

220

80

880

880

800

€ € € € €



Journal Entries

Y0

Y1

Y2

Y3

Y4

Dr

Cr

Dr

Cr

Dr

Cr

Dr

Cr

Dr

Cr

Dr

Cr

Dr

Cr

Dr

Cr

Dr

Cr

Loan asset

Cash

Cash

Loans and Advances

Cash

Loans and Advances

Cash

Loans and Advances

Cash

Loans and Advances

Loans and Advances

Interest Receivable P/L

Loans and Advances


Loans and Advances


Loans and Advances


800

220

220

220

220

31

24

16

8

800

220

220

220

220

31

24

16

8

€ €

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Y4Dr

Cr

Loans and Advances

Modification gain - P/L

83

83

Table 4 on the other hand, provides an illustration of when there is an expected modification in the expected cash flows of the credit-impaired loan. In this case, the loan holder expects to receive more cash-flows than originally determined. The modified cash flows show that the loan holder will be able to receive €30 additional cash inflows over the last 3 years of loan existence. The effect of these additional cash inflows would result in the recognition of a ‘modification gain’ of €83 (representing the pre-sent value of the modified expected cash flows) during the year the loan holder expects the cash flows to be modified.

Following the recognition of the modification gain, the loan holder will continue recognizing interest on the adjusted carrying amount (shown as €694 year 5 in Table 5) using the credit-adjusted effective interest rate determined upon initial recognition of the credit-impaired loan.

Year 4 5 6 7 Total

Opening Balance

Expected Cash Flows

Interest Receivable

Modified cash flows

Difference in cash flows

Repayment

Closing Balance

Table 4: Modification of cash flows


800

31

831

220

611

220

220

611

24

635

250

385

220

250

30

385

15

401

250

151

220

250

30

151

6

156

250

94

220

250

30

76

970

880

970

90

83

€ € € € €

Journal Entries € €



4 5 6 7 Total

Opening Balance

Closing Balance

Interest Receivable

Repayment

Modification gain

800

31

831

- 220

83

694

694

27

722

- 250

472

472

19

490

- 250

240

240

9

250

- 250

-

87

- 970

Year

Table 5: Modification of cash flows – subsequent measurement

Y5

Y6

Y7

Dr

Cr

Dr

Cr

Dr

Cr

Dr

Cr

Dr

Cr

Dr

Cr

Cash

Loans and Advances

Cash

Loans and Advances

Cash

Loans and Advances

Loans and Advances


Loans and Advances


Loans and Advances


250

250

250

27

19

9

250

250

250

27

19

9

€ € € € €

Journal Entries € €

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1Prof. Joseph Bannister (MFSA Chair-man), Holding a Strong Position, Inter-viewed by: Doing Business in Malta (Times of Malta), August 7, 2015.2World Economic Forum (2014). 2014-2015 The Global Competitiveness Report for 2014-2015.3National Statistics Office, (2015). News Release: Gross Domestic Pro-duct 2014. 9th March 2015. 4National Statistics Office, (2015). News Release: Gross Domestic Pro-duct Q2/2015. 2nd September 2015. 5Eurostat, GDP per Capita in PPS. 6Central Bank of Malta (2015). Econo-mic Update 6/2015. 26th June 2015.7Central Bank of Malta (2015). Econo-mic Update 7/2015. 27th July 2015.8Ministry of Finance (2015). Malta Sove-reign Credit Ratings. 24th August 2015. Available from:

https://treasury.gov.mt/en/Documents/Debt_Management_Directorate/Malta_Credit_Ratings/Malta_Credit_Ratings.pdf [Accessed on: 30th September 2015].

References

9Eurostat, General government deficit (-) and surplus (+) – annual data.10Eurostat, General government gross debt – annual data.11Malta Financial Services Authority. Double Tax Treaties. Available from: http://www.mfsa.com.mt/pages/view-content.aspx?id=196 [Accessed on: 30th September 2015].

http://www.mfsa.com.mt/pages/licen-ceholders.aspx12Malta Financial Services Authority. License Holders – Credit Institutions. Available from: http://www.mfsa.com.mt/pages/licenceholders.aspx [Acces-sed on: 30th September 2015].13Malta Financial Services Authority (2015). Annual Report 2014.14Central Bank of Malta (2014). Finan-cial Stability Report Update 2014. 15FinanceMalta (2015). Sector Guides 2015 – 2016: Insurance and Reinsurance.16Malta Financial Services Authority. Statistical Tables: 2nd Quarter 2015. Available from:

http://www.mfsa.com.mt/pages/view-content.aspx?id=324 [Accessed on: 30th September 2015].17Malta Financial Services Authority. Analysis of Collective Investment Sche-mes licensed by the Malta Financial Services Authority - 2014. Available from:

http://mfsa.com.mt/pages/viewcontent.aspx?id=55 [Accessed on: 30th Sep-tember 2015].18FinanceMalta (2015). Sector Guides 2015 – 2016: Financial Institutions.19Central Bank of Malta (2015). News – Web Release 2015: The Central Bank of Malta’s Categorisation of Banks According to Systemic Relevance. 3rd June 2015. Available from:

http://www.centralbankmalta.org/en/news/22/2015/425 [Accessed on: 30th September 2015].



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Partner

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Under the Microscope 2015

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