michael c bonello : validating malta ’ s strategy to create an international financial centre remarks by mr michael c bonello, governor of the central bank of malta, at the opening of the mediterranean bank plc, valletta, 29 september 2006. * * * i should first of all like to thank the management of mediterranean bank plc for inviting me to officiate at the opening of these premises. mediterranean bank is a welcome addition to malta ’ s growing financial sector. its focus on private banking, in particular on portfolio and wealth management services, represents a niche activity which offers much scope for further development. on this occasion i would like to reflect on two particularly significant aspects of mediterranean bank ’ s decision to locate in malta with a view to servicing clients in the mediterranean basin. the first is that it represents a further validation of malta ’ s strategy to create an international financial centre as a major pillar of its economy. here, i would like to salute the vision and pragmatism of those politicians and technocrats who in the early 1990s steered this project to a successful conclusion. today, financial intermediation activities alone directly contribute between 6 % and 7 % of the country ’ s gdp. this success is a unique example of what a bipartisan approach to strategic economic choices can achieve. it should indeed serve as an encouragement to our political leaders to tackle to - day ’ s much needed reforms in a similar manner. allow me to recall some facts to underline the impressive growth of the financial sector. there has been steady expansion all along, but especially since eu membership. 31 new licences for financial services operators were issued during 2004, 93 in 2005 and a further 61 up to june of this year. membership of the eu is contributing to this growth also as a result of the adoption of the single passport regulations and the right to provide cross - border services. there are 99 institutions with passporting rights in malta today, and two maltese credit institutions have passporting rights in the eu. the banking sector is composed of 18 banks, of which 6 are domestic and 12 foreign controlled. the combined balance sheet of the domestic banks has grown by an average annual rate of 7 % in the past two - an - a - half years and their assets to gdp ratio, at 280 %, is comparable to the average for the euro area. for the entire banking system, this ratio is closer to 750 %. in the area of investment services, there are currently 21 professional investment funds targeting institutional investors and high

and accountants, to ensure that malta ’ s financial centre remains synonymous with integrity, efficiency and reasonable costs. i emphasize this point because the recent rapid growth in the depth and breadth of the financial sector, and the expectation of further expansion, has sometimes given rise to behaviour - such as the use of aggressive methods to induce prospective customers to buy financial products and services and the resort to misleading advertising - which stretches the interpretation of our laws and regulations close to their limit. there should be no doubt in anybody ’ s mind that the cbm and the mfsa, acting in the common interest, will continue to exercise their respective responsibilities with diligence and rigour to ensure the integrity and stability of the financial system. in conclusion, i would like to wish mediterranean bank success in their malta venture and to express the hope that their presence here will also serve to enhance the reputation of our financial centre.