Sparkasse Bank Malta plc has recently been granted a licence to provide depository services to funds established in Ireland and has opened a branch in Dublin, with the aim of tapping into the jurisdiction’s substantial fund sector, which is one of the world’s best-performing.
Managing Director Paul Mifsud said the bank’s licence will enable it to prioritise “actively seeking new business from Ireland, which boasts a fund sector north of €3 trillion, compared to Malta’s €9 billion.” Ireland’s competitive market is characterised by the strong presence of behemoths in the industry, with more likely to base themselves in the Irish capital once Britain leaves the European Union.
“The establishment of our branch in Dublin is a positive addition to our product offering, for our customers and for staff in general,” Mr Mifsud told this newspaper. “We believe new opportunities will arise as the branch gathers repute and business in Ireland. Moreover, the new branch, which will be centrally located, shall feature as a direct business line within the bank’s organisational structure and will be considered as a direct profit centre.”
The decision to open depository functions in Ireland was taken in 2017, according to the Managing Director, in order “to explore the possibility of emulating the bank’s local model in other jurisdictions which lend themselves to international business and the fund sector.”
“Ireland was a natural choice for the bank due to its membership of the EU and its English-speaking environment. The bank had already established relationships and contacts with several service providers in Ireland which made the move and the decision all the more feasible,” Mr Mifsud explained.
Acquiring a licence in Ireland did not come without its challenges. Mr Mifsud noted the strict policies and processes the bank had to adhere to, the rigorous criteria it needed to meet, as well as internal governance matters which had to be addressed to secure and embed the branch well into the bank’s governance. “Fortunately, Sparkasse was able to rely on a great team of experts assisting it, as well as the regulators, both local and in Ireland, who were extremely responsive,” Mr Mifsud said.
Moving forward, the team in Ireland – entrusted with the management of relationships, depository functions, and the outlet – includes professionals with years of experience. Donncha Morrissey, who joined in August from CITI Bank, will be the Head of Branch while Eileen McCarroll has joined as Head of Depository from financial services technology solutions provider SS&C. Recruitment for other roles and responsibilities is still ongoing, with the plan to offer new work opportunities in Dublin to staff currently working locally. “This will be conducive to knowledge-sharing, culture-spreading and staff retention within the firm,” Mr Mifsud emphasised.
This expansion in operations comes off the back of “the strongest year on record both in terms of revenues and profitability” for Sparkasse Bank Malta, the Managing Director asserted. He credited the development of “a business model focusing on customer service and seamless connectivity between banking, investment and custody services” for some of the bank’s increase in revenue, as well as its having “built on its strengths” throughout the financial year.
“As a result, today, Sparkasse Bank is the second-largest noncore domestic bank on the island. The bank has built its business in Malta organically since its establishment in 2000 and is a significant player in the custody and depository space. We have achieved all this by being clear in our vision and focused on our core services,” he stated. This was no small feat, according to the Managing Director, due to the increasing challenges faced by the banking sector.
“Ever since the financial crisis, the banking environment has been, and will remain, a very challenging one within which to operate.” In his view, this is due to international regulatory changes, such as the implementation of the new MiFID II legislative framework; the PSD2 directive, which regulates payment services and payment service providers throughout the European Union, resulting in infrastructural IT challenges; and GDPR, which has forced firms to rethink the way they collect and use data. “All these – and many more – were introduced within the same year and required a high level of resources to fulfil,” Mr Mifsud said.
Other issues continue to affect the bank, including the “heightened requirement in governance standards and additional regulatory reporting” as well as “the prolonged period of negative interest rates in the eurozone” which, in his opinion, “will drive banks to re-think their revenue model.”
However, while these challenges will “continue to prevail in the foreseeable future,” forcing a review of “risk appetites and the alignment of customer data bases and service offerings,” Mr Mifsud is optimistic. He emphasised that 2018’s confident results were “a trend we wish to sustain in the coming years as we continue to focus on our core model and competences” and he underlined the potential for further sustainable growth.
Indeed, the bank’s priorities in 2019 reflect this, and have been put into place in order to “strengthen the business in Malta by continuing to support the fund industry and corporate service providers locally,” Mr Mifsud explained. He underlined the bank’s commitment to investing in human resources, IT infrastructure and new technologies to ensure that it is able to carry out its functions efficiently.
“The bank’s priority, in this respect, is to make sure that it has robust and sufficient resources at all times to support its business and regulatory obligations,” he stressed.
With Brexit on the horizon, Mr Mifsud emphasised that while the UK’s departure from the bloc might have an impact on asset managers seeking passporting rights into Britain, and British professionals who provide services to local structures, the bank “is well-placed” for it and, indeed sees potential advantages for the new branch in Ireland.
“Sparkasse’s counterparts are mainly situated within continental Europe, and the bank will now also be focusing on broadening relationships in Ireland,” he specified. Concluding, Mr Mifsud tied the strength of the bank’s future success to Malta’s healthy economy, expressing his faith in Malta’s ability to maintain buoyancy in the markets. “A strong economy must be realised in a prolonged and sustainable manner. The country has to preserve its business appeal from a cost-value perspective and kudos.”
This interview originally appeared in The Malta Business Observer