Should HSBC Malta return to local ownership – or stay under foreign control?

With three foreign banks still competing and local bidders stepping back in the race for HSBC Malta, fresh debate has emerged over the advantages and disadvantages of having major domestic banks under local ownership versus selling to foreign institutions.

Some banking professionals argue that foreign ownership can attract investment from other countries, boosting the local economy.

Others suggest that this perspective may be influenced by historical colonial ties and a lingering belief that foreign involvement is necessary to “save” the country – an idea they consider outdated and possibly overrated.

While there is no one-size-fits-all answer, it’s worth exploring the potential implications of each scenario.

Community connection and economic impact

Banking often operates within an oligopolistic market structure, where a small number of firms, such as HSBC and BOV, hold significant influence over market prices. This raises the question of whether the profits generated by these firms are best retained within the country.

When banks are locally owned, profits are more likely to be reinvested in the local economy, potentially strengthening job markets and financing for small businesses. In contrast, foreign ownership can lead to profit repatriation, which some argue may limit local reinvestment.

Additionally, locally owned banks offer valuable opportunities for local talent to develop high-level problem-solving skills by managing key functions on-site, rather than relying on decisions made by a distant foreign headquarters.

On the other hand, foreign banks may bring fresh capital and international expertise, which can boost competitiveness and innovation in the local market. Access to global financial networks might open new opportunities for local businesses, especially those aiming to expand internationally.

Customer service and decision-making

Local banks are often praised for a more personalised customer service, as they tend to have closer relationships with their clients. This can lead to tailored financial solutions that better meet the needs of individuals and small businesses.

Foreign banks can leverage advanced technology, risk management practices and global best practices to offer a wider range of products and services. While decision-making might be slower due to centralised structures, it can also bring more rigorous governance and compliance standards, which may increase overall stability and confidence in the system.

Economic sovereignty and stability

Locally owned banks can help preserve national economic control, ensuring that key financial decisions are made within the country. This may contribute to greater economic stability and a sense of trust among depositors and businesses.

Furthermore, local ownership is often argued to support employment and skills development within the community, especially in Malta, where many believe there is ample local talent capable of fulfilling these roles.

Conversely, foreign banks might enhance stability by diversifying economic exposure and providing access to international capital flows. Their global reach can help buffer local economies against domestic shocks.

However, reliance on foreign entities could also introduce vulnerabilities if strategic decisions are influenced by external geopolitical or economic considerations.

Supporting small and medium enterprises (SMEs)

Local banks are often viewed as better positioned to understand and support SMEs, which are vital to economic growth. Their relationship-based banking can provide the flexibility and personal attention that smaller businesses need to thrive.

On the other hand, foreign banks may offer SMEs access to more sophisticated financial products and international markets, supporting growth beyond local boundaries.

However, their standardised approaches might not always suit the nuanced needs of smaller or local businesses, which could limit access to credit for some SMEs.

Ultimately, whether HSBC Malta’s future lies in local or foreign hands, the decision will shape not only the bank’s direction but also the wider conversation about how ownership influences economic resilience, opportunity and community engagement.