Malta is set to rival Luxembourg

Jeremy Leach, CEO at Managing Partners Group, said at the Finance Malta Conference last week in Switzerland, that Malta is the only European Union jurisdiction outside of Luxembourg with the legislation to offer securisations. With regard to the growing pan-European demand for securisation products Malta can thus compete with Luxembourg and as an English speaking country it is highly attractive to investors who prefer English as a business language.

Malta’s Securitisation Act means that the Mediterranean island is the only European Union jurisdiction outside of Luxembourg that has the legislation in place to offer these flexible tools. It is easier for smaller jurisdictions, such as Malta, to establish the necessary laws to get into the securisations market. Additionally, there are only a few principalities that have the same passporting rights as Malta and Luxembourg. "Malta offers market access not just to the EU but Commonwealth countries, too. Its regulator, the Malta Financial Services Authority, is very approachable and has embraced European legislation, responding quickly to new directives such as the AIFMD, while its push for Islamic banking demonstrates its intention to position Malta as one of Europe’s most important financial centres", comments Jeremy Leach.

Highly attractive to English speaking investors
According to Leach, a securisation that invests in an asset class such as property could quite conceivably deliver an income of 5% per annum. This is highly attractive to European investors. In the UK, for example, the current five-year gilt yield is just 0.79%. In addition are Maltese securistaions more likely to be more popular with English-speaking communities because that is the business language in Malta, whereas Luxembourg has a greater following from Benelux and other French-speaking jurisdictions. Exchange Traded Instruments (such as listed securitisations) are also eligible for inclusion in UK tax-reduction vehicles such as SIPPs, SSASes and ISAs.

Securitisations have, in the past, been perceived as risky investments because US banks used them to move ownership of toxic loan books off their balance sheets during the credit crisis. But the reality is that when securitisations are used correctly, they are extremely efficient, transparent investment vehicles that invest capital for a fixed period of time to pass on a healthy return to investors. The fact that investor capital is tied up for a fixed period means that no investor is able to exit early and compromise the liquidity position. As a bondholder, the investor has priority over the shareholder (usually the sponsoring bank or investment manager), who carries the greatest burden of risk.